Four days after the stunning news that Paramount Skydance would acquire Warner Bros. Discovery, Paramount executives tried to calm fears that the blockbuster deal would result in massive layoffs.
In a call Monday, Paramount Chief Strategy Officer and Chief Operating Officer Andy Gordon told Wall Street analysts that $6 billion in merger “synergies” would come from “non-labor sources” and not a “reduction in production capacity.”
Instead, Gordon said, the company would reduce costs by consolidating its streaming technology and cloud providers, finding marketing efficiencies and “optimizing the combined real estate footprint,” likely an allusion to widely anticipated plans that the new owners will consolidate operations around the Warner Bros. lot in Burbank.
Efficiencies aside, most Hollywood observers — including people who are familiar with Paramount Skydance Chief Executive David Ellison’s plans — predict that Paramount will be forced to make large-scale layoffs in order to offset the enormous costs of the mega-deal, which is valued at more than $111 billion (counting debt).
It’s a reasonable expectation, at least if history is any guide.
Many at Warner dread the kinds of cuts seen after Walt Disney Co. bought most of 21st Century Fox’s assets, resulting in thousands of layoffs as the two companies combined operations and shed redundant jobs.
In the case of Warner-Paramount, the new company will have two film and TV studios, as well as two streaming businesses, two legal departments, two marketing departments and so on. It’s doubtful these overlapping functions will survive budget cuts.
Already, consolidation plans are underway.
This week Paramount announced it would combine the two streaming services — Paramount+ and HBO Max — to reach a total of more than 200 million subscribers and better compete against the behemoth Netflix, which boasts 325 million subscribers worldwide.
Ellison was full of praise for the HBO team on Monday’s analyst call, saying the premium service was a “crown jewel” and that it will “continue to have the resources and independence to do what it does best.”
He also reiterated that there is “no intention to pull back on production,” and that the company intends to make 30 films a year — 15 apiece from Paramount and Warner Bros.
“We have all the economic incentives to make sure that we grow this business and are going to invest in content to basically achieve those goals,” Ellison said Monday.
But this deal also includes $79 billion in net debt — a staggering load that overshadows even that of the merger that resulted in Warner Bros. Discovery. That amount became an albatross around that company’s neck and led to waves of layoffs.
“What everybody’s hoping is that the noise that’s being made around prioritizing content will hold true,” said Kevin Klowden, a Milken Institute fellow focused on entertainment and technology. “But until they see that happen, it’s really a question.”
Further job losses would be a blow to an industry that has been reeling from a steady drumbeat of job cuts fueled by media consolidation, dwindling streaming profits and the migration of film and TV jobs to cheaper states and countries.
Paramount executives have said the deal is expected to close in the fiscal third quarter of this year, and Ellison said he was “absolutely confident” they will meet that goal, based on conversations with regulators.
Despite support from the Trump administration, the acquisition is not yet final. Already, California Atty. Gen. Rob Bonta said he was in communication with other states’ attorneys general about challenging the merger on antitrust grounds, saying it wasn’t a “done deal.”
And on Monday, Rep. Sam Liccardo (D-San José), Sen. Elizabeth Warren (D-Mass.) and Sen. Richard Blumenthal (D-Conn.) called on Atty. Gen. Pam Bondi and White House Chief of Staff Susie Wiles to provide details of their conversations about the merger with Ellison and Netflix co-Chief Executive Ted Sarandos, highlighting the role of politics in the auction.
Paramount plans to keep the two studios separate for now, though company executives have discussed combining operations at the Warner Bros. Burbank lot at some point, according to sources close to Paramount who were not authorized to speak publicly. That could mean a wind down at the historic Paramount lot on Melrose Avenue — and more job losses.
The anxiety over looming cuts is especially deep inside Warner, where staff are still trying to process the news, according to people I spoke with. They noted that when Netflix was the winning bidder, co-Chief Executives Sarandos and Greg Peters came to the Burbank lot and spoke with several hundred of Warner’s senior leaders and outlined their plans, giving staff more clarity about a future under their ownership. No such conversations have occurred with the Paramount team, they said.
“I think genuinely, everyone’s nervous and a little uneasy,” said one Warner Bros. Discovery employee. “With the Netflix option, people had become a little more hopeful. But this outcome is a little more frightening for the staff.”
Stuff We Wrote
Film shoots
Number of the week
After 30 years, the Ghostface killer has still got it. Paramount Pictures and Spyglass Media Group’s “Scream 7” topped the box office this last weekend with $64.1 million in the U.S. and Canada, marking a franchise-best domestic opening. Globally, the film made $97.2 million.
The film centered on original franchise actors Neve Campbell and Courteney Cox, and featured numerous callbacks to the previous movies.
But the film’s debut did not come without controversy. Pro-Palestinian groups protested outside the “Scream 7” premiere on the Paramount lot last week and called for a boycott of the film after franchise star Melissa Barrera was fired more than two years ago for her comments on the Israel-Hamas war.
What I’m watching
On Sunday, I watched the UCLA women’s basketball team dominate USC in what I think is one of the best college rivalries out there (though I’m probably biased. Go Bruins!)