Sky Dance pulls back the curtain on how it plans to achieve at least $6 billion in cost savings over the next three years.
“By combining two global streaming services, two groups of film and television studios, two television portfolios and overlapping business functions, we can reduce duplicate spending on a spending base of more than $50 billion,” the company wrote in a letter to shareholders Monday as part of Paramount Skydance’s third-quarter earnings release.
Skydance, the company formed from the merger of Paramount Skydance and Warner Bros. Discovery, said it expects cost reductions of at least $2.2 billion through the elimination of “redundant back-office and enterprise functions,” including the elimination of management layers and increased use of artificial intelligence. These savings also explain the “rationalization” of its office footprint.
Skydance expects at least $1 billion in savings from streamlining marketing and promotion spending. And about $1.4 billion in savings will come from unifying its streaming business and delivery architecture and integrating back-end technology.
The final savings of $1.4 billion will be related to “optimizing third-party spend,” eliminating overlapping spend and consolidating purchasing decisions within a centralized group, Skydance said.
“We are confident in achieving these savings, building on our guidance from Paramount,” the company wrote. “This program is on track to achieve more than $2.7 billion in operational efficiencies by the end of 2026.”
Some of this cost reduction has already begun.
Last month, Skydance began offering voluntary buyouts to its employees ahead of official layoffs. At the same time, the company adopted a five-day-a-week policy in the office. Additionally, last week saw the departure of eight executives – four from Warner Bros. and four from Paramount.
The company previously announced plans to eventually merge streaming services Paramount+ and HBO Max into a single platform.
On Monday, Skydance announced that it would take the first step toward that goal early next year, offering a set of streaming services “at an even higher price.”
Co-CEO Ynon Kreiz told investors during the company’s earnings conference call that Skydance was also looking for ways to optimize its content budget. The company spends more than $30 billion a year on shows and movies.
“As a single company, we can make smarter choices about how we distribute and monetize both new and library content,” Kreiz said.
Skydance said it expects a $200 million headwind in the fourth quarter due to Warner Bros. studio’s theatrical underperformance. linked to titles already launched and upcoming releases.
The company will also use AI to speed up production and reduce filmmaking costs, co-CEO and president David Ellison said on the call.
“We think these tools will help unlock more original storytelling by making the budget more digestible to be able to take as many risks,” Ellison said.
The updates accompanied former Paramount company Skydance’s third-quarter results, which included revenue of $7.03 billion, which was roughly in line with StreetAccount’s estimates of $7.04 billion, and adjusted earnings before interest, taxes, depreciation and amortization of $1 billion, beating StreetAccount’s estimates of $913.5 million.
However, adjusted earnings per share of 45 cents were not immediately comparable to StreetAccount EPS estimates.
Results do not include the impact of the Warner Bros. acquisition. Discovery, finalized after the end of the third quarter.
Skydance detailed the combined entity’s business units, including studios, direct-to-consumer and television, and said it would provide full-year guidance when it reports fourth-quarter earnings early next year.
“Going forward, we will provide advice on an annual basis as we prioritize long-term value creation, which we believe will be more consistent with our strategic approach,” the company told shareholders. “We will continue to provide quarterly updates, including certain forward-looking commentary where appropriate, which will give investors visibility into the progress of our business in the near term.”
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