Skydance Plans $6 Billion in Cost Cuts Over Three Years

Skydance Corp. has outlined a comprehensive strategy to reduce expenses by at least $6 billion over the next three years, following its merger with Warner Bros. Discovery. The combined media entity, now operating under the Skydance name, aims to trim costs by merging overlapping functions across its vast $50 billion expense base.

In a letter to shareholders released Monday alongside Paramount Skydance's third-quarter earnings, the company explained that savings will be generated by integrating two global streaming services, two film and television studios, and two television portfolios. Additionally, redundancies in corporate functions will be addressed to eliminate duplicated spending.

Skydance anticipates saving $2.2 billion by cutting back-office and management layers, streamlining administrative operations, and expanding the use of artificial intelligence. These reductions also include consolidating office locations to optimize real estate costs. Marketing and promotional budgets will be trimmed by at least $1 billion through more efficient spending and campaign alignment.

The company expects $1.4 billion in savings from combining its streaming platforms and broadcast infrastructure, alongside integrating backend technology systems. Another $1.4 billion will come from optimizing third-party expenditures, reducing overlapping costs, and centralizing purchasing decisions under one group to leverage better terms.

Skydance emphasized confidence in reaching these targets by applying lessons learned from Paramount’s prior cost-cutting efforts, which are on track to realize $2.7 billion in run-rate efficiencies by the end of 2026.

Some restructuring moves have already started. Last month, the company offered voluntary buyouts to staff ahead of planned layoffs. It also introduced a five-day workweek in-office policy to increase collaboration. Recently, eight senior executives departed, evenly split between Warner Bros. and Paramount leadership.

A major part of Skydance’s future plans involves merging the Paramount+ and HBO Max streaming services into a single platform. The company announced it will begin by offering a bundled subscription early next year at a more attractive price point, moving closer to a unified streaming experience.

During the earnings call, Co-CEO Ynon Kreiz highlighted ongoing efforts to optimize the content budget, which currently exceeds $30 billion annually for programming and film production. Kreiz stated, "As one company, we can make smarter choices about how we distribute and monetize both new content and library content." This approach aims to ensure more efficient use of resources while maintaining a strong slate of offerings.

The company also noted a $200 million anticipated headwind in the fourth quarter, primarily due to underperformance at Warner Bros. theaters from both released and upcoming titles. To offset costs, Co-CEO and Chairman David Ellison said the firm will expand its use of AI technology to accelerate production timelines and lower expenses. Ellison remarked, "We think these tools will help unlock more original storytelling by being able to make the budget more digestible to be able to take that amount of risk." This reflects a desire to balance creativity with financial discipline.

The third-quarter results for the legacy Paramount Skydance entity showed revenue of $7.03 billion, closely matching analysts’ expectations of $7.04 billion. Adjusted earnings before interest, taxes, depreciation, and amortization came in at $1 billion, surpassing the forecasted $913.5 million. However, adjusted earnings per share of 45 cents were not directly comparable to estimates. It is important to note these figures do not yet incorporate the Warner Bros. Discovery acquisition, which was finalized after the quarter ended.

Skydance outlined its business segments post-merger, including studios, direct-to-consumer services, and television operations. The company plans to issue full-year guidance during its fourth-quarter earnings report early next year. Moving forward, Skydance intends to provide annual guidance to emphasize long-term value creation, while continuing quarterly updates that include forward-looking commentary when relevant to give investors insight into near-term progress.

This extensive cost-saving initiative reflects wider industry trends where media companies are consolidating operations and streamlining content offerings amid evolving consumer viewing habits and increasing competition in the streaming market.