MW Paramount says its Warner Bros. deal can work without big layoffs. Hollywood isn't buying it.
By Lukas I. Alpert
Faced with an immense debt load and a target of $6 billion in cost savings in the next three years, Paramount will likely find deep layoffs impossible to avoid, media watchers say
Hollywood is bracing for big job cuts at Warner Bros. Discovery when its merger with Paramount goes through. Paramount has insisted it can make the deal work without lots of layoffs.
Soon after winning their fight for Warner Bros. Discovery $(WBD)$, executives at Paramount Skydance $(PSKY)$ laid out plans for $6 billion in cuts over the next three years at the combined company - but insisted they could do it without wholesale layoffs.
Hollywood isn't so convinced. Several of Tinseltown's powerful unions and members of its creative community have decried the $110 billion deal to merge two of the industry's biggest studios, calling it anticompetitive and saying it would result in fewer jobs and opportunities.
Paramount Skydance CEO David Ellison told the investment community on Monday that the savings could largely be found from "nonlabor sources" - mainly through the consolidation of technology platforms, outside service contracts, real estate and other corporate overhead costs.
Ellison pointed to plans to merge the two companies' streaming services, HBO Max and Paramount+, into one platform, reducing significant overlap and costs.
But analysts and media-industry experts say that the $79 billion debt load the company will take on when the deal closes, plus the huge cost for the increased output of 30 films a year that Ellison has promised, will likely make large-scale layoffs inevitable.
"The idea that there won't be broad redundancies at least in areas like IT and HR and account services seems really unlikely," said Bradford Auerbach, a veteran media lawyer who heads the sports, entertainment and media practice at Outside General Counsel. "I just don't think it's possible to find $6 billion in cuts in the way that they are saying."
A review of recent media megamergers would seem to back him up.
After Walt Disney $(DIS)$ acquired 21st Century Fox's film and television studios in 2019, more than 4,000 layoffs followed. The merger of Warner Bros. and Discovery in 2022 was followed by multiple rounds of layoffs. And the acquisition of Paramount by Ellison's Skydance Media last fall has led to 2,000 job cuts.
Many in Hollywood had similarly been critical of the deal Warner Bros. Discovery had reached earlier with Netflix $(NFLX)$, saying it would also result in fewer jobs and opportunities and hasten the decline of the movie-theater industry. Netflix, which had argued that its merger proposal would have resulted in far fewer job losses, walked away from the deal last week after Paramount raised its bid.
In an interview with CNBC on Thursday, Ellison danced around the question of layoffs but signaled that some job cuts may be coming.
"We will absolutely have to rationalize the overall corporate overhead of the company," Ellison said after being asked about the possibility of layoffs. "But that's not the primary driver of the synergies in the deal."
Ellison's projections, however, are largely tied to how efficiently he can transform the two legacy media brands to meet the ambitious targets he has set for revenue and Ebitda in the coming years. Many analysts have been less optimistic in their estimations.
"We are more cautious on expecting the cost cutting to translate directly into Ebitda upside based on multiple prior media M&A deals," media analyst Robert Fishman of MoffetNathanson Research wrote in a note to clients. Ebitda refers to earnings before interest, taxes, depreciation and amortization, a measure of the underlying profitability of a business.
Fishman wrote that while the company sees an ambitious revenue target of $84 billion by 2030, he estimates it would be closer to $70 billion by that point, factoring in the considerable declines expected from the two companies' linear television units. That wouldn't be a substantial improvement from the combined $69 billion the two companies have projected for 2026.
"It's worth remembering that Warner Bros. has changed hands several times over the past decade, and arguably no prior owner was able to fully unlock the value of its asset portfolio without ultimately resorting to a sale. Will [Paramount] be different?" he wrote.
Ellison's soft-pedaling around the topic of layoffs may also be aimed at calming resistance from Hollywood's labor unions and from government officials - most notably California Attorney General Rob Bonta, who has vowed to heavily scrutinize the deal, Outside General Counsel's Auerbach noted.
"It feels like what they are saying may simply be air cover as they are trying to get this deal through regulation," he said.
Part of Paramount's agreement with Warner Bros. Discovery is a "ticking fee" of an additional 25 cents per share for every quarter the deal fails to close past Sept. 30. That would cost Paramount an additional $650 million for every quarter the deal is delayed.
-Lukas I. Alpert
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March 07, 2026 09:30 ET (14:30 GMT)
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