Paramount Skydance reports mixed second quarter as Warner deal faces March trial

By Dawn Chmielewski

LOS ANGELES, CALIFORNIA, Aug 4 (Reuters) - Paramount Skydance reported mixed second-quarter results on Tuesday, with higher streaming and studio revenue offsetting declines in television, as the company works to close its planned $110 billion acquisition of Warner Bros. Discovery. 

The entertainment giant's revenue rose 1% to $6.91 billion, exceeding estimates of $6.88 billion, according to data compiled by LSEG.

Second-quarter profit came in at $41 million, or 4 cents a share, compared with analyst estimates of $109 million or 9 cents a share. 

Paramount CEO David Ellison said he expects to close the merger with Warner Bros. even as a federal judge on Tuesday set a March trial date for an antitrust suit brought by a dozen states seeking to block the deal.  In an earnings call, Ellison said the company is "absolutely open to finding a solution out of court, but we also really believe that we'll win at trial." 

For the second quarter, Paramount's streaming business reached nearly $2.5 billion in revenue, up 9% from the same quarter a year ago. The company said the "Yellowstone" sequel, "Dutton Ranch," and sporting events like the UFC Freedom 250 cage match and the FIFA World Cup helped its marquee Paramount+ service add 2 million new subscribers, bringing the total to 81.6 million.

Chief Operating Officer Andy Gordon told Reuters the company has merged its streaming services onto a single technology platform, allowing it to more effectively promote content.

For the second quarter, Paramount's studio business reported revenue of $1.3 billion, reflecting strong sales to third parties like Netflix and Amazon Prime Video, and better content licensing, offset by a weaker summer theatrical slate whose highlight was "Jackass: Best and Last," compared with last year's "Mission: Impossible — The Final Reckoning."

Gordon said Paramount has made headway in consumer products licensing, striking a multiyear deal with Mattel for its Teenage Mutant Ninja Turtles entertainment brand. 

Sales for the television unit, which includes broadcaster CBS and cable networks such as Comedy Central, declined 9% to $3.1 billion.

The company expects revenue in the current quarter ending in September to range between $6.95 billion and $7.15 billion, based on higher expected gains in streaming and studios, with profit before certain items expected to reach between $875 million and $975 million.

LAWSUIT 

The company said the lawsuit filed by California and 11 other states, seeking to block its planned $110 billion acquisition of Warner Bros "does not reflect the realities of today's highly competitive entertainment marketplace," in its earnings statement.

A federal judge in California ruled on Tuesday that the lawsuit will go to trial in March next year.

Ellison published an essay in the New York Times on Tuesday, arguing that the concern over the pending merger stemmed less from market concentration than "whether I can be trusted as a steward of Warner’s CNN." Ellison promised it would remain independent, a statement that affirmed his interest in keeping the news network as part of the deal.

Paramount agreed to pause the transaction until June 2027 at the latest, as it awaits a ruling in the antitrust case.

The company could owe as much as $1.7 billion ​in ticking fees to Warner Bros. shareholders if the deal is ​delayed until then. The fee costs $7 million a day if the merger does not close by September 30.

(Reporting by Dawn Chmielewski in Los Angeles, Additional reporting by Harshita Mary Varghese in Bengaluru; Editing by Edmund Lee in New York and Sanjeev Miglani)