And now, here’s Julia with a quick review of the new streaming services…

And now, the main event…

In recent days, as Skydance C.E.O. David Ellison and his consigliere Jeff Shell assumed control of Paramount and embarked on their bicoastal press tour, I’ve devoted considerable attention to the new management team’s plans for CBS News—an inarguably marginal piece of their $17.5 billion business, but one that also inarguably punches above its weight in terms of the mishegas it creates for its ownership and management. As many media executives are fond of saying to one another, and occasionally to me, the news business is an alluring but sticky wicket—5 percent of my business and 95 percent of my problems, as the saying goes. Shari Redstone, for her part, recently attested as much in the pages of The New York Times.

As I have noted, Ellison didn’t buy Paramount for CBS News. He and Shell view it as a significant cost burden, and would probably offload it if they could. Alas, it came with the package, and there was no way to get Paramount Pictures, the Taylor Sheridan-verse, and Sunday AFC games without it. So now, while paying customary lip service to the news division’s legacy—a day-one visit to the newsroom, paeans to Cronkite, etcetera—Ellison and Shell will embark on a plan to rightsize the business by reducing talent salaries, cutting operational costs, and, yes, laying off some staff, all in the interest of reducing that burden.

Just how much of a burden is CBS News? Earlier this week, I reported that the division was losing $50 million a year, according to two sources with knowledge of the company’s finances. A Paramount spokesperson later told me that “the figure is inaccurate and, in fact, the division is currently profitable”—a discrepancy that led to a lot of public confusion about the division’s financial health and media reports about the conflicting accounts. (Remember what I said about mishegas?) Anyway, I subsequently went back to my sources to get a better appreciation for the nuances of the numbers, and discovered that I was indeed a bit off: The annual losses are closer to around $35 million.

The royal road to this number is instructive and relevant and involves some pencil-stroking and adjusted EBITDA calculations. Yes, CBS News is considered profitable, as the spokesperson insisted, according to Paramount’s traditional internal accounting—but only through an internal adjustment that apportions some $50 million in revenue from retransmission fees to the news division. 

A year ago, CBS News was profitable with or without that revenue allocation. This year, however, I’m reliably told that advertising revenue is on pace to decline by more than $50 million, which would bring profits to a number that scratches the very low eight figures, but only with that retrans fee cushion. And yet, the new administration may not be inclined to generously cover over the business unit’s challenges with the application of that $50 million retransmission placebo. The retrans business, as the new management team knows, is buoyed by sports rights and other high-value programming. That high-value programming may include 60 Minutes, but almost certainly does not include the news division’s perennially third-place morning and evening shows.

I’ve spent some time in the barrel over this, but the truth is that it’s immaterial whether CBS News is going to cost Skydance $50 million or $35 million a year, or turn a slight profit only through spreadsheet love from another business unit. The trend lines here are moving in the wrong direction, and fast, and Hollywood economics won’t save anyone—a fact that the new Skydance team ostensibly understands. Last month, of course, Skydance approved the cancellation of The Late Show with Stephen Colbert on the grounds that it was losing $40 million a year. Critics of the decision have argued that this accounting overlooks the retrans allocation, which may indeed be the case. But from the perspective of the front office, the same logic that applies to news also comes into play here: Programs like The Late Show aren’t meaningful drivers of retrans fees and their existences shouldn’t be justified by them.

So what’s next? The new management team may strike a deal with Bari Weiss, or not. They may ask Gayle King to take a pay cut, or politely show her the door. And they will almost certainly undo the previous regime’s imbecilic decision to install John Dickerson and Maurice DuBois at Evening News. But one thing is certain: They will cut costs.

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