Paramount Global CEO Bob Bakish
Provided by Paramount Global
Paramount Global reached 67.5 million Paramount+ streaming subscribers worldwide at the end of the fourth quarter, an increase of 4.1 million from the previous quarter.
The Hollywood conglomerate, which has been the subject of growing speculation on Wall Street about its future, said on Wednesday that it expects “significant company-wide revenue growth” in 2024 and that Paramount+ will reach domestic profitability in 2025. He said there was.
On a call with aftermarket analysts, Paramount CEO Bob Bakish cited increased viewer engagement, lower churn and higher subscription prices as what will make Paramount+ profitable next year. He emphasized that this represents “an important and exciting milestone in the company’s transformation.” Naveen Chopra, the studio’s chief financial officer, also predicted a decline in programming spending on Paramount’s streaming platforms.
“While I think subscription growth in 2024 will be lower than in 2023, it’s important to point out that we still expect very healthy revenue growth for Paramount+. “Revenue is a more important metric than subscriptions,” Chopra added regarding Paramount+ subscribers. Analyst calls predicted growth this year.
Paramount’s first-quarter net income was $514 million, compared with net income of $21 million a year earlier, and overall revenue was down 12% to $7.63 million. Adjusted for one-time items, the studio’s earnings per share were 4 cents, compared with 8 cents per share in the year-ago period. Analysts expect a fourth-quarter loss of 1 cent on revenue of $7.84 billion.
The studio’s streaming losses fell to $490 million, compared to a $575 million loss in the same period last year, which was good news for Wall Street. Paramount has signaled that it will reach peak streaming losses in 2022, a year ahead of schedule, by cutting full-year direct-to-consumer losses in 2023.
In the direct-to-consumer segment, advertising revenue increased 14% to $526 million, driven by growth in Paramount+ and Pluto TV, and subscription revenue increased 43% to $1.33 billion. Paramount’s traditional TV revenue, which includes assets such as CBS and its MTV, Comedy Central and Nickelodeon cable networks, fell 12% to $5.16 billion in the latest quarter.
Television ad revenue fell 15% to $2.28 billion, and affiliate and subscription revenue fell 1% to just over $2 billion.Home of Paramount’s movie studio division Mission Impossible and top gun Franchise segment revenue was reported at $647 million, down 31% from $936 million in the year-ago period due to a significant decline in licensing revenue.
The conglomerate controlled by Shari Redstone is fighting to replace lost terrestrial TV revenue with streaming and other digital revenue to keep pace with consumers’ rapidly changing TV viewing habits. On the advertising side, direct-to-consumer advertising revenue increased in the fourth quarter, but TV media decreased. This includes his 5% impact from a decline in political advertising. Paramount’s advertising revenue for the quarter was also affected by Hollywood’s double strike.
Benjamin Swinburne, an analyst at Morgan Stanley Research, said: “These headwinds are not unique to Paramount, but the company has significant exposure to terrestrial television, increased debt leverage, and no meaningful free cash flow. ), Paramount stock is uniquely affected,” said Morgan Stanley Research analyst Benjamin Swinburne. It is expected to be released ahead of the studio’s latest financial results.
The decline in linear television advertising and the acceleration of cord-cutting are hurting cash flow as major studios look to higher marketing and subscriber acquisition costs, as well as higher original content production costs due to Hollywood’s double strike. Concerns are growing.
Paramount announced that it generated net operating cash flow of $558 million and free cash flow of $443 million in the fourth quarter.
Streaming growth offset a weak advertising market in the fourth quarter, CEO Bakish said in a statement accompanying the company’s latest financial results. Even after 2024. ”
Bakish added: “Looking to the future, we remain focused on maximizing the return on content investments and growing streaming while transforming the cost base of our business. We could not be more excited about the growth and validation of the strength of our strategy and assets.”
The Paramount boss also mentioned that the company has announced plans to form a sports streaming joint venture with Disney, Warner Bros. Discovery and Fox to fend off competition from the tech giants. “There’s still a lot we don’t know about this service, including pricing, packaging, and consumer appetite. And for consumers, for true sports fans, this product only includes a small part of the sport.” “Hmm. Half the NFL, football and golf are virtually non-existent at many colleges. Look, it’s hard to believe this is ideal, especially at the price point that’s being speculated on,” he told analysts.
The as-yet-unnamed streaming venture from Disney, Warner Bros. Discovery and Fox is seen as a step toward streaming sports bundles amid industry-wide expectations for more content rebundling moves in the streaming era. ing.
But Bakish added that sports fans have already embraced the service available on CBS and Paramount+. And for viewers who come to Paramount+ for sports purposes, he claimed that his 90% of viewer engagement is with non-sports programming. “The bottom line is we really like where we are in terms of sports delivery and believe Paramount’s strategy is creating substantial value,” he added.
Paramount stock took a hit last week when Warren Buffett’s Berkshire Hathaway reported it was cutting its stake in the media conglomerate by a third. Buffett’s stock sale coincides with market speculation that David Ellison’s Skydance Media and Redbird Capital are eyeing a potential purchase of Shari Redstone’s control of the conglomerate. .
On a conference call with analysts, Bakish answered questions about possible strategic options as the studio considers its options in the consolidated market. “When it comes to M&A, Paramount is always looking for ways to create shareholder value. To be clear, this is for all of our shareholders. But I’m not going to speculate or comment on timelines. But that’s clearly what we’re focused on,” he said.
Another media mogul, Byron Allen, also toyed with Paramount Global by unveiling a proposal to buy all of the studio’s outstanding stock for $14.3 billion. If the deal with Paramount Global goes through, market analysts expect a significant sale, including the possibility of Skydance and Paramount combining filmed entertainment studios to expand their scale as content producers. are doing.
Bakish also talked about partnering with rivals in the U.S. market and abroad to offer streaming bundles that will help attract and retain subscribers by making content offerings more attractive and affordable. Discussed. “We already have a lot of experience with the power of bundling and streaming. We offer hard bundles internationally with Sky, Canal and others. They are key to our go-to-market strategy. “These are definitely additive to the subbase and economics of Paramount+. In the US, we also have things like Walmart+, which is another form of bundle,” he said.
