There were brighter signs on the horizon after a gloomy year for Paramount Global, whose Q4 2023 earnings came in below market expectations on Wednesday. At the same time, reports emerged that Warner Bros. Discovery (WBD) has cooled on the idea of merging with Paramount, fuelling further speculation over the company’s future.
The two broadcasters are in similar boats, both scuppered by the Hollywood strikes and a weak TV ad market, yet buoyed by their strong streaming prospects. Paramount’s quarterly revenues slid by 6 percent YoY (in line with WBD’s 7 percent drop), pulled down by a 15 percent slump in linear ad revenues.
But Paramount CEO Bob Bakish pointed to an optimistic scatter market, that is ad inventory not purchased at the Upfronts but closer to the air date. “Yes, the ad market was challenging in 2023 and still isn’t exactly where we want it to be,” he said on the earnings call. “But we’re encouraged by some signs of stabilisation, including healthy scatter premiums.”
And the streaming business remains relatively healthy, having passed the peak of its losses in 2022. Paramount+ revenues climbed 69 percent YoY, and added 4.1 million subscribers during the quarter, bringing its total user base to 67.5 million. The company expects its domestic streaming business to turn profitable by 2025, two years behind WBD, whose streaming service Max turned a profit in 2023.
Plusses and minuses
Paramount’s film studio was also worse hit than that of WBD. Paramount studio revenues fell 31 percent YoY, compared with WBD’s 17 percent loss. As a result, Paramount plans to dial back its content spending, doubling down on the leaner strategy it implemented during the SAG-AFTRA strike. This included running lower-cost entertainment programming across its linear networks, and sharing more content across its linear and streaming channels.
“As we move into 2024, we’re focused on producing content more efficiently and magnifying the impact of our slate,” said Bakish. And Paramount has already seen positive results from this approach at its CBS network. “We prioritise lower-cost formats, like unscripted and those shot abroad, while maintaining our strength in franchises,” said the CEO.
The company identified its tentpole franchises, such as Star Trek and Yellowstone, as key drivers for international growth on its streaming service. “We’ve learned that Paramount+ subscribers outside the United States spend nearly 90 percent of their time with our global Hollywood hits, meaning we can keep them engaged while right-sizing our investment in content that does not travel around the world,” said Paramount CFO Naveen Chopra.
And while 2024 will see higher content spend than 2023 (owing to the impact of the strikes on production), Paramount does not plan to return to pre-strike spending. Chopra said the company expects to spend 50 percent of the “strike savings” this year, therefore producing around half the amount of content it would have made last year.
Strange New Worlds
But Paramount’s cost-cutting measures have also hit its workforce, axing 800 jobs earlier this month in efforts to right the ship. Paramount shares were down 2 percent following the results, and its stock has lost 48 percent over the past year.
The future of the company is therefore up in the air, with WBD reportedly walking away from a potential merger. Skydance Media, RedBird Capital and Byron Allen are rumoured to be bidding on Paramount, as media mogul Shari Redstone seeks to sell the business.
Backish offered little comment on the acquisition rumours, but noted that Paramount was focused on “ways to create shareholder value.” He was more forthcoming on the question of bundling, after reports emerged last week that Paramount and Comcast were considering a partnership to bundle Paramount+ and Peacock. The CEO did not offer specifics, but said the company would “continue to look to incremental opportunities” in this regard.
