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Paramount Global is a leading global media, streaming, and entertainment company that creates premium content and experiences for audiences worldwide. The company operates through three main segments: TV Media, Direct-to-Consumer, and Filmed Entertainment, offering a wide range of entertainment products and services . Paramount Global's offerings include broadcast operations, streaming services, and film production, catering to diverse audiences across the globe . The company is known for its popular brands like CBS, MTV, Nickelodeon, and Paramount Pictures .
- TV Media - Operates broadcast operations such as the CBS Television Network and domestic and international cable networks like MTV and Nickelodeon. Includes television studio operations and digital properties like CBS News Streaming and CBS Sports HQ.
- Direct-to-Consumer - Comprises domestic and international streaming services, including Paramount+, Pluto TV, and BET+. Showtime Networks' domestic premium subscription streaming service was discontinued as a standalone service for new subscribers in 2023 and will no longer be available after April 30, 2024.
- Filmed Entertainment - Encompasses film production through Paramount Pictures, Paramount Players, and Paramount Animation, along with other studios like Nickelodeon Studio and Miramax.
What went well
- Paramount+ has amassed 68 million global subscribers and is on track to achieve domestic profitability in 2025, exploring strategic partnerships and joint ventures to increase scale, improve content offering, reduce costs, and drive long-term value and profits .
- The company's sports strategy is driving growth in both broadcast and streaming audiences; for instance, NFL on CBS viewership increased 5% year-over-year, and the streaming audience on Paramount+ grew by more than 50%, showcasing the effectiveness of delivering unduplicated audiences across platforms .
- Paramount is leveraging its powerful content library by continuing to license content to third-party platforms, which drives more revenue, reach, and relevance, while also increasing demand on their own platforms by introducing content to new audiences .
What went wrong
- Paramount Global experienced a decrease of 2.8 million Paramount+ subscribers in Q2 2024 due to the exit from its hard bundle partnership with Tving in South Korea, signaling challenges in international streaming growth.
- The company recorded a $6 billion noncash goodwill impairment charge specific to its cable network reporting unit, driven by declines in linear TV and the valuation implied by the Skydance transaction, indicating troubles in its traditional cable business.
- Management expressed uncertainty about future licensing revenue growth, as they did not confirm if licensing will remain a growth driver after 2024, focusing instead on maximizing content on their own platforms and acknowledging timing dynamics affecting performance.
Q&A Summary
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Paramount+ Profitability
Q: When will Paramount+ be profitable?
A: The company aims for domestic profitability for Paramount+ in 2025, focusing on a full-year positive result. They are exploring strategic partnerships and joint ventures to accelerate profitability by improving scale, enhancing content offerings, reducing costs, and driving long-term value. -
Cost Savings Plans
Q: Can you detail the $500M cost savings and Skydance's $2B?
A: They are implementing $500 million in immediate cost savings, primarily through headcount reductions. This is just the first step; they are also pursuing additional significant cost reductions beyond headcount, which won't all occur simultaneously. These plans contribute to the initiatives comprising the $2 billion referenced in the Skydance transaction. -
Goodwill Impairment Charge
Q: What caused the $6B goodwill impairment?
A: The $6 billion noncash goodwill impairment charge is due to linear declines and the value implied by the Skydance transaction. Accounting rules require reconciling the value of individual reporting units with the enterprise value implied by the transaction, resulting in the charge specific to the cable network reporting unit. -
Content Licensing Strategy
Q: Will licensing remain a growth driver post-2024?
A: Licensing remains a compelling business. The company focuses on maximizing first-run content on its own platforms but continues to license to third parties to drive more revenue, reach, and relevance. Despite timing dynamics due to strikes, they believe long-term licensing will continue to be a growth driver. -
Charter Agreement Impact
Q: How does the Charter deal affect subscribers and revenue?
A: Subscribers who activate Paramount+ through Charter will be counted as Paramount+ subscribers. Revenue from such deals will be allocated between the TV Media segment and the D2C segment. The revenue received is not contingent on activation; it's part of the overall economics of the arrangement with the distributor. -
Cash Flow Outlook
Q: What's the outlook for free cash flow and leverage?
A: The company expects to deliver growth in free cash flow in 2024, alongside significant growth in adjusted OIBDA, with no changes to prior expectations for the year. -
International Streaming Strategy
Q: Any updates on international streaming plans?
A: While maintaining a global footprint, they are exploring options to optimize profitability. This may include strategic partnerships or joint ventures to reduce costs and drive greater profits, focusing on markets where they can achieve better scale. -
Sports Rights Strategy
Q: Will you pursue new sports rights?
A: Satisfied with their current sports portfolio, including recent deals with EFL and Serie A, they remain opportunistic and will consider acquiring additional rights that enhance offerings for both broadcast and streaming.
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With the planned reduction of approximately 15% of your U.S.-based workforce to achieve $500 million in annual run rate cost savings, how will you ensure that these cuts do not negatively impact your ability to produce best-in-class content and maintain competitiveness during the interim period before the Skydance transaction closes?
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Given the exit from the Tving partnership in South Korea and your intention to explore strategic partnerships to accelerate profitability in international markets, can you elaborate on your specific plans for the international streaming footprint of Paramount+ and how these might impact both scale and profitability?
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The recent $6 billion noncash goodwill impairment charge was attributed to declines in the linear affiliate marketplace and the valuation implied by the Skydance transaction; can you provide more detail on the specific indicators that led to this charge and how it affects your strategy for the cable network reporting unit?
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As cord-cutting accelerates and more content shifts to streaming platforms like Paramount+, how do you plan to address concerns from CBS affiliates regarding the value they receive from national programming and the potential pressure to moderate or decline reverse compensation fees?
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Considering that the Direct-to-Consumer segment was profitable in Q2 but is expected to incur losses in Q3 and Q4 due to content expenses and seasonality, what are the key factors that give you confidence in achieving Paramount+ domestic profitability in 2025 on a full-year basis, and what challenges could potentially impact this timeline?
Competitors mentioned in the company's latest 10K filing.
- Broadcast and cable networks - Compete for distribution and audiences .
- Streaming services - Compete for audiences, creative talent, and content distribution .
- Film and television studios - Compete for creative talent and content distribution .
- Production groups and independent producers - Compete for creative talent and content distribution .
- Television stations and station groups - Compete for distribution of content .
- Social media, websites, apps, and other online experiences - Compete for audiences and advertising revenues .
- Radio programming and print media - Compete for audiences and advertising revenues .
- Video games, sports, travel, and outdoor recreation - Compete for audiences and consumer spending .
Recent developments and announcements about PARA.
Financial Reporting
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Revenue and Profitability: The company reported a total revenue of $6.731 billion for the quarter, a decrease of 6% compared to the same period last year. Despite the decline in revenue, the Direct-to-Consumer (DTC) segment showed a notable improvement, with adjusted OIBDA increasing by $287 million year-over-year to $49 million .
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Direct-to-Consumer Segment: Paramount+ added 3.5 million new subscribers, reaching a total of 72 million subscribers. The DTC revenue increased by 10% year-over-year, driven by a 25% growth in Paramount+ revenue and an 18% rise in DTC advertising revenue. The segment's profitability was bolstered by cost efficiencies and revenue growth .
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TV Media Segment: Revenue in the TV Media segment decreased by 6% to $4.3 billion, primarily due to lower affiliate revenue and fluctuations in licensing revenue. Advertising revenue in this segment decreased by 2% .
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Filmed Entertainment Segment: This segment experienced a 34% decline in revenue to $590 million, largely due to a 71% decrease in theatrical revenue. However, adjusted OIBDA for the segment increased by $52 million compared to the previous year, which was impacted by labor strikes .
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Cost Savings and Strategic Goals: Paramount is advancing towards $500 million in annual run rate cost savings through organizational streamlining. The company continues to focus on strategic goals, including the anticipated closure of Skydance transactions in the first half of 2025 .
Earnings Report
Paramount Global Q3 2024 Earnings Results
Paramount Global has released its earnings results for the third quarter of 2024, showcasing significant developments and trends in its financial performance:
These results highlight Paramount's strategic focus on enhancing its DTC offerings and achieving cost efficiencies, despite challenges in other segments such as TV Media and Filmed Entertainment .