Paramount Global: Financial Challenges and Growth Potential
Paramount Global faces financial challenges amidst streaming growth, declining traditional assets, and merger speculation in 2024.
Paramount Global, long the subject of talk that it might be sold, continued to balance a fast-growing but unprofitable streaming business with a collection of declining television and movie assets in late 2024.
Paramount’s fourth-quarter results, released Wednesday evening, illustrate the challenges and time pressures faced by traditional media companies working to pivot from cable and movie-theater business models to direct-to-consumer offerings in the streaming age.
Paramount has been most in the news lately in regards to merger speculation. Since the fall, Warner Bros. Discovery, Allen Media Group, and Skydance Media have all reportedly been in talks with or interested in taking over the company or its Redstone family-controlled parent, National Amusements, but no deal has emerged.
In conclusion, Paramount Global faces a delicate balance between its growing streaming business and declining traditional assets as it navigates through a changing media landscape in 2024.
For all of 2023, Paramount recorded an adjusted Oibda loss of $1.7 billion on its streaming business. That was again a slim improvement over 2022, and management said on Wednesday that streaming losses should narrow again in 2024. They expect Paramount+ to reach profitability in the U.S. in 2025.
The kind of fast but unprofitable growth seen at Paramount is unlikely to get as much credit from investors in the current higher interest-rate environment as it did a few years ago, when growth-at-any-price stocks were in vogue.
When the streaming business is coupled with a melting ice cube of cable-TV and movie profits, Paramount needs to fund those streaming losses until the break-even point is reached. Paramount’s largest segment—TV media—saw a 12% drop in revenue, to $5.2 billion, as adjusted Oibda also dropped 12%, to $1.1 billion.
Trends at Paramount’s smaller movie segment looked even worse. Revenue was down 31% to $647 million and adjusted Oibda tumbled 63% to $24 million.
The overall picture is of a race between declining legacy profits and narrowing losses on streaming, with an eventual path to profitability. For Paramount shareholders, a sale of the company may be the ultimate—and best—outcome. The question remains at what price.
Paramount stock is up 7.1% on Thursday, but has lost 48% over the past year. Analysts aren’t particularly bullish, with only 26% having a Buy or equivalent rating on Paramount stock, versus 39% at Sell.
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