By Paramount Global, a company long rumored to be up for sale, continues to navigate the delicate balance between a rapidly expanding yet unprofitable streaming business and a portfolio of declining television and movie assets as of late 2024.
Fourth Quarter Challenges
The fourth-quarter results released by Paramount on Wednesday evening shed light on the obstacles and time constraints faced by traditional media companies transitioning from traditional cable and movie theater models to direct-to-consumer offerings in the streaming era.
Paramount’s revenue for the last quarter of 2024 stood at $7.6 billion, a decrease from $8.1 billion in the previous year’s same period. Despite Wall Street analysts’ average prediction of $7.8 billion, the company reported a loss of 2 cents per share, in contrast to an 8-cent profit the year before, with adjusted Oibda reaching $520 million, down 15% from $614 million.
Merger Speculation
Recent headlines have focused on Paramount amidst merger talks with Warner Bros. Discovery, Allen Media Group, and Skydance Media expressing interest in acquiring either the company or its Redstone family-controlled parent, National Amusements. However, no concrete deal has materialized despite ongoing discussions.
Paramount’s share price has fluctuated between $11 and $17 over the past four months as merger rumors have swirled in the media.
Streaming Growth Amidst Losses
Despite this rapid growth, Paramount has yet to see profitability in its streaming division, reporting an adjusted Oibda loss of $490 million in the fourth quarter, a slight improvement from the $575 million loss during the same period a year earlier.
Paramount’s 2023 Streaming Business Performance
In 2023, Paramount reported an adjusted Oibda loss of $1.7 billion for its streaming business. While this showed a slight improvement from the previous year, management anticipates further narrowing of streaming losses in 2024. The goal is for Paramount+ to achieve profitability in the U.S. by 2025.
Investors’ Perspective and Market Conditions
Investors may not view rapid but unprofitable growth as favorably in the current high-interest-rate environment compared to previous years when growth-at-any-cost stocks were in demand. This sentiment is particularly relevant considering the coupling of Paramount’s struggling cable-TV and movie profits with its streaming losses.
Financial Challenges and Segment Performance
Paramount’s TV media segment, its largest, experienced a 12% revenue decline to $5.2 billion, coupled with a 12% drop in adjusted Oibda to $1.1 billion. Revenue streams from affiliate fees, advertising, and licensing also faced challenges.
The company’s movie segment saw an even steeper decline, with revenue down 31% to $647 million and adjusted Oibda plummeting by 63% to $24 million.
Path to Profitability and Potential Sale
The overarching narrative for Paramount is one of balancing dwindling traditional profits with the prospect of reducing streaming losses en route to profitability. For shareholders, the possibility of a company sale looms as a potential optimal outcome, although the price remains a key consideration.
Paramount stock has experienced a 48% decline over the past year, with significant drops following announcements such as dividend cuts aimed at conserving cash. Job reductions have also been part of recent cost-saving measures.
Analyst Sentiment and Market Position
Analysts exhibit limited optimism, with only 26% holding Buy or equivalent ratings for Paramount stock, contrasting with 39% urging to Sell. In comparison, the average S&P 500 stock garners around 55% Buy ratings.
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