Paramount Misses Streaming’s Blank-Check Season
Strong subscriber growth overshadowed by aggressive investment plans as investors take harder look at economics of streaming
By Dan Gallagher
Wall Street Journal
Feb. 16, 2022 12:52 pm ET
A scene from ‘1883’, streaming on Paramount+. The company once known as ViacomCBS added more streaming subscribers in the fourth quarter than analysts expected, but its shares nevertheless fell. PHOTO: EMERSON MILLER/ASSOCIATED PRESS
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Sometimes being late to the party means missing the best part.
Just ask the company once known as ViacomCBS. The media giant unveiled its new Paramount Global moniker on Tuesday along with its fourth-quarter results. The renaming closely aligns the company’s identity with the Paramount+ streaming service that launched last March.
That was late compared with streaming platforms from other media giants, but the company has made up for lost time. Paramount+ ended the year with nearly 33 million subscribers; Peacock, the streamer launched by NBCUniversal nine months earlier, ended the year with 24.5 million monthly active accounts and 9 million paid subscribers.
Paramount also said Tuesday that it added 9.4 million subscribers across all of its streaming services during the fourth quarter, which was 47% more than analysts had projected. Such a disclosure used to be enough to send a media company’s stock soaring. But Paramount’s share price actually slid 22% Wednesday morning. The company’s adjusted operating income for the fourth quarter came in around $557 million—20% below Wall Street’s expectations—due mostly to the heavy investments it is making in streaming.
That bottom-line pressure won’t be ebbing soon. The company used an analyst meeting Tuesday following the results to showcase some major movies and shows on the way and to boost the long-term targets it gave investors a year ago. Paramount now expects to hit 100 million paid subscribers by the end of 2024—it has about 56 million now. The 2024 target for revenue and content costs for the direct-to-consumer, or DTC, segment that includes streaming were both raised by 50% from their prior levels. Operating losses in DTC are expected to keep growing from the $1 billion reported for 2021 for the next two years. The company said those losses would start to moderate in 2024, but it gave no timeline for its streaming segment to reach profitability.
Paramount is hardly the only media titan running up big losses to chase the streaming opportunity. Even Walt Disney, whose Disney+ service now has nearly four times the paid subscribers of Paramount+, expects to run losses in streaming over the next two years. But the Mouse House also has an almost fully recovered theme-park business to help with cash flow.
Investors clearly are getting more sensitive to the brutal economics of streaming. Netflix added 8.3 million subscribers in the fourth quarter, which was down slightly from 8.5 million added in the previous year’s fourth quarter despite a 20% jump in the number of new original content releases. That, combined with a disappointing outlook, has taken nearly one-quarter off the streaming pioneer’s market value since its Jan. 20 report.
Paramount’s rebranding and plan to double down on streaming also would seem to take other options off the table, such as a partnership or merger with another media outlet looking to catch up in streaming. Jessica Reif Ehrlich of Bank of America downgraded the company to a “neutral” rating Wednesday, noting that her prior rating “was largely predicated on [Paramount] being a potential attractive target amid a wave of industry consolidation.” Doug Mitchelson of Credit Suisse noted that the company’s recent shift “leaves investors with a challenging dynamic” in how to treat streaming losses in a market already skeptical about too much competition.
Simply racking up eyeballs no longer seems enough.
Write to Dan Gallagher at dan.gallagher@wsj.com
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Appeared in the February 17, 2022, print edition as 'Paramount Misses Streaming’s Blank Checks.'
Paramount Misses Streaming’s Blank-Check Season - WSJ |
