Paramount Global—the media conglomerate that owns CBS, Nickelodeon, MTV, and Showtime, among other major broadcasting networks—has been placed by independent rating firm S&P Global on negative credit watch, citing weaker cash flow trends.
The warning follows the company’s move toward a “lower margin” streaming model and away from traditional cable television.
S&P Global also noted that the margin and cash flows generated by direct-to-consumer streaming platforms—such as Paramount Global’s streaming services, Paramount+ and Pluto TV—would be lower than the linear television segment as a result of “greater required content spending, higher technology investments, and higher marketing and subscriber acquisition costs.”
According to the report, Paramount Global isn’t the only media brand to encounter weakened free cash flows while developing its streaming component. However, S&P indicated the company did have weaker cash flow metrics compared to its similarly rated counterparts.
“Its cash flow declines have been worse than its industry peers because of its smaller scale, less business diversification, and slower DTC [direct to consumer] ramp up,” the report states.
Although S&P Global alluded to potential opportunities for Paramount and other media companies to “capture consumers and advertisers” in the streaming realm, it noted that “the environment is more competitive than the traditional linear model due to the highly competitive landscape and higher churn dynamics.”
Paramount’s Streaming Services Report Losses
Paramount Global has a big bet on streaming to try to better compete with Netflix. Breitbart reported more than $1 billion in losses for Paramount+ and Pluto TV in the six months leading up to May 2023. The company reportedly lost a staggering $511 million in the fiscal first quarter even as it added subscribers and viewers.The media conglomerate also narrowed its losses to $238 million, from $343 million the previous year. Additionally, Paramount+ gained 2.7 million new subscribers, bringing its total subscribers for the quarter to 63 million. However, as of Sept. 30, the media company had accrued $15.17 billion in net debt, according to The Globe and Mail.
Paramount Global is set to report its fourth quarter and full-year financial results for 2023 during a conference call on Feb. 28.
Paramount Sets Layoffs
Paramount Global’s “credit watch negative” rating follows reports of layoffs earlier this month. On Feb. 13, CNBC reported that the company—which had roughly 24,500 full-time and part-time employees at the close of 2022—had announced it would be laying off 800 employees, or about 3 percent, in an internal memo sent out to employees.“I am confident this is the right decision for our future,” CEO Bob Bakish, wrote in the memo. “These adjustments will help enable us to build on our momentum and execute our strategic vision for the year ahead—and I firmly believe we have much to be excited about.”
Amid the company’s financial struggles, speculation of an impending sale of Paramount Global continues to swirl. Most notably, businessman and film producer Byron Allen was said to have made a bid to purchase the media giant via his entertainment company, Allen Media Group.
“We’re focused on day-to-day execution because that is the most predictable creator of value. But, of course, we look more broadly at options, and we look at a lot of things. As to what direction we’re going to go, we’ll see,” he said.
“But what it really tells you is there’s extraordinary value in Paramount Global. This is an unmatched content collection in the world, our studios, our libraries ... incredible value creators in content, so—again, a lot of value here.”
When asked whether or not Mr. Allen did indeed make a bid on Paramount, the CEO offered little. “I’m not going to comment on speculation as you might guess,” he told Mr. Faber, reiterating that the company was focusing on generating shareholder value “through execution or through alternate means.”
