Advanced Television

Analysts issue Paramount Global warning

May 22, 2023

Research analysts MoffettNathanson (MN), at their first Technology, Media, and Telecom Conference in New York City last week, made a number of individual recommendations to delegates. Not all were positive.

Amongst the portfolio were Meta Platforms, Cogent Communications, video games business Roblox, Charter Communications and Paramount Global.

Analyst Robert Fishman from MN said that even though Paramount’s stock price had “underperformed” over the past year or so (down 45 per cent), he added that “Paramount has performed among the worst in our universe, but we’re going to show you why this should continue.”

Fishman explained that much of the focus over the past year had been on Paramount+ “and the success that they’re having on their direct-to-consumer pivot. In 2022, DTC revenues represented only 16 per cent and that’s with the success they’ve had up to that time. TV Media, which is driven by the linear networks, is still over 70 per cent of the company.”

He added that linear Advertising and Affiliate fees had declined by only 1 per cent over the past 3 years (CAGR) with Advertising being relatively stable, and Affiliate fees growing slightly.

Fishman advised delegates that over the next 3 years he expected a deceleration of these trends. “We project advertising revenue to drop by over $1 billion, and that’s being driven by not just the macro, but all of the linear viewership today that is essentially going away. On the affiliate fee side, we have probably an optimistic picture here, where affiliate fees are set to decline, and retrans staying stable and essentially offsetting a lot of the cable network portfolio declines.”

He said that the costs for original programming on Paramount and Paramount+ the company was talking about reaching “peak losses” this year. Fishman disagreed, and said he did not see direct-to-consumer as being “a real path to profitability”.

He concluded, saying: “Putting it all together, what we tried to lay out here is why we think Paramount has more downside risk despite the decline we’ve seen to date. We’re still Underperform with a $12 Price Target, which represents about 20 percent downside from here.”

Perhaps affecting the overview of Paramount+ prospects could be the price it charges for access. Paramount+ will raise its monthly subscription price to $11.99 (up from $9.99), when Showtime is included. Showtime will be added on June 27th.

Paramount+ is also hiking its price for its ‘Essential’ option from $4.99 to $5.99 and the OTT service will continue to add Pluto TV for subscribers. Paramount will close its Showtime app.

“From Yellowjackets to Your Honor, Showtime is home to big, premium, sophisticated series which will now be complemented with broad, blockbuster originals and movies in the alignment of Paramount+ with Showtime,” said Chris McCarthy, president/CEO for Showtime/MTV Entertainment Studios & Paramount Media Networks, in a statement. “Together, Paramount+ with Showtime will provide our consumers a much more rewarding experience with our vast set of unique originals and deep library of iconic shows and hit films.”

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