Paramount’s Bakish Looks For Ad Recovery Later This Year

After reporting soft financial results for the fourth quarter to cap a challenging year, Paramount Global is promising investors that the company’s investment in streaming will turn the corner to profitability this year. That will include an increase in subscription rates for all tiers of Paramount+. Combined with an expected second half recovery in the advertising market this year, President-CEO Bob Bakish is promising a return to earnings growth in 2024.

“2023 will be another year of content momentum. Our ’23 film stream is strong and driven by some of our most popular franchises: including Scream, Mission Impossible, Transformers and Paw Patrol. And CBS’s momentum is only getting stronger. The network is on the verge of achieving No. 1 status for the 15th straight broadcast year. And we see great stability in its schedule, with very few slots to fill — and thus limited and very focused pilot activity, which is also good for our economics. On Paramount+ you’ll see all this, plus great Paramount+ originals,” Bakish said.

“2023 will also be an important year with respect to advertising, where we are looking forward to an improvement in the market in the back half of the year. The ad market, as you know, has been cyclically tough and, like our peers, we felt this impact in 2022. Our portfolio puts us in excellent position to build on the early stabilization we’re seeing. And we are seeing early signs of stabilization in advertising. The sports marketplace continues to be active across the NFL, PGA and NCAA. We like what we’re seeing in travel and pharma — and recent activity in auto is encouraging,” the CEO said.

Bakish rolled out some data to make the case that CBS’s content viewing is on par with Netflix. “In Q4 U.S. viewers spent 370 billion minutes consuming CBS content alone on both linear and digital. That’s virtually the same amount of time as viewers spent with Netflix and substantially larger than its entire slate of originals,” he told analysts.

CFO Naveen Chopra reported fourth quarter total company revenues up 2% to $8.1 billion, while the TV Media portion of that was down 7% to $5.9 billion. But cost-cutting helped TV Media achieve 5% OIBDA growth to $1.3 billion, while total company operating income turned negative.

“The ad market continued to experience weakness in Q4, resulting in a 5% decline in Paramount’s quarterly advertising revenue. The majority of the decline came from international markets and FX [foreign exchange] impacts, while domestic advertising declined 2%,” the CFO said.

TV Media advertising company-wide was down 7% to $2.7 billion in the quarter. The company said increases in political advertising and pricing only partially offset lower impressions and a 2% unfavorable impact from FX.

CEO Bakish provided some more commentary on current ad trends in Q&A.

“There are some bright spots for sure. Categories that are really working at the moment are food and beverage, pharma, travel, and increasingly auto. So we like that. The strength really is much more so on the direct side of the business, and that’s the place where Paramount has a real advantage,” he said, then noting that the programmatic side is still soft.

“The underlying local ad business is also improving, but lower political spend will be a headwind in Q1 relative to Q4,” Chopra had noted earlier in discussing ad trends.