Paramount Results, Q4.23 earnings analysis

1. TV Media revenues are stagnant... Massive, but stagnant. Ads down 15%, licensing down 9%. I love their strong focus on content post-strikes but licensing will take a little while to claw back.
2. Predicting “low to mid teens” growth in advertising. Digital ads were up 17% YoY and will grow along with their digital footprint, but expecting a turnaround on linear feels against the market (I’ve seen between -9% & 0% est.).
3. D2C & Paramount+ (P+) growth is impressive. 61% YoY revenue growth (P+), driven by subs (21%) and ARPU (33%). Further price increases are anticipated but expected to slow, ARPU (max) 20% and subs (max) 79m thru 24. By my calcs, this would cap P+ revenue at a $2.3Bn increase, $6.8Bn FY24.
4. They’re nearing profitability for P+, currently spending $1.25 (23) for every dollar earnt (21: $1.30, 22: $1.37) - Warner Bros. Discovery needed c.100m subs to break even so 2025 probably sounds about right.
5. I’m not a fan of the ‘global’ digital strategy, pulling back from local content and marketing, relying on domestic US hits to drive growth. Given it’s 1 of 3 corporate priorities, in such a competitive market, this feels counterintuitive.
6. Lastly, they seem pretty focused on cost savings, another $1Bn restructuring charge expected early this year. The way they quickly brushed off any M&A questions on the call suggest these are active considerations.

So, all considered, upside could look like $2.0Bn to $3.5Bn, if all goes well, and closer to flat (digital replacing falling TV income) if it doesn’t. A lot will depend on execution and the continuing shift of core market dynamics. That or finding the right buyer!