Now it's Paramount's turn to spook the investment market
Welcome to a Friday edition of Unmade, the industry newsletter your boss actually reads. Today, Paramount’s drop in TV advertising spooks the market, and another messy day on the Unmade Index.
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Bad news from Bob Bakish
For the second time this week, a media company lost more than a quarter of its valuation in just a few minutes.
After Ooh Media’s profit warning on Wednesday triggered a two-day price decline of more than 30%, we turned back to the tail end of quarterly profits season in the US for an overnight update from Paramount Global.
It was poor news for investors, triggering a 29% fall in the share price while Australia was asleep last night.
Most significantly, Paramount’s global TV revenue fell by 8%, while costs rose, taking the company to a loss for the quarter of more than US$1bn.
Alongside that news, Paramount slashed the dividend it pays its investors, to make an annual saving of about half a billion dollars per year. And although global president Bob Bakish repeatedly insisted this was merely prudent financial management to allow the company to invest nimbly, the repeated question of the investor conference call that followed was varying versions of why now? Is the company’s US$15bn in long term debt beginning to weigh down its thinking as interest rates rise?
While Paramount’s most famous TV asset is the CBS network, outside of the US Network Ten in Australia and Channel 5 in the UK are up there.
There was no specific mention for Ten in the update, but a couple of oblique references. “Advertising revenue declined 11% year-over-year, reflecting weakness in the global advertising market and fewer NFL games on CBS”. In actual terms, global revenue was down from US$2.52bn for the quarter to US$2.26bn.
Ten has, of course, contributed to that weak performance. Despite the local TV market suffering local declines for the quarter of more than 10%, this week’s updates from Nine and Seven suggested they did not have the worst of it, which implies that Ten did.
There were other signals though. The persistent local rumours that Ten might be for sale, still doesn’t accord with what the global management are saying, even when you read between the lines. Bakish referred more than once to his plan to restart the sale process of book publisher Simon & Schuster. The previous attempt to sell to Penguin Random House was blocked on competition grounds. But there was no vibe during the Q&A session that they’d be interested in getting rid of TV assets. The Ten sale rumour still feels more like wishful thinking from competitors.
Another signal points to something worth keeping an eye on locally. Bakish said he wanted to see higher affiliate revenues. For Southern Cross Austereo, which takes the Ten signal in most of its regional markets, that’s badly timed, as the affiliation agreement is due for renewal at the end of next month.
And whenever the market gets bad news, it likes to hear about cost cuts, which often means job losses. Asked about headcount Bakish used an ominous phrase for employees: “Rest assured, that’s something we’re very focused on”.
And Bakish also said the quiet part out loud. You know you’ve reached a certain stage of a downturn when media companies start cranking out the message that brands that continue to spend get an outsized advantage on the other side.
But in the real, short term world, boards have skeptical investors to placate, so they look for the least painful place to make cuts. As Bakish put it: “We’ll be evolving marketing budgets where it makes sense, and where we can do so efficiently.” Later he referred a second time to “marketing efficiencies”.
Still, it’s a bad look for media companies to prosecute the case to brands to keep spending without doing the same themselves.
The stock market seemed to give less weight to the good news part of the presentation: Paramount’s streaming operations are rapidly growing - with direct-to-consumer revenue up 39% for the quarter from US$1.1bn to US$1.5bn. That comes both from subscription revenues from Paramount Plus and its ad-supported Pluto TV streaming channels. Subs revenue was up 50%, rising above US$1bn for the quarter for the first time. Advertising grew by 15%. That’s a respectable growth story.
If Bakish’s commitment to the market that Paramount has now reached its peak investment phase is correct, then profits should soon improve. Looking at the share price, the stock market doesn’t necessarily believe him.
Unmade Index falls for a fourth day
Ooh Media’s poor week continued yesterday with the company seeing the biggest decline on the Unmade Index for a second day in a row.
Yesterday saw Ooh’s market capitalisation fell to $674m after a 4.03% tumble in share price for the day, following on from Wednesday’s 24% fall.
Meanwhile, Seven West Media saw a 3.90% decline yesterday.
Agency holding company Enero, parent company of BMF and Hotwire, gained 3.67%, while B2B publisher Aspermont posted a 13.33% lift in share price just two days after experiencing a 16.7% fall.
Time to leave you to your Friday.
I’ll be back with Best of the Week tomorrow morning.
Publisher - Unmade