Paramount’s Big Game Is Still a Sideshow

Paramount owns cable networks such as Nickelodeon and BET and broadcast network CBS.
Paramount owns cable networks such as Nickelodeon and BET and broadcast network CBS.

Summary

The Super Bowl gave its beleaguered ad business a lift, though deal rumors still cloud the media giant’s future.

Too bad a Super Bowl with Taylor Swift in the stands doesn’t happen every quarter.

The record-breaking Super Bowl featuring the world’s biggest pop star will be giving a nice lift to Paramount Global’s beleaguered TV advertising business. On a conference call Wednesday to discuss the company’s fourth-quarter report, Chief Financial Officer Naveen Chopra said Paramount expects low to midteen percentage advertising revenue growth in the first quarter of this year, including the impact from the Super Bowl.

Given that Paramount’s ad business has fallen year over year in the past eight consecutive quarters, with an 11% drop in the fourth quarter being the worst, a turn is undoubtedly good news. Paramount’s share price rose slightly in after-hours trading following Wednesday’s call.

But it will likely be a short-term boost at best given the accelerating pace at which cable subscribers are cutting the cord and moving to streaming. Paramount entered the streaming ad game early, before higher-profile rivals like Disney and Netflix. But the scales still don’t balance evenly. Paramount expanded its streaming ad business by around $260 million in 2023, but its TV ad business shrank by nearly $1.2 billion during the same period.

Paramount is hardly the only traditional media giant struggling with the brutal shift to streaming economics. It is, however, the one bearing the largest “For Sale" sign in the industry. The past couple of months have brought a seemingly endless stream of headlines about suitors knocking on the door. But no deals have yet emerged, and one potential acquirer—Warner Bros. Discovery—reportedly dropped out this week. That deal would have been a stretch: Warner carries three times as much debt as Paramount and isn’t any more popular with investors, with its stock having lost a third of its value over the past six months.

The strongest possibility seems to be the independent film producer Skydance Media, run by David Ellison, the son of the billionaire co-founder of Oracle, Larry Ellison. But that would be a complicated option as well. Skydance is reportedly looking at taking control through Paramount’s controlling shareholder, National Amusements. Paramount executives wouldn’t discuss the deal rumors on Wednesday’s call, and investors don’t seem convinced something good is on the horizon. The stock has slid around 20% over the past three months since reports of the first deal talks started to surface, and 39% of Wall Street analysts polled by FactSet maintain sell ratings on the shares—by far the highest portion of bearish calls among media peers.

The latest results won’t change that dynamic, the Super Bowl boost notwithstanding. The company’s overall streaming revenue came in a little better than expected for the fourth quarter, with 4.1 million net new subscribers added to the Paramount+ service. That led the company to project that streaming will become profitable next year. But overall revenue still fell by 6% year over year to $7.6 billion, driven by the ad weakness and a theatrical business hurt by the Hollywood strikes. The settlement of those strikes means more shows are coming this year and next.

They will have to compete with Paramount’s corporate drama, which seems to have plenty of episodes remaining.

Write to Dan Gallagher at dan.gallagher@wsj.com

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