Going into 2024, Paramount confronts more financial uncertainty and pressure than any other media corporation.
Speaking at the UBS investor conference on Tuesday, Deadline reports that Naveen Sarma, managing director and sector head for S&P’s U.S. media and telecom sectors, made this claim. Sarma presented the argument for why Paramount is less competitive than bigger media companies like Disney or Warner Bros. Discovery because of its smaller size.
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During the entire meeting, Sarma defended his company’s decision to lower Paramount’s credit rating, pointing out that the company’s cash flows suffered greatly as a result of a botched switch from traditional cable TV to streaming. Early in the year, its rating fell from BBB to BBB-, approaching the lowest tier of investment grade.
He pointed out that because of its lower credit rating, it would have trouble obtaining “commercial paper,” which are smaller, shorter-term loans with more affordable interest rates that are used to support initiatives. This is an issue as Paramount continues to spend a lot of money on properties like its Star Trek and Halo franchises, which will soon release a second season. In 2024, it is also expected to owe the NFL $2 billion in broadcasting rights.
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Sarma’s remarks are only the most recent example of the difficulties Paramount has. Paramount really debuted its streaming service, once known as CBS All Access, years ahead of some of the major players. However, the service hasn’t had as much of an impact in the years that have passed, and Nielsen’s list of the top streamers for November did not include it. Over the past few months, Pluto TV, the company’s free ad-supported service, has continuously outperformed Paramount+.
This is in addition to Paramount’s ongoing financial losses from its streaming division, which saw an operating loss of $238 million in the third quarter compared to a loss of $343 million in the same period last year. CEO Bob Bakish stated that the company anticipates a return to increase in total earnings in 2024, but he did not specify when the streaming division would start to produce a profit.
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Disney and Warner Bros. Discovery may increase their earnings before interest, taxes, depreciation, and amortization, according to Sarma, but the situation “isn’t clear cut with Paramount.”
The analyst pointed out that Paramount’s lesser presence is mostly to blame for the problem. According to Deadline, Sarma stated, “The size and scale of that business relative to their peers is putting a lot more pressure on the rest of their business.”
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