With just two months under its belt, the new Paramount executive team led by CEO David Ellison made its first Wall Street appearance on an earnings conference call Monday and laid out a vision for a $1.5 billion investment in entertainment and sports — and another $1 billion in cost savings.
Shares rose 5% in after-hours trading when the news came out.
While the call was brief, with a lot of talk of “North Stars” and promises to invest in content and infrastructure, the reality of its challenges loomed — which includes layoffs of as many as 2,000 employees. Paramount posted a third-quarter loss of $257 million, or 37 cents a share. Even adjusting for one-time items, the company lost $24 million, or 12 cents a share, far below the estimate of 38 cents a share in profit Wall Street was expecting.
Looking ahead, the company expects to generate $30 billion in revenue in 2026, up from Wall Street’s projection of $29.1 billion this year.
Here are the five biggest takeaways from the call:
- M&A: Without mentioning Warner Bros. Discovery directly, Ellison said there were “no must-haves for us”
- Streaming a priority: Ellison wants to invest more in content
- UFC is a unicorn: Leadership sees it as a unique asset to win new audiences to Paramount+
- Broadcast and cable, not so much: While some money will be put into CBS, Paramount is still figuring how to go digital with its cable brands
- Going bigger with theatrical: The company expects to ramp up to 15 films annually starting next year
M&A
There were frustratingly few questions about Paramount’s multiple bids for Warner Bros. Discovery, but Ellison did offer a nugget to the single question asked about the M&A activity in the industry.
“It’s important to know that there’s no must-haves for us,” Ellison said. “We really look at this as buy versus build, and we absolutely have the ability to build to get to where we want to go.”
The comments, at face value, could be interpreted as Ellison signaling that he’s willing to walk away from a WBD bidding war. Or it could just be a bit of gamesmanship as WBD CEO David Zaslav tries to drum up as much interest as possible, with both Comcast and Netflix exploring bids for the company.
“As it relates to M&A, everything for us is going to tie back to: Does it accelerate those three core principles? We’re fortunate that we have the balance sheet to be able to be opportunistic when we think that M&A will accelerate our goals, but we’re also long-term-disciplined owner-operators,” Ellison added.
Still, it’s more than Zaslav offered last week on the WBD call, when he said there was an “active” sale process going on.
Streaming is the priority
Paramount added 1.4 million streaming customers, bringing its total base between Paramount+, Pluto and BET+ to 79 million.
“We’ve made really great progress in that arena,” Ellison said. “We need to increase investment in our content.”
The company said that it was investing an additional $1.5 billion in everything from streaming to expanding its film slate. He also rattled off a few of the big players he has signed, from retaining “South Park” stewards Trey Parker and Matt Stone to bringing in “Stranger Things” creators the Duffer Brothers next year.
Notably, Ellison did not address Taylor Sheridan, who is set to leave for NBCUniversal in 2029. His numerous shows, from “Tulsa King” to “Landman,” power a significant amount of demand for Paramount+.
But all that extra content will come at a cost to the consumer, with a price increase expected to kick in early in the first quarter.
Ellison also took the time to address one of his favorite topics, technology. In talking about the goal to become “the most technologically capable media company,” he reiterated the benefits of consolidating Paramount+, Pluto TV and BET+ into a unified backend infrastructure, which would allow the company to deliver a more consistent experience to customers and better help serve ads to the different services.
He said the goal was to get those services unified by the middle of next year.
UFC is a “unicorn”
One of the big investments it’s already making in content is a seven-year, $7.7 billion deal to become the home of UFC.
Paramount leadership tossed the term “unicorn” around a lot during the call when describing UFC’s value. Ellison talked about the opportunity that comes from UFC, which he noted is the largest sport not split across multiple platforms.
Paramount+ Chief Operating Officer Andy Gordon said that both its streaming and CBS audience tends to skew female and older, so UFC is an effective way of attracting younger men and improving its audience mix. He added that UFC is a year-round sport, so you wouldn’t get users dropping off a service once a season ends, like with the NFL.
Broadcast and cable, not so much
With all of the attention on streaming and content plays for its direct-to-consumer business, Ellison called CBS a “cornerstone,” although he acknowledged the challenges there.
“On the broadcast side, obviously it’s declining,” he said. “It’s a linear asset like any other linear asset, but the declines are very modest compared to the cable side, and those don’t even take into account the fact that the content on the broadcast side is increasingly a huge driver on DTC, both in terms of subs and engagement.”
While revenue comes from streaming, CBS still provides the company with reach, he added.
He was far more critical of the cable business.
“On the flip side, cable is continuing to decline, and each quarter is accelerating decline, not just for us, but for everybody around the media business, and it’s increasingly clear that streaming, first and foremost, is a replacement for that,” he said.
Paramount president Jeff Shell reiterated that there were no plans to spin off or sell the cable networks, which he said historically has not benefited Paramount. While talking up the potential value of networks like Nickelodeon, MTV and Comedy Central, he didn’t provide specifics on what he planned to do with them.
“Our goal is to look at those brands, see if we can transform those businesses in a digital way to drive value long term and make them increasing pieces of our overall scale, global streaming strategy, which is our core business, so that’s our plan,” Shell said.
Going bigger with theatrical
One of the reasons the theaters cheered Skydance’s merger with Paramount was because of the prospect of the studio producing more theatrical films.
On the call, Ellison said he was targeting at least 15 films a year starting next year, which is earlier than expected. But in August, Ellison said he was aiming long term to release 20 films a year. A company spokeswoman said that the company still wants to get to that level at some point.
Still, that’s more than the roughly eight films a year Paramount is releasing at the moment.
“While this rebuilding will take time, we are confident that our creative direction and business strategy will deliver the quality films that will enable us to engage and expand audiences worldwide more broadly,” he said.
