I found this Hollywood Reporter scan of investor reactions well done.
It addresses many of the points of speculation swirling around the Star Trek franchise. (It also gives me pause, as there’s a strong implication that Paramount and other AMTPT members are using the WGA and SGA-AFTRA strikes to cooldown excesses in competitive streaming production at the expense of the creators and talent.)
It covers Paramount Global’s quarterly earnings report, CEO Baklish’s statements around direct to consumer (DTC, i.e. streamers and Pluto) strategy, and the sale of Simon and Schuster.
TLDR: Don’t put credence in firesale narratives that would see the Star Trek IP sold off to another streamer / content producer - but expect tighter constraints and more careful playing of market niches/segments in greenlighting and scheduling new franchise content.
Here are some key points/excerpts…
- Paramount Global got most of the bad news out to investors last quarter, taking the price punishment in one go. Between the strike and the sale of Simon and Schuster (as well as the debt restructuring announced last quarter) is now in a better cash position, able to lower its relatively high leverage (debt ratio). Its streamers are also expected to be closer to profitable.
… the second quarter saw the conglomerate beat Wall Street estimates and “speak to ‘significant growth’ in earnings for ’24,” the Wells Fargo expert noted. “Paramount is also expecting accelerating direct-to-consumer (DTC) ad revenue in the third quarter, better second-half free cash flow due to the strikes and should see more than 20 percent DTC global average revenue per user (ARPU) growth in ’24.”
- Don’t expect the Redstone family to break up Paramount Global to achieve a sale.
Steven Cahall, the Wells Fargo analyst also shared his take on what he described as some investors’ “M&A dream.” Mentioning a value of around $25 billion on Paramount’s studio and content assets, Cahall shared: “We can think of five well-heeled buyers for content/studios in isolation, but only one to two (and maybe zero) if networks/DTC are part of a deal.” While “M&A works with a break-up,” he believes that Shari Redstone-controlled owner National Amusements wouldn’t go for that option, writing: “Unfortunately, we think NAI would only consider a deal for the whole.”
- Paramount Global’s doing a reasonable job of managing the hand it was dealt (in terms of selling off assets) and is moderating its streaming strategy.
MoffettNathanson analysts Robert Fishman and Michael Nathanson, “Although we remain skeptical, Paramount believes DTC can ultimately turn into a meaningful profit driver,” they noted. “Management seemed to concede that it had narrowed the scope of its DTC ambitions, saying it is rejiggering its content strategy to focus on the demographics that have already flocked to the platform with an eye towards increasing engagement and thus reducing churn.”
- Paramount is doing better in curbing the free fall of linear television
Beyond Wall Street, Third Bridge analyst Jamie Lumley also commented on Paramount’s latest financial and operating update. “In an environment where traditional TV is under increasing pressure, Paramount brought some stability to its TV Media segment with revenue dropping just 2 percent,” he noted. “However, our experts caution that what’s important to see is the fall season given the degree of impact that the writers and actors strike will bring to Paramount’s lineup.”
