The Board of Directors of Paramount Global announced that Bob Bakish, President and CEO, is stepping down from his role as CEO and from the Board of Directors. To lead and oversee the company moving forward, Paramount Global has established an Office of the CEO, consisting of three senior company executives: George Cheeks, President and CEO of CBS; Chris McCarthy, President and CEO of Showtime/MTV Entertainment Studios and Paramount Media Networks; and Brian Robbins, President and CEO of Paramount Pictures and Nickelodeon. Cheeks, McCarthy, and Robbins will work closely with Naveen Chopra, CFO, and the Board of Directors.
The Office of the CEO is working with the Board to develop a comprehensive, long-range plan to accelerate growth and establish popular content, materially streamline operations, strengthen the balance sheet, and continue to optimize the streaming strategy. The Board has great confidence in the leaders comprising the Office of the CEO, all of whom are senior creative executives and business leaders with a track record of success running meaningful businesses within Paramount Global. Shari Redstone, Chair of the Board, said: "Paramount Global includes exceptional assets, and we believe strongly in the company's future value-creation potential. I have tremendous confidence in George, Chris, and Brian. They have the ability to develop and execute a new strategic plan and to work together as true partners. I am extremely excited for what their combined leadership means for Paramount Global and for the opportunities that lie ahead."
The Board of Directors said: "The creation of the Office of the CEO will enable the company to accelerate growth and strengthen operations. We look forward to working with George, Chris and Brian as they execute on key initiatives to enhance performance and value creation at Paramount Global."
Bob Bakish joined Viacom in 1997 and took on roles of increasing seniority across the company's operations, becoming CEO of Viacom in 2016 and the CEO of the combined company in 2019. Ms. Redstone said: "The Board and I thank Bob for his many contributions over his long career, including in forming the combined company and his successful efforts to rebuild the great culture Paramount has long been known for. We wish him all the best."
Paramount reported on Monday its q1 2024 earnings results, which highlighted that Paramount+ increased revenue by 51% year-over-year and reached more than 71 million global subscribers. The company's direct-to-consumer adjusted OIBDA improved year-over-year for the fourth consecutive quarter, and total advertising revenue rose 17%; total company revenue increased 6%. Paramount generated $260 million of net operating cash flow and $209 million of free cash flow in Q1.
"The team delivered another quarter of strong operational and financial performance — including significant growth in total company earnings and free cash flow — despite the dynamic environment we continue to operate in. It was a record-setting quarter for Paramount+ in engagement, revenue, and the DTC segment as we continued to narrow streaming losses substantially. And CBS dominated with its powerful combination of sports and the return of a delayed fall slate that launched to massive audiences. As we look ahead, we remain focused on execution and transforming our cost base to best position Paramount for the future", said Naveen Chopra, Executive Vice President & Chief Financial Officer.
BUSINESS PERSPECTIVE
Paramount Global has a highly valuable, top-tier content library but has not translated this into an industry-leading streaming offering, according to data from Parrot Analytics. The company explained that the combination of a money-bleeding DTC segment, a struggling studio, and exposure to linear TV has made Paramount Global as a whole worth less than the sum of its parts. Paramount+ has a loyal audience for specific scripted fare, such as the "Star Trek" and "Taylor Sheridan" universes. It also has exclusive access to premier live sports, most notably the NFL, March Madness, and the UEFA Champions League, among others.
Paramount's linear assets, however, are the most significant question mark. While CBS remains the most-viewed broadcast network in total viewers, essential cable networks such as MTV, BET, Comedy Central, and VH1 face brand perception challenges in the modern marketplace and rapidly declining viewership. The new owner will need to modernize the company's strategy lest it fall prey to the same issues. Depending on the new owner, Paramount Global can either revitalize itself with an influx of new resources and fresh ideas or become a downsized footnote in Hollywood.
Corporate demand share can assess which companies have the most valuable content to license and can help value a conglomerate's legacy and library content in aggregate. According to Parrot Analytics, Paramount Global remains in third place in this category, well ahead of NBCUniversal and Netflix, but significantly behind leaders Disney and Warner Bros. Discovery, although growing slightly in Q1 2024, from 11.9% in Q4 2023.
Streaming original content accounts for a fraction of the overall demand for most streamers, showing why many legacy companies are now re-opening up their libraries to licensing deals after trying to build walled gardens earlier this decade. Paramount+ highly relies on the programming of Paramount Global's broadcast (CBS) and cable channels (Nickelodeon, Comedy Central, etc). Given the decline in the cable TV business, it's questionable what a buyer would want with these linear channels in the long term.
While demand for original content drives subscription growth, library content is critical for customer retention, an increasingly crucial element of all streaming strategies, as consumers have more choices and easier ways to cancel than ever. Paramount+ (8.6%) has now finished behind Peacock (8.8%) for two quarters in a row. Peacock consistently placed last among the significant streamers in on-platform demand share until Q4 2023.
As Paramount Global contemplates its future amidst challenges in the streaming landscape, the potential for revitalization looms alongside the risk of stagnation. With its valuable content library and loyal audience base, Paramount+ holds promise, yet the fate of its linear assets remains uncertain. As corporate demand share shifts and streaming strategies evolve, the company faces a pivotal moment shaping its trajectory in the competitive entertainment industry.