Amid an M&A frenzy that sees the biggest entertainment giants become even bigger, analysts and pundits alike have singled out Paramount Global (fka ViacomCBS) as a company that Apple, Amazon, or Comcast might want to buy to increase their streaming might. Paramount execs haven’t publicly entertained that idea, but on Tuesday CEO Bob Bakish appeared to leave the door open — maybe more than just a crack.
Speaking at the Morgan Stanley Technology, Media & Telecom Conference, Bakish doubled down on many points he made during the marathon Paramount investors day presentation last month. He said his company — with its legacy businesses, franchises, and SVOD service — is fit to become a streaming-era leader (even though it’s currently nowhere close to the top).
However, he also used his time to point out something that “was missed in some of the post-investment call narrative.” The moves Paramount is making now not only bolsters its position as a standalone company, Bakish said, it also makes them what he would consider an attractive acquisition target.
“When I look at a company to buy – we’ve done a bunch of smaller deals particularly in Latin America and you can rest assured we look at all the deals – the single most important thing is, ‘If you buy the company, can you use the content?’ The answer typically is no, not for a while,” Bakish said during his Morgan Stanley keynote. “Our investment strategy is increasing optionality because we’re gaining more and more control over high-quality content.”
Bakish was referring to deals inked last fall that saw Paramount acquire a majority stake in Fox TeleColombia & Estudios TeleMexico from Disney. But whether Paramount has control over its content is a question that only becomes germane the other way around: if it is the target of acquisition.
Paramount doesn’t fully control all of its most valuable properties. Certain Paramount Pictures films still make a detour to EPIX thanks to a pay-one deal that expires in 2024. “South Park” is on HBO Max for three more years; a deal inked last month will bring the long-running animated series to Paramount+ in 2025.
Bakish said that “repatriating” valuable content, along with investing in new series, will help fuel subscriber and revenue growth to eventually deliver TV media-like margins. As he noted, it also “increases optionality” — i.e. makes Paramount a desirable buy for shareholders and bigger fish alike.
Paramount Global’s market cap is $22 billion. By comparison, Apple is worth $2.6 trillion, Amazon is worth $1.4 trillion, and Comcast clocks in at $209 billion. (Here we should point out that if Comcast acquired Paramount Global, it would likely have to spin off CBS as to not be in violation of FCC rules by also owning broadcast channel NBC.)
IndieWire reached out to Paramount Global with a request for comment on this story and a clarification on Bakish’s “optionality” remarks, but did not immediately receive a response.
After Discovery and WarnerMedia announced their plans last May to combine the two companies, there was renewed conversation around Paramount as a likely takeover target. Analysts, most notably Bank of America Merrill Lynch’s Jessica Reif Ehrlich, singled out the value of its content library as why it could command a premium in a market where Amazon is paying $8.45 billion for MGM.
What’s $30 billion or so for the “mountain of entertainment” Paramount+ never stops advertising? While still far behind the likes of Netflix, Disney+, and the combined HBO/HBO Max subscriber numbers, Paramount represents more than a hill of beans for the bean-counters. It’s certainly a lot larger than Apple TV+ and Peacock, and has a much more diverse portfolio.
In its fourth-quarter earnings report last month, Paramount revealed that pay-streaming services Paramount+ and Showtime OTT represented a total 56 million paid global subscribers at the end of 2021. That represented 9.4 million more paid subscribers than one quarter earlier and the company’s best quarter of streaming-subscriber growth to date. Revising its earning projections, the company now expects 100 million paid global subscribers by the end of 2024. A year ago, its projections were 65 million-75 million subscribers.
All of that growth comes at a price. The former ViacomCBS spent $2.2 billion on streaming movies and shows in 2021, up from $1 billion in 2020. At last month’s investor day, Paramount executives said they now expect streaming content spend to ramp up to $6 billion in 2024, way up from the year’s previous $4 billion goal.
After the investor day, Reif Erlich lost some of her bullishness on Paramount and downgraded the stock from a “buy” to “neutral.” The company’s rising costs to acquire streaming subscribers could cripple its cash flow, she argued. Spending is expected to begin to decline from there, executives have said, and Paramount+ may even reach profitability in 2025.
How is Paramount planning to afford all of this? Well, ViacomCBS posted a 48 percent increase in fourth-quarter global streaming revenue (to $1.3 billion) and an 84 percent rise in subscription revenue; that’s a start. Paramount executives also have said they expect streaming revenue to reach $9 billion in 2024, a revision of the year’s previous $6 billion projection.
Now we’re talking. The only remaining question: Will the acquisition talks follow?