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Challenges in the Advertising Environment for Legacy Media Companies

The advertising landscape continues to pose challenges for traditional media companies as ad buyers shift their focus from linear television to streaming platforms.

“The ad market has been tough throughout 2023 and we are still not where we want to be,” stated Paramount (PARA) CEO Bob Bakish during the company’s fourth quarter earnings call. “However, we are seeing some signs of stabilization, including healthy scatter premiums.”

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Struggles Amid a Tough Ad Environment

Like many others in the industry, Paramount has faced challenges in the tough advertising environment. While tech giants have experienced a rebound in their businesses, smaller players have not fared as well.

Linear ad revenue saw a 15% year-over-year decline in Q4, surpassing analysts’ expectations of a 12% drop and worsening from the 14% decline in the previous quarter.

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Positive Outlook and Growth Opportunities

Despite the setbacks, Paramount foresees promising developments ahead, particularly driven by sports-related advertising.

Paramount CFO Naveen Chopra anticipates low to mid-teens advertising growth in Q1, with the upcoming Super Bowl expected to provide a significant boost.

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Expanding Horizons and Addressing Challenges

Bakish highlighted domestic growth in other ad categories such as consumer products, quick service restaurants, and retail, although international markets remain challenging.

The company is optimistic about the growth potential of its direct-to-consumer advertising, which saw a 14% increase in the quarter fueled by the rise in viewing hours on Paramount+ and Pluto TV.

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Struggles in the Streaming Era

Paramount faces mounting challenges in the shift towards streaming, with full-year streaming losses peaking in 2022 and not expected to achieve domestic profitability until 2025.

S&P Global recently placed Paramount on “credit watch negative” due to weakening free cash flow trends resulting from the transition from linear TV to streaming.

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