Paramount follows hot on the heels of Warner Bros, taking an eye-watering hit on the value of its legacy media assets.
It’s been quite the couple of days for the big conglomerates seeking to slowly steer their colossal business towards profitability in the age of streaming. Warner Bros and Paramount are perhaps the most troubled in this regard: both companies have burned through resources in an attempt to get into profitability with their streaming services whilst also dealing with dwindling income from assets that are irreversibly declining: cable TV networks and falling advertising revenue.
Ever since Netflix’s subscriber growth began to slow down a couple of years ago, the desire for growth in the streaming sector has been replaced by the need to show profit. And to Paramount’s credit, its streaming service – Paramount+ has just achieved that metric for the first time, eking its way into the black on the balance books.
However, the problem for Paramount is that the profitability of some of its legacy media assets are declining at a speedier rate than its newer assets are adding value. That conundrum has hamstrung the company’s ability to make strategic changes and saddled it with plenty of debt too. This of course has led to the company being sold: barring a dramatic turn of events, Skydance will absorb Paramount and have to make some pretty radical moves, including figuring out what to do with all of those declining assets which are worth less and less every day.
A lot less today, actually. Following in the footsteps of Warner Bros who yesterday announced a colossal $10bn (yes, that is a ‘bn’) write-down of its ailing TV networks, Paramount has done the same.
The latter has ‘only’ written down the value of its declining linear assets by $6bn but overnight, the company’s value has significantly shrunk. With the Skydance deal inbound, there are bound to be some tough choices ahead.
While we keep hearing that Paramount’s film studio will be protected in the upcoming merger, the fate of all of those TV networks, their programming and of course, their employees is very uncertain at this point given that the company’s public valuation is now vastly reduced. Tough times lie ahead, unfortunately. We’ll bring you more on this as we hear it.
