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ViacomCBS Is Changing Its Name. More Subscribers Joined, but at a Cost.

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ViacomCBS is changing its name to Paramount Global.

Dreamstime


ViacomCBS

reported a very solid quarter of streaming-subscriber gains on Tuesday, but that growth didn’t come cheaply.

The company ramped up spending on content and marketing for its Paramount+ and other services, depressing profits in the fourth quarter. Legacy TV and advertising businesses plugged along, and won’t be raising any eyebrows, but there remains plenty for both the bulls and the bears to point to in the company’s results and trajectory.

Just don’t call it ViacomCBS anymore: The company will soon be renamed Paramount Global, Chairwoman Shari Redstone said at an investor event on Tuesday. ViacomCBS stock (ticker: VIAC) was down more than 13% in premarket trading on Wednesday. 

On Tuesday evening, ViacomCBS reported 26 cents in adjusted earnings per share for the fourth quarter. That was down 75% from the same period a year earlier and well behind the 43 cents that Wall Street analysts were expecting.

Revenue was $8.0 billion, up 16%, comfortably more than the $7.5 billion consensus estimate. Management’s preferred profit measure, adjusted operating income before depreciation and amortization, or Oibda, came in at $557 million, down 53% from a year earlier. Analysts had been expecting about $700 million in adjusted Oibda on average.

Like every media company pivoting to streaming these days, ViacomCBS’ subscriber performance gets plenty of scrutiny every quarter. Tuesday’s earnings release was followed by a flashy investor event previewing new content coming to Paramount+ in the near and not-so-near future. The event began with a video clip of Redstone and CEO Bob Bakish starring in a car-chase scene involving the ‘Bumblebee’ Chevrolet Camaro from The Transformers franchise and several robotic pursuers.

For the final three months of 2021, ViacomCBS’ Paramount+ and Showtime streaming services added a net 9.4 million subscribers, to reach a combined 56 million globally. Analysts had been expecting 6.4 million net adds on average.

During Tuesday’s investor event, Bakish said that ViacomCBS now expects to have 100 million streaming subscribers by the end of 2024—up from the 65 million to 75 million it said last year that investors can expect.

ViacomCBS’ advertising-supported streaming service Pluto had 64 million monthly active users last quarter, up by 10 million. Wall Street analysts’ average forecast had been for growth of 4.2 million MAUs, but the calls were all over the map. Management expects to have 100 million to 120 million MAUs on Pluto TV by the end of 2024.

For the final period of 2021 reported on Tuesday, ViacomCBS’s streaming revenues from subscriptions and advertising hit $1.3 billion, up 48% year over year and a quarterly record. The company doesn’t disclose bottom-line results from its streaming business. But with all of management’s emphasis on streaming-content investments, those are likely to have been negative.

Chief Financial Officer Naveen Chopra said on Tuesday that the company will have at least $9 billion in direct-to-consumer revenue in 2024, up from earlier guidance for $6 billion.

Starting with the current quarter, ViacomCBS will change the way it reports to put more focus on its direct-to-consumer future—in addition to its rebranding as Paramount. It will disclose its results for three segments: direct-to-consumer, TV, and movie theaters. Under the new reporting structure, streaming revenue would have been about $1.1 billion with an adjusted Oibda loss of $502 million in the fourth quarter, the company said on Tuesday.

ViacomCBS’ legacy businesses didn’t make a splash in the quarter. The largest contributor to revenues was advertising, which was up 1% to $2.6 billion. Affiliate fees—which cable and satellite TV providers pay to ViacomCBS to include its channels like Nickelodeon, MTV, and Comedy Central in their bundles—rose 2% to $2.1 billion. 

Revenue from content licensing—which includes new and catalog movies and TV series sold to other companies—were $1.9 billion, up 45%. Finally, movie-theater revenues remained depressed by the pandemic as few new films came out: Theatrical sales were just $39 million last quarter.

ViacomCBS deserves credit for the rapid progress it has made in growing its nascent streaming services in a relatively short period. A flurry of new content on Paramount+ and the company’s other services—plus international launches in more markets this year and a coming European joint venture with


Comcast

‘s (CMCSA) Sky—should keep new subscribers coming. But the business today is still almost entirely that of a legacy TV and movie studio company, with streaming profits far off and far from assured. 

ViacomCBS stock traded for just 9.5 times 2022 earnings at Tuesday’s close, and bears will say it is cheap for a reason.

Cable TV is a melting ice cube as cord-cutting continues, with affiliate fee rate increases only able to delay the inevitable decline of that revenue stream. The movie business isn’t what it was before the pandemic.

And streaming growth is nice to see, but subscriber gains alone don’t put food on the table. ViacomCBS needs to show that the new viewers will stick around and yield profits, too.

Some investors worry that ViacomCBS won’t be able to play with the big dogs in the streaming industry. Rivals with much deeper pockets include


Netflix

(NFLX),


Walt Disney

(DIS), and the soon-to-be-implemented combination of


Discovery

(


DISCA

) with


AT&T

‘s (T) WarnerMedia.

ViacomCBS stock has lost 37% after dividends over the past year through Tuesday’s close. It was down more than 65% from a March 2021 high above $100, while the

S&P 500
had returned about 13%.

Write to Nicholas Jasinski at nicholas.jasinski@barrons.com

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