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Paramount’s CFO Is Focused on “Getting the Most Out of Every Single Dollar We Invest in Content”

Paramount Global is focused on “getting the most we possibly can out of every single dollar that we invest in content,” CFO Naveen Chopra told an investor conference on Wednesday.

Speaking at the Morgan Stanley TMT Conference in San Francisco in a session that was webcast, he said: “We feel very proud of our content portfolio. We think we punch above our weight and we’re incredibly excited about what’s coming. And we want to extract as much value as we possibly can.”

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In the streaming space, that means a more focused approach to original programming and its timing of release. “It’s all about the right volume and the right cadence of original content, which you then use to drive consumers into library and affinity programming, which tends to be significantly less expensive and therefore more efficient,” Chopra said. “We really want every single one of our customers to believe that there are, call it one or two, new originals available on the service that are relevant to them at any given point in time,” he explained Paramount’s streaming focus.

The company, led by CEO Bob Bakish, and its Shari Redstone-led controlling shareholder National Amusements have been the subject of much deal speculation on Wall Street. Confronted with that, Chopra declined to comment in detail but shared management’s broader take. “From management’s perspective, we are focused on execution,” which “will unlock value,” the CFO said, but emphasized his team will also be “diligent” about possible alternatives that may present themselves.

After all, creating value for all shareholders is key for management. “There are multiple ways to potentially accomplish that. We think execution of our plan is compelling,” Chopra said. “But to the extent that there are other alternatives, we’ll be diligent about exploring them.”

In its recent fourth-quarter earnings update, Paramount said it expects to deliver “significant total company earnings growth” in 2024 and reach profitability for streaming service Paramount+ domestically in 2025. The streamer ended 2023 with 67.5 million subscribers.

“I do think sub growth in 2024 will be lower than 2023, though importantly I’d point out we do still expect very healthy Paramount+ revenue growth and, of course, revenue is the more important metric than subs,” Chopra forecast recently, predicting lower programming spend for Paramount’s streaming platforms this year.

The conglomerate, however, continues to battle to replace lower linear TV revenue with streaming and other digital revenue amid fast-changing consumer TV viewing habits.

Chopra reiterated that Paramount expects to return to free cash flow growth this year and would keep an eye on cost cutting and controlling measures after a recent round of layoffs.

He also shared some positive thoughts on the state of the advertising market. “On the linear side of the business, we are seeing some stabilization,” he said. “Scatter premiums in the market are are pretty healthy, which is good dynamic going into the upfront.” He concluded: “In general, I think sentiment is more positive than it was.”

He was also asked about a possible bundling of streaming services, saying Paramount sees what Walt Disney and Charter Communications did in their recent carriage agreement as “a version of a bundle, and it’s actually quite similar to the hard bundles that we have embraced outside of the United States where we bundled Paramount+ with television services in several different markets.” Those have been “quite successful for us,” he said. “Number one, it’s obviously a route to significant expansion of your subscriber base in a relatively short period of time. The cost to acquire those subscribers is very low. So it’s efficient from that perspective. Those subscribers typically churn at a much lower rate than direct retail subscribers. And you’ve got a partner who is helping you market and drive awareness of the service, your content, etc. So there are a lot of tailwinds that it provides.”

A trade-off though is getting a lower “wholesale average revenue per user (ARPU),” the Paramount CFO said. “But based on what we’ve seen outside the United States, we really do believe that if you structure those things correctly, they can be quite accretive to the business overall.”

Speaking of ARPU: helping Paramount’s streaming ARPU in the future will be subscriber growth, growing ad prices and further consumer price hikes, although such are not planned for 2024, the CFO told the investor conferences. Six to seven months after its 2023 price increases, Chopra said any subscriber defections have been “more than offset” by higher ARPU.

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