Q2 2022 Paramount Global Earnings Call

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Good morning, My name is and I'll be the conference operator today.

Finally, I would like to welcome everyone to Paramount Globals Q2, 2022 earnings conference call all lines have been muted to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session.

If you would like to ask a question. During this time simply press star followed by one on your telephone keypad.

I would like to withdraw your question. Please press star followed by two.

In order to get as many of your questions as possible. We ask that you. Please limit yourself to one question.

At this time I will now turn the call over to Anthony Diclemente, Paramount Global's EVP Investor Relations you May begin your conference call.

Good morning, everyone. Thank you for taking the time to join US for our second quarter 2022 earnings call.

Joining me for today's discussion are Bob <unk>, our president and CEO and Naveen Chopra. Our CFO . Please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our website I.

I want to remind you that certain statements made on this call are forward looking statements that involve risks and uncertainties. These risks and uncertainties are discussed in more detail in our filings with the SEC.

Some of today's financial remarks will focus on adjusted results.

Conciliations of these non-GAAP financial measures can be found in our earnings release or in our trending schedules, which contain supplemental information and in each case can be found in the investor Relations section of our website.

Now I will turn the call over to Bob.

Good morning, everyone and thank you for joining us.

I'll start this morning by talking about Q2 highlights and preview what's next.

Then I'll turn it over to <unk> to take you through financial and operating details and we'll wrap up with a Q&A as usual.

Big picture, while we are clearly navigating some near term headwinds in the macroeconomic environment Q2 shows we have the asset strategy and ability to compete and win over the long term.

Q2 shows the company that is taking market share.

Streaming and broadcast in box office, and then upfront dollars.

It also shows the company increasing its penetration of the most important growth market and media streaming.

As evidenced by our over 5 million <unk> subs added in the quarter.

In Q2 shows how we leverage investments across multiple platforms.

That unlock multiple revenue streams.

This combined with our fiscally disciplined approach, including with respect to cost management provides a real advantage in these challenging times and beyond.

At the center of course is our hugely popular content.

Big broad and beloved.

Think of the biggest movie in the World top gun Maverick the most popular TV show in the country Yellowstone.

Radial global hits like the CBS crime procedural ntis and FBI.

For the world's most popular preschool franchise, Nickelodeon Paw patrol.

Our content consistently attract entertain mass audiences.

When I say audiences I don't just mean kids or adults I mean, the whole household not.

Not just the coast, but the entire country.

Not just the us but the entire world.

Not just the streaming audience, but the TV theatrical and streaming audience.

Part of the reason that we don't just make popular content.

We also make content popular.

By leveraging our powerful platforms.

After all to drive best in class marketing and distribution, you've got to have best in class asset.

Like the number one broadcast network in America.

Largest broadcast footprint globally, the number one free AD supported streaming TV service in the U S.

And one of the fastest growing premium asphalt services.

The combination of our content platforms and strategy ensures we can reach the largest total addressable market Gen.

Generate strong returns on content investment.

And create devoted fan followings, taking full advantage of our deep and growing library of valuable IP.

All of these advantages came to life in Q2.

So let me show you how starting with film.

Nowhere is our popularity more evident than at the box office.

Look no further than top gun Maverick, which is already the biggest film of 2022.

Fifth number one title this year in.

In fact top gun Maverick just cleared one 3 billion at the global box office and became one of the top 10 domestic movies of all time.

Here, we leveraged our portfolio of brands, including CBS and MTV to execute a major cross company consumer campaign that resonated with audiences everywhere.

A strategy that has been proven to be highly effective when deployed against our major assets.

Success like this five number one films at the box office top gun Scream, Jackass forever velocity and Sonic the Hedgehog too, which by the way also made history as the biggest videogame opening of all time.

Success like this isn't that given it.

It requires the right strategy and strong execution.

In the early stages of the pandemic, we were very selective with our releases.

Holding certain films until market conditions improve.

While we could have released top gun Maverick and velocity earlier, we held off because we knew these phenomenal stories, we bring audiences back to theaters.

That proved to be the right call Paramount continues to shine at the box office with numbers that outperformed even our own expectations.

And we're excited about the future we will end this spectacular year with Damien <unk> Babylon, starring Brad Pitt and Margot Robbie which begins its theatrical rollout in December .

And our 2023 fleet, it's anchored by fresh commercial takes on some of our most popular and new franchises.

From Transformers, and teenage mutant Ninja turtle.

Dungeons and Dragons and Paw patrol.

To name just a few.

But our amazing content isn't limited to the silver screen viewer.

Fewer hungry for incredible storytellers are also turning up an ever greater numbers to our flagship streaming service Paramount plus.

This quarter, Paramount plus added $4 9 million global subscribers.

And revenue grew 120%.

Further cementing Paramount plus that's one of the fastest growing premium streaming services.

Based on third party data Paramount plus is the number one premium service in the U S in sign ups and net subscriber additions.

Both this quarter and year to date.

And based on other third party data Paramount plus it's also the most popular premium streaming service in the U S to add amongst switchers.

That means people, who dropped the service in the last 12 months were more likely to add paramount plus than any other service.

Yet again evidence we are taking market share.

The success of our streaming platforms.

Speaks to the power of our content strategy.

For movies and sports to shows and news <unk> events and more.

The diversity and quality of our content is unrivaled, especially on Paramount plus.

Box office hits like La City, and Sonic the Hedgehog to came to Paramount plus in May.

Generating terrific engagement across all demographics.

Their success demonstrates that our strategy of a big theatrical release with a fast follow the streaming is by far the most effective way to maximize the return on our investments and movies.

Meanwhile, hits CBS original like Ncis, which consistently dominate ratings and linear have drawn significant viewership to paramount plus.

And driven engagement there.

As Hap must-see sporting events like the UEFA Champions League final in May which aired on CBS and Paramount plus.

Additionally, the power and strength of our franchises existing and new was on full display this quarter.

Thanks to strong performances from Star Trek Strange New World.

83 of the Yellowstone Universe, and our latest South Park Special South Park, the streaming wars.

As well as Halo, which has become a top driver globally for subscriber acquisition and engagement.

And we're just getting started we have got more captivating content on the way.

And our multi platform approach will drive even more viewers to streaming.

Later this year the biggest show on TV Yellowstone returns for its fifth season to the Paramount network in the U S.

Importantly, Yellowstone linear premiere will support the streaming launch of Taylor Sheraton's latest original for Paramount plus Tulsa King.

Which debuts November 13th and stars the one and only Sylvester Stallone.

<unk> plus will also debut a criminal minds survival.

Building on what is already a fan favorite.

In September another season of the NFL and SEC College football also returns to CBS and Paramount plus in the U S.

The momentum of Paramount plus is not just the product of its strong and diverse portfolio of content.

It's also the product of a smart distribution strategy.

Which is bringing our flagship streaming services to more audiences than ever before.

For instance, parallel plus continues to expand internationally.

Leveraging our rich heritage as a truly global operating company.

With the help of partners Sky and CJ Entertainment, we just launched Paramount plus in the U K, Ireland and South Korea.

Hard bundled deals like these allow us to quickly unlock a healthy volume of subscribers.

Euro acquisition costs and with very low churn.

September we're using that same strategy to launch Paramount plus as a hard bundle in Italy with Sky Italia.

Later in the year, we will do the same with Sky in Germany, Austria and Switzerland.

And with canal plus in France.

Meanwhile, in markets like India, and Eastern Europe , we're focused on balancing long term market growth with a smart allocation of capital.

As exemplified by our deals with Viacom 18, and reliance with whom we're partnering to bring Paramount plus to India.

And with our Sky Showtime partnership with Comcast, which we'll launch later this year.

By the end of the year inclusive of Paramount plus and Sky Showtime, we expect to have our subscription video on demand services in 60 total market.

Moving forward, we will continue to harness the strategy of ubiquitous distribution.

Which includes direct to consumer as well as channel partners like Roku, Amazon and Apple.

In addition to the aforementioned hard bundles.

So that paramount plants can reach as large an audience as possible.

We're also seeing the power of partnership bring Pluto TV to greater Heights.

We don't have a T V is already the number one free AD supported streaming TV service in the U S.

This quarter monthly active users grew to nearly 70 million globally.

And through partnerships with by play group and chorus, we are now expanding Pluto Tv's international footprint in the Nordics and Canada, respectively.

With Pluto, we provide a global platform and global libraries, and our partners provide compelling local content and local AD sales capabilities.

A powerful and efficient global model.

Now because our assets continue to perform impressively across television and streaming advertisers are taking note even amid broader market uncertainty.

We've long known what makes us the ideal advertising partner, our ability to deliver both scale and efficiency.

I'll wrap around premium content.

And scale, our multi platform strategy is a clear advantage.

Our audience reach across broadcast cable AD supported asphalt at Paramount plus in free AD supported streaming TV and Pluto TV.

Represents a connected viewing ecosystem that produces over one trillion AD impressions per year.

In high engagement premium environment.

That are proven to drive outcomes for clients.

Well in a competitive market scale isn't enough.

To attract the best partners and build the best business, you've also got to make it easy and efficient for advertisers to reach their audiences of choice.

And at this scale, we offer advertisers access to a wide variety of audiences across every demographic.

At competitive pricing that makes paramount a must buy for marketers.

No need to efficiently aggregate awareness around their products.

We see our partners responding enthusiastically.

Evidence and it's worth noting that we recently had our strongest multi platform unified upfront yet.

We had broadcast and cable pricing increase at the same high single digit rate.

And we grew digital volume in the range of 30%.

Most importantly, it's pretty clear that we grew share.

But are you content with cross platform scale and efficiency.

This robust combination that differentiates paramount in the marketplace and makes US a must have partner for advertisers.

So in closing we are continuing to create value across our business from theatrical to streaming to advertising.

Millions of new customers are signing up for our streaming services.

Fans are headed back to the theatres to watch her film.

Viewers keep turning to our networks for their favorite content.

And advertising partners are eager to get a share of it all.

We couldn't be prouder.

With an iconic Hollywood film studio that owns more than a century of IP.

The number one broadcast network in the U S.

With some of the most popular cable brands and content in the world.

With the fastest growing premium streaming service and Paramount plus.

And with the leading free AD supported streaming TV service include OTV.

It's a powerful combination.

Which we will continue to lean into for the rest of the year and well into the future.

And in a world where people are more and more focused on the financial envelope.

All year round streaming.

The benefits of our multi platform strategy powerful content engine and IP ownership will become clearer and clearer.

We have always executed with financial discipline.

And we continue to be laser focused on it.

Now I'd like to turn it over to the mean to jump into our financial results for the quarter and walk you through our expectations for the second half of the year.

<unk>.

Thank you Bob and good morning, everyone.

Second quarter results demonstrate the value of our diversified media business and expansive monetization platforms.

We delivered 19% total company revenue growth through continued strong <unk> momentum and record performance at the box office.

Affiliate and subscription revenue grew 12% in the quarter.

Advertising was down 2% year over year or flat on a constant currency basis due to macroeconomic headwinds.

And licensing revenue grew 27%.

Today, I will highlight some of the key financial and operational drivers behind our second quarter results and share some insight on expectations for the second half of the year.

Starting with direct to consumer we added $5 2 million global DTC subscribers in Q2.

<unk> plus <unk>.

Added $4 9 million global subs.

All our other streaming services grew modestly.

As of June 30th we had a base of $63 7 million global DTC subscribers, including $43 3 million Paramount plus subscribers.

Our quarter end totals reflect the removal of $3 9 million D to C C.

Russia of which $1 2 million or from Paramount plus.

Assistant with a plan to remove these subscribers from our reporting.

Due to subscriber growth benefited from the launch of Paramount plus in the U K, Ireland, and South Korea as well as continued domestic growth.

We added new hit content to the service.

Paramount plus saw continued engagement improvement as our content offering expanded even further.

<unk> customers are watching a greater number of unique titles today than ever before as evidenced by sequential and year over year growth entitles viewed per active domestic subs.

We also saw sequential growth in hours per active.

And most importantly deeper engagement resulted in sizable improvement in domestic churn.

The combination of subscriber growth and engagement drove Paramount plus revenue growth of 120%, including subscription revenue growth of 126% and advertising growth of 92%.

Paramount plus <unk> improved on a sequential basis in Q2, with both domestic and international <unk> higher versus Q1.

Peter TV added $2 1 million global MAA used in Q2, bringing our global reach to $69 6 million in Ma.

Revenue grew 10% year on year.

Although Pluto TV revenue growth was impacted by the macro environment.

Service continues to demonstrate strong engagement with the year over year growth rate in total viewing hours accelerating from Q1 to Q2.

Continued improvements in engagement.

And our compelling advertiser proposition.

And that Pluto is well positioned to both gain share and benefit from organic growth.

Our dual revenue stream model delivered 56% year over year DTC revenue growth.

With total DTC revenue now, reaching $1 2 billion in the quarter.

This growth consisted of a 74% increase in subscription revenue and a 25% increase in advertising revenue.

D to C. OIBDA was a loss of $445 million in the quarter.

Reflecting the investments, we're making in content marketing and international expansion in support of what we believe is a compelling growth opportunity for Paramount.

The combination of continued investment and AD market softness means that DTC losses should remain roughly the same in the second half of 2022 as the first half of the year.

As we said last quarter, except for the removal of subscribers to our services in Russia.

Full year <unk> subscriber growth expectations are unchanged.

And longer term, we remain focused on our goal of reaching over 100 million global DTC subscribers and generating at least 9 billion in DTC revenue by 2024.

And we continue to forecast D to C. OIBDA losses will be greatest in 2023, and then improve in 2024.

Turning to our television media segment revenue grew 1% in Q2 as strong growth in content licensing was mostly offset by declines in advertising and affiliate revenue.

TV media advertising declined 6% in the quarter.

As pricing growth only partially offset the impact of lower linear impressions and a 2% headwind from FX.

T V media affiliate revenue declined 3% in the quarter.

Importantly, the vast majority of the year over year decline occurred in international markets, where we proactively restructured key affiliate deal.

<unk> in a shift of revenue from our pay TV to DTC services.

Over the term of these deals the reduction in television media affiliate revenue is expected to be more than offset by revenue generated from our Paramount plus hard bundled relationships.

Resulting in net growth to the company.

Domestic affiliate revenue was flat in Q2, excluding a 50 basis point headwind from a year over year decrease in pay per view revenue.

T V media licensing grew 27% in the quarter driven by the delivery of new seasons of existing series, including Jack Ryan The third party.

As well as higher international licensing.

T V media OIBDA declined 8% in the quarter to $1 4 billion, reflecting the flow through of lower advertising and affiliate revenue.

And while macroeconomic conditions are likely to continue to affect advertising demand and impact T V media financials.

Political advertising as well as price increases negotiated in this year's upfront and.

In combination with continued expense discipline.

Should help mitigate market driven headwinds, particularly in Q4.

As such in the second half of the year, we expect TV media OIBDA to return to modest growth on a year over year basis.

In filmed entertainment Q2 revenue was $1 4 billion more than double the year ago period.

The actual revenue increased $630 million driven by the success of top gun Maverick and Sonic the Hedgehog too.

Licensing revenue at filmed entertainment increased 27% largely due to the monetization of theatrical releases.

Filmed entertainment OIBDA was $181 million benefiting from the strong performance of our current year theatrical slate.

For the full year, our outlook for stable year on year OIBDA at filmed entertainment remains unchanged.

Turning to the balance sheet, we finished the quarter with $4 billion of cash on hand, and total debt of $15 8 billion.

We continue to maintain significant financial flexibility, which will increase with the addition of proceeds from the sale of Simon and Schuster.

We also maintain a committed $3 5 billion credit facility that remains undrawn.

In closing we are enthusiastic about the long term opportunity for Paramount.

Not by powerful content, and a massive and growing market for screening.

Despite short term headwinds related to the macro environment.

The value of our diversified business, and particularly our ability to monetize content across platforms and audiences is becoming more clear than ever.

With that operator can you. Please open the line for questions.

Thank you for our Q&A, if you would like to ask a question. Please press star followed by one on your telephone keypad now.

If you change your mind, Please press star followed by two.

I wanted to ask a question please enjoy devices locally.

And as a reminder, we please ask that you.

Alright yourself to one question.

Our first question today comes from Michael Morris from Guggenheim Partners. Your line is open. Please go ahead.

Yeah.

Thank you good morning, guys.

Bob maybe you could share your thoughts on your expectation for changes to the competitive landscape for streaming advertising as we move into the back half of the year I'm, particularly interested in how you're thinking about the launches of some of these AD supported services from Netflix or Disney plus how.

How they could impact the CTV AD market and Paramount portfolio in particular.

And then if I could maybe I apologize because I know, it's early to discuss 'twenty three but I'd be curious if you could provide any frame of reference for how much greater those peak D to C losses could be in 'twenty three relative to the 2022 outlook and any thoughts on <unk>.

Or swing factors and investment drivers topline that would be incremental there. Thank you guys.

Yeah.

Yeah sure Mike Let me start look we've been big believers in a dual revenue stream model and streaming I E advertising from the start and the <unk>.

Fact that others are following our lead is really validation of the thesis we've had for years. So yes, there will be incremental options in the market.

But really competition is nothing new and importantly, our competitive position in the AD market is very strong adverts.

Advertisers are focused on being associated with premium content.

And we have a really diverse collection here across entertainment sports and news.

And it's highly coveted by advertisers I'd also point out that our content, that's been created and formatted with advertising in mind.

And that's important.

Second look we've been in a multi platform AD business for years and that gives us very high quality reach and scale of over a trillion AD impressions per year across all demographics.

And then you add to that industry leading.

Integrated advertising.

And advanced advertising capabilities and.

And really a long track record ship, a partnership and customer services with agencies and their clients and we know how to transact in Upfronts, we know that transact in scatter, we know how to do probably programmatic.

So we had a lot of elements of strength here and I pointed out that all of that is not just conceptual it translates into performance.

You look at our Q2 growth rate, particularly in digital and I think you'll find that at the top of the industry.

And it's quite clear to me that we took share in this most recent upfront and there we had digital volume up on the order of 30%.

So, yes, there'll be some new entrants, but we feel very good about our position.

And we look forward to continuing to benefit from it.

And Mike with respect to your question on the <unk>.

Outlook for 2023.

I'd really say two things one I mean as you saw in Q2, we continue to see tremendous momentum in the direct to consumer business, whether you look at the growth on <unk>.

Paramount plus subs, what we're seeing in terms of churn nice Mou growth that engagement growth that Pluto and most importantly.

D C revenue growth at very very strong level of 50% on a combined basis, well over 100% revenue growth at Paramount plus.

So what we're really navigating from an OIBDA perspective is the weakness in the macro.

Advertising marketplace.

And as you said, it's really too early to know exactly what the market will look like in 2023.

But we are still focused on managing the business to peak losses in 2003.

And then starting to see improvements in earnings both through the DTC segment, and the consolidated business as a whole beyond that.

As we move toward our long term DTC revenue and subscriber goals.

Great. Thanks, a lot Mike operator, we'll take our next question. Please.

Our next question comes from Bryan Kraft from Deutsche Bank. Your line is now open.

Alright. Thanks. Good morning, I was wondering if you could talk in some more detail about the impacts of the macroeconomic environment that youre seeing in the business and particularly what you're seeing in terms of advertising demand across your own platforms and maybe along with that if you could talk about what youre seeing as far as specific advertiser category strength.

The weakness and any additional color.

On the outlook for <unk> in the back half of the year given what you saw in Q. Thanks.

Sure, Brian well look we see both headwinds and tailwind in advertising it's true that.

There are some challenges in the scatter market and digital and that really is as you would guess driven by the state of the macro economic environment.

That's showing up in certain categories things like auto continues to be impacted by the supply chain packaged goods is managing through inflation issues, which is really impacting their AD spending as they look to protect margins.

These aren't long term issues. There are short term challenges, we got to just work through on the positive side.

TV clearly remains resilient on a relative basis, and that's a function of a very tight supply.

And so we benefit at Paramount from having a balance across linear and digital clearly.

And I'd note that we are seeing some areas of category strength.

Including in Q2, and today that that travel that's technology.

Also worth noting that we're taking advantage of the current situation to increase our level of promotion for in house assets, particularly with respect to Paramount plus you know that gives us incremental product visibility of the consumer and it also benefits us in terms of third party expense reduction.

As we look ahead in this ad market.

Two things I'd note first.

Really pleased with how the upfront played out well and particularly the volume dynamic in it which was up nicely.

Second there are two important category tailwind that we'll see.

Late Q3, and certainly Q4. The first is pharmaceuticals that came back big in the upfront that's super important to us because it's a big category for us given our demographics and specifically a demo of CBS .

The second is political.

We're expecting advertising related to the mid terms to be very strong given what's going on there.

Note that historically, that's really a stations business in it for sure it'll be a stations.

This year.

But also with targeting we see IQ and.

Pluto, playing there and therefore benefiting as well.

So that's really the AD market I don't know if you want to comment on.

Yeah, I mean in terms of our expectations for Pluto in the back part of the year I'd say, a couple of things and we don't obviously guide to Pluto specifically it.

It is part of our broader.

D to C business as you well know and we continue to see.

Very healthy levels of growth there.

56% due to see revenue growth in the quarter.

And.

I think we will probably finish the year with a very healthy revenue growth across the segment.

Thanks, a lot Brian next question. Please.

We know to answer Stephen Cahill from Wells Fargo. Your line is open. Please go ahead.

Thanks, I just wanted to pick up on some of the <unk> line of questioning it seems like the Mou growth is strong I assume the engagement is pretty strong as well and so with some of the slowdown in revenue is the right way to think about this business that it is just a price taker in the programmatic market and that price pressure.

Arrive unannounced and if Thats. The case was just wondering if you could talk about some of the pricing changes that you saw late in Q2, and how those have trended as <unk> gotten into Q3.

The improvement or degradation.

And then at TV media I think investors have been a little bit skeptical about the stable guide in OIBDA. So thanks for that color on the second half growth could you maybe just think about what the drivers for stable guidance might be for next year, especially since youre comping political thanks.

Yeah, Steve Let me take the <unk> piece and then.

And we'll go from there so I'd start by saying Pluto is a leader in fast in the U S and as you know its rapidly growing internationally as well.

I'd note that the supply side of Pluto continues.

<unk> continues to track very strongly we look at impression delivery and it's in line with our expectations from the beginning of the year.

<unk> are now at basically 70 million.

Because we're getting great consumer traction and engagement.

Time spent et cetera, and blue continues to grow in fact, we saw an acceleration of that from Q1 to Q2, so very good about very good supply side equation.

Revenue side has certainly been impacted by the macroeconomic situation.

It's really a marketplace dynamic and unfortunately, we're not immune to.

But even with that.

Some very compelling facts to focus on.

Related to the streaming assay is Paramount plus grew advertising over 90% in the quarter.

And you look at our total DTC AD business in the quarter, including Pluto TV that grew 25%.

That's partially because we are gaining share we have a very strong proposition in the marketplace.

And another indicator of that strength is really the 30%.

Digital volume growth add volume growth that we saw in the upfront.

So.

To your question of it being a price taker sure we play in the programmatic market that matters.

It's an important part of the equation, but again, we're not just selling <unk>, we're selling a full range of streaming product and multi platform product.

And.

Having great traction with advertisers and we think that is a tremendous positive for the company and will be even more so as the macro situation improves.

And in terms of the question around.

The stability of TV media earnings.

As we said we do expect the in the near term there'll be some impact because of the.

Macro advertising environment, but longer term, we do still remain confident that once that advertising market recovers.

We can deliver television media stable T V media OIBDA and that's enabled by a combination of a few things.

Number one.

Rate increases in both the affiliate and advertising sides of the business and there has been evidence of that.

Over the last few quarters, we've done a very successful track record of.

Putting in place new affiliate deals that either have a bill.

Built in rate escalators or fixed fee components on the on the station side of the business and then obviously on the advertising side.

We're very happy with what we've seen in the upfront both in terms of price increases and.

What we've been able to do from a volume perspective, so right as an important part of the equation.

We also.

Expect to see continued meaningful contributions from the licensing side of that business, which is enabled by a combination of both.

Incredible catalog and unique production capabilities.

And of course, we will continue to have a lot of innovation and discipline on the cost side of the equation and that's true across programming that's true across marketing.

And it's true across our.

Our broader operations. So the combination of all those things will be key to delivering stable television media OIBDA.

Thanks, Steve next question.

We now turn to Ben Swinburne from Morgan Stanley . Your line is open.

Thanks, Good morning.

I just had a couple of questions on one topic, which is sort of the international opportunity with Paramount plus.

Bob could you talk a little bit about how the launch went in the U K and South Korea in the quarter.

Sort of the strategy to drive that business.

And did you see the whole benefit of the initial launch in Q2 or some of that going to bleed into Q3.

And as part of that could you talk about your international Programing strategy I believe you guys have some.

Local productions Foreign language productions in the works could you give us a sense of your appetite to build that out as a part of the offering as you grow the business outside the U S.

Yes sure Ben.

So a couple of things to say.

One.

We're very pleased with.

To start with we definitely are viewing streaming as a global opportunity and you're seeing us move against the international.

<unk>, particularly western Europe here in 2022.

Two is with respect to Western Europe , We obviously launched the UK and Ireland in June .

By the way, we also launched South Korea.

A week before.

Those launches.

<unk>.

We're forming above our expectations.

Both of those have.

Hard bundle elements to them, obviously, we're in business with Sky in the UK and Ireland.

<unk>.

They are very pleased with what we brought to market by the way the response to the launch more broadly.

It's been very strong, including what we showed in London related to launch event.

Same thing is true with South Korea, there, we're working with tier two with TVN, which is a local streamer.

C J as a minority stake in it and.

There were really the global part of the global tier to their local offering and again, there very happy with what we brought to market and how it's performing.

And so we're off to a very good start to your question of is this Q2, only boost subs or does it extend past that definitely extends past that.

Recall that our international distribution strategy is focused on achieving ubiquity. It really has three fundamental components hard bundle plus channel stores, like Roku, and Amazon and Apple and direct you to see on an <unk> basis. So we will be deploying all of that.

In those markets.

Therefore, we see sub growth not only coming from where it really engagement from the hard bundles, where more and more people use it but we also see those other two pillars of the distribution strategy beginning to kick in and in fact, they already have.

Third point I'd make is this is a big year for Western Europe for US we have Italy.

In.

September that's another launch with Sky on a hard bundled basis.

That's tracking very well and then we have Germany, and Austria, and Switzerland with Sky.

December I believe as well as.

France with canal plus all of those.

Hard bundle elements, but again.

Broader distribution to penetrate.

Broader distribution outlet strategy, the Tam last point your local content.

All of those markets do have local content dimensions.

We really have.

So you see a dual benefit there on the one hand.

With local content and local content for a long time from operating networks things like using a local format of the shores and making it for a market where its very well were also have in the U K. We have channel five so it has a relationships that are triggering stories. There. So yes local content is one thing, but the second element.

There's a lot of that we're going to use globally because on a dubbed basis.

The streaming world has proven that works.

So local is very much part of our strategy in the mix, it's not an overwhelming part but as part of it.

<unk>.

I think he can cover the.

Got it alright.

Next question.

I mean, how sensitive rich Greenfield from light shed partners. Your line is open. Please go ahead.

Hi, Thanks for taking the question so when Netflix published it.

Q2, It showed this chart.

That had minutes viewed and I think Cvs was actually number two behind Netflix I. It didn't have paramount plus or Pluto, but I would assume that would close the gap between Netflix and sort of the broader Paramount company, but I think the question that sort of every investor on this call is thinking about is as the business shifts from linear to digital meaning <unk>.

Yes, sort of shrinks and share and Paramount plus include a growing their share can paramount maintain sort of aggregate time spent and what will the margin profile of that business looks like because I think if you think about everyone. In streaming today like you are talking about $1 8 billion of losses for the calendar year sort of everyone, but Netflix.

Is losing billions a year on streaming and maybe just the way to think about this is on a revenue basis. Your linear TV business. This quarter had $2 billion of advertising plots and Paramount plus was sort of in the $90 million range in Pluto at $2 65, or so so I guess the point is just as this business shifts can you capture enough time spend.

To have the similar profit look that your business has and legacy as you move to streaming if that makes sense.

Yeah sure rich so a couple of points there.

I don't know exactly what chart, you're looking at but if you look at Q2.

Paramount's combined U S linear delivery was bigger than Netflix.

And that's even more the case, if you combine linear and streaming but that's really neither here nor there the question on margins.

It's really the core of what you're asking and as we look at as streaming becomes bigger for us as we gain scale, we see operating margins from streaming approaching that of TV media remember rich we've only been in the streaming business for a short time, others had been there for years, we need to give us a bit of time to play out but there is.

There are real reasons.

That we see this path to superior margins and at the core of it is our differentiated as we say playbook.

You look at where we are in content. We're clearly advantaged, we've got a broad offering many many globally. We're now owned franchises backed up by a deep library.

Economic value of going and trying to replace that library I didn't even know what it would be.

We got tremendous engagement I E time spent off the library.

So that's one important economic advantage too.

We have a platform advantage the combination of streaming and traditional is significant helps our content economics. It helps our marketing economics.

And it shouldnt be discounted.

Third we are in the free streaming space and the pay streaming space. So what does that do it gets it's a bigger Tam.

We regularly see the value of serving consumers that don't pay for streaming as well as the ones that do and obviously the associated add access.

And fourth we have this global operating footprint, we deployed it.

In the U K. The reason, we got the CJ deal done in South Korea is we've been there for years.

Their joint venture, but nonetheless, we have experienced we have assets, we have relationships and those are provide real leverage including in streaming. So you put all that together.

And we do see a superior financial envelope at comparable level of scale to someone else.

And we do see this tracking to television media like markets, which is at the core of your question.

We just have to let it play out a bit.

And yes, we got to manage through some near term macroeconomic headwinds but.

But we will so we're very excited about this transformation journey that we're on.

Thanks, a lot rich next question.

Operator, we'll take our next question please.

Our next question is from Don Merril from RBC capital markets. Your line is open. Please go ahead.

Good morning, and thanks for taking the questions one on content spend and one on some entertainment if I could so on content spend some of your peers have clearly revisited their content spend budgets for the next few years as there is perhaps a greater focus on getting to profitable growth. I know you are in a unique position of being able to leverage your content.

Investments across a more diverse set of linear and digital platforms, but on the other hand, it sounds like OIBDA losses for DTC. This year are shaping up to be closer to a $1 8 billion versus expectations for one five before so I was curious if you had a updated view on what the appropriate level of content spend is evolving into.

Two for Paramount, whether thats for the total company or just for DTC and just briefly on filmed entertainment.

Popcorn success has been pretty remarkable and it seems like you have a very solid slate for the balance of this year and then of course more to come in 'twenty three 'twenty four.

I know it might take some time before we get to the more profitable windows for these films to really flow through the financials. So maybe not for this year, but are we approaching a period, where you could see more meaningful step function improvements in filmed entertainment profitability. Thanks.

Yeah I'll.

I'll take both of those.

First on content spend.

The most important thing to remember is that when we think about our content investment we're always looking at it in the context of.

The growth and the return that it unlocks.

And so of course, when you think about it through that lens.

You have to focus on the fact that we added 5 million Paramount plus subs in the quarter Paramount plus revenue growth was 120% and we continue to be very bullish about growth going forward. So our content investment.

That is definitely working its producing very real results.

And the momentum that you've seen.

And at the same time, we are very committed to our long term growth objectives around the D to C business.

And we intend to continue to invest to support that growth opportunity continuing as we have to.

Make those decisions prudently with a real eye toward the ROI of the investments what we don't want to do is sacrifice our long term opportunity by overreacting to the short term headwinds.

That obviously exists, particularly in the advertising marketplace today.

So we're continuing to move forward, we're continuing to fund the growth, we think it's incredible opportunity and as you pointed out.

Our content dollars are used differently than many of our peers.

We leverage those those assets across many platforms and it's one of the reasons.

That we can grow faster, while spending less than than others.

In terms of your question on.

The filmed entertainment business.

Obviously, we have not provided any specific long term guidance there but.

I would encourage you to think about that business more broadly which is to say increasingly the value of our movies is not just about what they generated in the box office.

Those windows.

Are now expanding in terms of it's not just about box office and home Entertainment and then.

Going to third parties, we can generate a lot of value out of those assets on our streaming services.

We continue to monetize them from a catalog perspective, so it's for US it's really about continuing to build the asset value and we do that by having.

Great slate.

That will continue to be heavy on franchises.

And we're looking forward to what that does both for the box office business and also our other channels.

Thanks next question please.

We now turn to Jessica Reif from Bank of America Securities. Your line is open. Please go ahead.

Yeah.

I was wondering if you could give us color on IPL.

What the dollar commitment your commitment is.

And what your goals out there and then just to go back to the content spend could you at least talk about like step function increase in content spend 23 versus <unk> 22, and 24 as well.

Sure Jessica.

IPL.

E India cricket.

I assume.

No.

That's a deal that was done by our joint venture in India Viacom 18.

Recently had a transaction where they brought in Bodhi tree.

An investor in capital infusion.

Their intent.

And I don't really leave it to the joint venture, which by the way our other partners reliance to speak to that and they haven't spoke to it much but what they have said.

As you know, we obviously have the streaming rights there, it's going to be part of our.

Our streaming offering for the Indian market.

That Viacom 18 is going to launch in 2023.

We've also said that we.

We are going to pay.

<unk> plus is going to launch with it.

Essentially as another form of hard bundle of tier.

And therefore, we're really excited about it because we get the very material benefit of cricket.

It is.

The top of the food chain in India.

And so it'll be a real engine for streaming and then kind of a plus.

We'll benefit by being part of that even though we're not directing directly investing on in Illinois basis.

Obviously part of the joint venture. So so that's the IPL answer.

And Jessica with respect to the question on content spend in future years.

I'd point, you back to what we shared during our Investor day back in February .

Our goal is to drive.

Drive the growth on the DTC business to over $9 billion of revenue by the end of 2024, we said at that time that that would involve D to C content expense of around $6 billion.

We're still operating with that in mind, we haven't provided any kind.

Yeah, Let me just jump in here I really want to thank everyone for their time today in closing I Hope you heard how we're deploying a very unique asset portfolio with a differentiated strategy.

To not only successfully compete in this challenging macroeconomic environment, but importantly take share and continue to have real momentum, particularly in the streaming space.

So we're very excited about the future we're going to continue to manage through it and we look forward to keeping you updated as we do.

In the interim thanks again for your time and be well everyone Bye bye.

Today's call is now concluded let's thank for your participation you may now disconnect your lines.

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Good morning, My name is and I think I'll be the conference operator today.

Tom I would like to welcome everyone to Paramount Globals Q2, 2022 earnings conference call all lines have been muted to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

If you would like to ask a question. During this time simply press star followed by one on your telephone keypad.

If you would like to withdraw your question. Please press star followed by two.

In order to get as many of your questions as possible. We ask that you. Please limit yourself to one question.

At this time I will now turn the call over to Anthony Diclemente, Paramount Global's EVP Investor Relations.

Annual conference call.

Yeah.

Look no further than top gun Maverick, which is already the biggest film of 2022.

Fifth number one title this year.

In fact top gun Maverick just cleared one 3 billion at the global box office and became one of the top 10 domestic movies of all time.

Here, we leveraged our portfolio of brands, including CBS and MTV to execute a major cross company consumer campaign that resonated with audiences everywhere.

A strategy that has been proven to be highly effective when deployed against our major assets.

Success like this five number one films at the box office top gun Scream, Jackass forever velocity and Sonic the Hedgehog too.

By the way also made history as the biggest video game opening of all time.

Success like this isn't a given.

It requires the right strategy and strong execution.

In the early stages of the pandemic, we were very selective with our releases.

Holding certain films until market conditions improve.

We could've relief top gun Maverick and velocity earlier, we held off because we knew these phenomenal stories, we bring audiences back to theaters.

That proved to be the right call Paramount continues to shine at the box office with numbers that outperformed even our own expectations.

And we're excited about the future will end this spectacular year with Damien <unk> Babylon, starring Brad Pitt and Margot Robbie which begins its theatrical rollout in December .

And our 2023 slate, it's anchored by fresh commercial takes on some of our most popular and new franchises.

From Transformers, and teenage mutant Ninja turtle.

Dungeons and Dragons and Paw patrol.

To name just a few.

But our amazing content isn't limited to the silver screen viewer.

Fewer is hungry for incredible storytellers are also turning up in evergreen on numbers to our flagship streaming service Paramount plot.

This quarter, Paramount plus added $4 9 million global subscribers.

And revenue grew 120%.

Further cementing Paramount plus that's one of the fastest growing premium streaming services.

Based on third party data Paramount plus is the number one premium service in the U S and sign ups and net subscriber addition.

Both this quarter and year to date.

And based on other third party data Paramount plus it's also the most popular premium streaming service in the U S to add amongst switchers.

That means people, who dropped the service in the last 12 months were more likely to add paramount plus than any other service.

Yet again evidence we are taking market share.

The success of our streaming platforms.

The power of our content strategy.

From movies and sports.

It shows the news <unk> events and more the diversity and quality of our content is unrivaled, especially on Paramount plus.

Box office hits like La City, and Sonic the Hedgehog two came from Paramount plus in May.

Generating terrific engagement across all demographics.

Their success demonstrates that our strategy of a big theatrical release with a fast follower to streaming is by far the most effective way to maximize the return on our investments and movies.

Meanwhile, hits CBS original like Ncis, which consistently dominate ratings and linear have drawn significant viewership to paramount plus.

And driven engagement there.

As Hap must-see sporting events like the UEFA Champions League final in May which aired on CBS and Paramount plus.

Additionally, the power and strength of our franchises existing and new.

On full display this quarter.

Thanks to strong performances from Star Trek Strange New World.

83 of the Yellowstone Universe.

Our latest South Park Special South Park, the streaming wars.

As well as Halo, which has become a top driver globally for subscriber acquisition and engagement.

And we're just getting started.

We've got more captivating content on the way and our multi platform approach will drive even more viewers history.

Later this year the biggest show on TV Yellowstone returned for its fifth season to the Paramount network in the U S.

Importantly, Yellowstone linear premier will support the streaming launch of Taylor Sheraton's latest original for Paramount plus Tulsa King.

Which debuts November 13th and stars the one and only Sylvester Stallone.

<unk> plus will also debut a criminal minds survival Bill.

Building on what is already a fan favorite.

In September another season of the NFL and FCC College football also returns to Cvs and Paramount plus in the U S.

The momentum of Paramount plus is not just the product of its strong and diverse portfolio of content.

It's also the product of a smart distribution strategy, which.

Which is bringing our flagship streaming services to more audiences than ever before.

For instance, parallel plus continues to expand internationally.

Leveraging our rich heritage as a truly global operating company.

With the help of partners Sky and CJ Entertainment, we just launched Paramount plus in the U K, Ireland and South Korea.

Hard bundled deals like these allow us to quickly unlock a healthy volume of subscribers.

Zero acquisition cost and with very low churn.

In September we're using that same strategy to launch Paramount plus as a hard bundle in Italy with Sky Italia.

Later in the year, we will do the same with Sky in Germany, Austria and Switzerland.

And with <unk> in France.

Meanwhile, in markets like India, and Eastern Europe , we're focused on balancing long term market growth with a smart allocation of capital.

As exemplified by our deals with Viacom 18 and reliance.

With whom we're partnering to bring Paramount plus to India.

And with our Sky Showtime partnership with Comcast, which we'll launch later this year.

By the end of the year inclusive of Paramount plus and Sky Showtime, we expect to have our subscription video on demand services in 60 total market.

Moving forward, we will continue to harness the strategy of ubiquitous distribution.

Which includes direct to consumer as well as channel partners like Roku, Amazon and Apple.

In addition to the aforementioned hard bundles.

Paramount plus can reach as large an audience as possible.

We're also seeing the power of partnership bring Pluto TV to greater Heights.

We don't have TV is already the number one free AD supported streaming TV service in the U S.

This quarter monthly active users grew to nearly 70 million globally.

And through partnerships with via play group and chorus, we are now expanding Pluto Tv's international footprint in the Nordics and Canada, respectively.

With Pluto, we provide a global platform and global libraries, and our partners provide compelling local content and local AD sales capabilities.

As a powerful and efficient global model.

Now because our assets continue to perform impressively across television and streaming advertisers are taking note even amid broader market uncertainty.

We've long known what makes us the ideal advertising partner, our ability to deliver both scale and efficiency.

I'll wrap around premium content.

And scale, our multi platform strategy is a clear advantage.

Our audience reach across broadcast cable AD supported asphalt at Paramount plus and free AD supported streaming TV in Pluto TV <unk>.

<unk> represents a connected viewing ecosystem that produces over one trillion AD impressions per year.

In high engagement premium environment.

That are proven to drive outcomes for clients.

But in a competitive market scale isn't enough.

To attract the best partners and build the best business, you've also got to make it easy and efficient for advertisers to reach their audiences of choice.

And at this scale, we offer advertisers access to a wide variety of audiences across every demographic.

At competitive pricing that makes paramount a must buy for marketers.

Who need to efficiently aggregate awareness around their products.

We see our partners responding enthusiastically.

Evidence and it's worth noting that we recently had our strongest multi platform unified upfront yet.

We had broadcast and cable pricing increase at the same high single digit rate.

And we grew digital volume in the range of 30%.

Most importantly, it's pretty clear that we grew share.

Premium content with cross platform scale and efficiency.

This robust combination that differentiates paramount in the marketplace and makes US a must have partner for advertisers.

So in closing, we're continuing to create value across our business from theatrical to streaming to advertising.

Millions of new customers are signing up for our streaming services.

Fans are headed back to the theatres to watch her films view.

<unk> keep turning to our networks for their favorite content and advertising partners are eager to get a share of it all.

We couldnt be prouder.

With an iconic Hollywood film studio that owns more than a century of IP.

With the number one broadcast network in the U S.

With some of the most popular cable brands and content in the world.

With the fastest growing premium streaming service and Paramount plus.

And with a leading free AD supported streaming TV service include OTV.

It's a powerful combination which.

Which we will continue to lean into for the rest of the year and well into the future.

And in a world where people are more and more focused on the financial envelope.

Particularly around streaming.

Benefits of our multi platform strategy powerful content engine and IP ownership will become clearer and clearer.

We have always executed with financial discipline.

And we continue to be laser focused on it.

Now I'd like to turn it over to the mean to jump into our financial results for the quarter and walk you through our expectations for the second half of the year.

<unk>.

Thank you Bob and good morning, everyone.

Second quarter results demonstrate the value of our diversified media business and expansive monetization platforms.

We delivered 19% total company revenue growth through continued strong <unk> momentum and record performance at the box office.

Affiliate and subscription revenue grew 12% in the quarter.

Advertising was down 2% year over year or flat on a constant currency basis due to macroeconomic headwinds.

And licensing revenue grew 27%.

Today, I will highlight some of the key financial and operational drivers behind our second quarter results and share some insight on expectations for the second half of the year.

Starting with direct to consumer we added $5 2 million global DTC subscribers in Q2.

Air amount plus.

Added $4 9 million global subs.

All our other streaming services grew modestly.

As of June 30th we had a base of $63 7 million global DTC subscribers, including $43 3 million Paramount plus subscribers.

Our quarter end totals reflect the removal of $3 9 million D to C C.

Russia of which $1 2 million were from Paramount plus.

Assistant with a plan to remove these subscribers from our reporting.

Due to subscriber growth benefited from the launch of Paramount plus in the U K, Ireland, and South Korea as well as continued domestic growth.

As we added new hit content to the service.

Paramount plus saw continued engagement improvement as our content offering expanded even further.

E plus customers are watching a greater number of unique titles today than ever before as evidenced by sequential and year over year growth entitles viewed per active domestic subs.

We also saw sequential growth in hours per active.

And most importantly deeper engagement resulted in sizable improvements in domestic churn.

The combination of subscriber growth and engagement drove Paramount plus revenue growth of 120%, including subscription revenue growth of 126%.

Advertising growth of 92%.

Paramount plus <unk> improved on a sequential basis in Q2, with both domestic and international <unk> higher versus Q1.

<unk> TV added $2 1 million global MAA used in Q2, bringing our global reach to $69 6 million.

Revenue grew 10% year on year.

Although Pluto TV revenue growth was impacted by the macro environment.

Service continues to demonstrate strong engagement with the year over year growth rate in total viewing hours accelerating from Q1 to Q2.

Continued improvements in engagement.

And our compelling advertiser proposition.

Pluto is well positioned to both gain share and benefit from organic growth.

Our dual revenue stream model delivered 56% year over year D. C revenue growth with total DTC revenue now, reaching $1 2 billion in the quarter.

This growth consisted of a 74% increase in subscription revenue and a 25% increase in advertising revenue.

D to C. OIBDA was a loss of $445 million in the quarter.

Reflecting the investments, we're making in content marketing and international expansion in support of what we believe is a compelling growth opportunity for Paramount.

The combination of continued investment and AD market softness means that DTC losses should remain roughly the same in the second half of 2022 as the first half of the year.

As we said last quarter, except for the removal of subscribers to our services in Russia.

Our full year DTC subscriber growth expectations are unchanged.

And longer term, we remain focused on our goal of reaching over 100 million global DTC subscribers and generating at least 9 billion in DTC revenue by 2024.

And we continue to forecast D to C. OIBDA losses will be greatest in 2023, and then improve in 2024.

Turning to our television media segment revenue grew 1% in Q2 as strong growth in content licensing was mostly offset by declines in advertising and affiliate revenue.

TV media advertising declined 6% in the quarter as pricing growth only partially offset the impact of lower linear impressions and a 2% headwind from FX.

T V media affiliate revenue declined 3% in the quarter.

Accordingly, the vast majority of the year over year decline occurred in international markets, where we proactively restructured key affiliate deal, resulting in a shift of revenue from our pay TV to DTC services.

Over the term of these deals the reduction in television media affiliate revenue is expected to be more than offset by revenue generated from our Paramount plus hard bundled relationships.

Resulting in net growth to the company.

Domestic affiliate revenue was flat in Q2, excluding a 50 basis point headwind from a year over year decrease in pay per view revenue.

T V media licensing grew 27% in the quarter driven by the delivery of new seasons of existing theory, including Jack Ryan The third party.

As well as higher international licensing.

T V media OIBDA declined 8% in the quarter to $1 4 billion, reflecting the flow through of lower advertising and affiliate revenue.

And while macroeconomic conditions are likely to continue to affect advertising demand and impact T V media financials.

Political advertising as well as price increases negotiated in this year's upfront.

In combination with continued expense discipline.

It helped mitigate market driven headwinds, particularly in Q4.

As such in the second half of the year, we expect TV media OIBDA to return to modest growth on a year over year basis.

In filmed entertainment.

<unk> revenue was $1 4 billion more than double the year ago period.

The actual revenue increased $630 million driven by the success of top gun Maverick and Sonic the Hedgehog too.

Licensing revenue at filmed entertainment increased 27% largely due to the monetization of theatrical releases.

Filmed entertainment OIBDA was $181 million benefiting from the strong performance of our current year theatrical slate.

For the full year, our outlook for stable year on year OIBDA at filmed entertainment.

Unchanged.

Turning to the balance sheet, we finished the quarter with $4 billion of cash on hand, and total debt of $15 8 billion.

We continue to maintain significant financial flexibility, which will increase with the addition of proceeds from the sale of Simon and Schuster.

We also maintain a committed $3 5 billion credit facility that remains undrawn.

In closing we are enthusiastic about the long term opportunity for paramount unlock by powerful content and a massive and growing market for screening.

Despite short term headwinds related to the macro environment.

Value of our diversified business, and particularly our ability to monetize content across platforms and audiences is becoming more clear than ever.

With that operator can you. Please open the line for questions.

Thank you for our Q&A, if you would like to ask a question. Please press star followed by one on your telephone keypad now.

If you change your mind, Please press star followed by two.

When preparing to ask a question. Please enjoy devices on these did locally.

And as a reminder, we please limit yourself to one question.

Our first question today comes from Michael Morris from Guggenheim Partners. Your line is open. Please go ahead.

Yeah.

Thank you good morning, guys.

Bob maybe you could share your thoughts on your expectations for changes to the competitive landscape for streaming advertising. They can move into the back half of the year I'm, particularly interested in how youre thinking about the launches of some of these AD supported services from Netflix or Disney plus how they could impact the CTV AD Mark.

And Paramount plus Guido in particular.

And then if I could maybe I apologize because I know, it's early to discuss 'twenty three but I'd be curious if you could provide any frame of reference for how much greater those peak D to C losses could be in 'twenty three relative to the 2022 outlook and any thoughts on.

Growth or swing factors and investment drivers.

Topline that would be incremental there. Thank you guys.

Yeah.

Yeah sure Mike Let me start look we've been big believers in a dual revenue stream model and streaming E advertising.

From the start.

And the fact that others are following our lead is really validation of the thesis we've had for years. So yes, there will be incremental options in the market.

But really competition is nothing new and importantly.

Our competitive position in the AD market is very strong.

Advertisers are focused on being associated with premium content.

And we have a really diverse collection here across entertainment sports and news.

And it's highly coveted by advertisers I'd also point out that our content, that's been created and formatted with advertising in mind.

And that's important.

Second look we've been in a multi platform AD business for years and that gives us very high quality reach and scale of over a trillion dollars AD impressions per year across all demographics, and then you add to that industry leading.

Integrated advertising.

And advanced advertising capabilities, and really a long track record ship, a partnership and customer services with agencies and their clients and we know how to transact in Upfronts, we know that transact in scatter, we know how to do probably programmatic.

So we had a lot of positioning element of strength here and I'd point out that all of that is not just conceptual it translates into performance.

You look at our Q2 growth rate, particularly in digital and I think you'll find that at the top of the industry.

And it's quite clear to me that we took share in this most recent upfront.

There, we had digital volume up.

On the order of 30%.

So, yes, there'll be some new entrants, but we feel very good about our position.

We look forward to continuing to benefit from it.

And Mike with respect to your question on the outlook for 2023.

I'd really say two things one I mean as you saw in Q2, we continue to see tremendous momentum in the direct to consumer business, whether you look at the growth on Paramount.

Paramount plus subs, what we're seeing in terms of churn nice Mou growth that engagement growth that Pluto and most importantly.

DTC revenue growth at very very strong level of 50% on a combined basis.

All over 100% revenue growth at Paramount plus.

So.

What we're really navigating from an OIBDA perspective is the weakness in the macro.

Advertising marketplace and as you said, it's really too early to know exactly what the market will look like in 2023.

But we are still focused on managing the business to peak losses in 'twenty three.

And then starting to see improvements in earnings both through the DTC segment and the consolidated business as a whole beyond that as we move toward our long term DTC revenue and subscriber goals.

Great. Thanks, a lot Mike operator, we'll take our next question. Please.

Our next question comes from Bryan Kraft from Deutsche Bank. Your line is now open.

Alright. Thanks. Good morning, I was wondering if you could talk in some more detail about the impacts of the macroeconomic environment that youre seeing in the business and particularly what you're seeing in terms of advertising demand across your own platforms.

And maybe along with that if you could talk about what youre seeing as far as specific advertiser category strength or weakness and any additional color on the outlook for <unk> in the back half of the year given what you saw in <unk>. Thanks.

Sure, Brian well look we see both headwinds and tailwind in advertising it's true that.

That there are some challenges in the scatter market and digital and that really is as you would guess driven by the state of the macro economic environment.

That's showing up in certain categories things like auto continues to be impacted by the supply chain packaged goods is managing through inflation issues, which is really impacting their AD spending as they look to protect margins.

These aren't long term issues. There are short term challenges, we got to just work through on the positive side.

TV clearly remained resilient on a relative basis, and that's a function of a very tight supply.

And so we benefit at Paramount from having a balance across linear and digital clearly.

And I'd note that we are seeing some areas of category strength.

Including in Q2 and today.

Travel that's technology.

Also worth noting that we're taking advantage of the current situation to increase our level of promotion for in house assets, particularly with respect to Paramount plus you know that gives us incremental product visibility of the consumer and it also benefits us in terms of third party expense reduction as we look ahead.

In this ad market.

Two things I'd note first we are.

We're really pleased with how the upfront played out well and.

And particularly the volume dynamic in it which was up nicely.

Second.

There are two important category tailwind that we'll see probably late Q3, and certainly Q4.

First is pharmaceuticals that came back big in the upfront that's super important to us because it's a big category for us given our demographics and specifically the demos of CBS and the second is political.

We're expecting advertising related to the mid terms to be very strong given what's going on there and I would note that historically, that's really a stations business in it for sure it'll be a stations.

Year.

But also with targeting we see IQ and.

Pluto, playing there and therefore benefiting as well.

So that's really the AD market I don't know if you want to comment on.

Yeah, I mean in terms of our expectations for Pluto in the back part of the year I'd say a couple of them, but we don't obviously guide to Pluto specifically.

It is part of our broader.

D to C business as you well know and we continue to see.

Very healthy levels of growth there.

56% due to see revenue growth in the quarter.

And.

I think we'll probably finish the year with a very healthy revenue growth across the segment.

Thanks, a lot Brian next question. Please.

Now to answer Stephen Cahill from Wells Fargo. Your line is open. Please go ahead.

Okay.

Thanks, I just wanted to pick up on some of the Pluto line of questioning it seems like the <unk> growth is strong I assume the engagement is pretty strong as well and so with some of the slowdown in revenue is the right way to think about this business that it is just a price taker in the programmatic market and that price pressure kind of arrive unannounced.

And if that's the case I was just wondering if you could talk about some of the pricing changes that you saw late in Q2, and how those have trended as you've gotten into Q3.

The improvement or degradation.

And then at TV media I think investors have been a little bit skeptical about the stable guide in OIBDA. So thanks for that color on the second half growth could you maybe just think about what the drivers for stable guidance might be for next year, especially since you are comping political.

Yeah, Steve let me take the.

Fluor piece and then.

And we'll go from there so I'd start by saying Pluto is a leader in fast in the U S and as you know its rapidly growing internationally as well.

I'd note that the supply side of Pluto Kantar.

<unk> continues to track very strongly we look at impression delivery and it's in line with our expectations from the beginning of the year.

<unk> are now at basically 70 million.

Because we're getting great consumer traction and engagement.

Time spent et cetera on Pluto continues to grow in fact, we saw an acceleration of that from Q1 to Q2. So very good about very good supply side equation revenue side has certainly been impacted by the macroeconomic situation.

It's really a marketplace dynamic and unfortunately, we're not immune to.

But even with that.

Some very compelling facts to focus on.

Related to the streaming outsized Paramount plus grew advertising over 90% in the quarter.

And you look at our total DTC AD business in the quarter, including Pluto TV that grew 25%.

That's partially because we are gaining share we have a very strong proposition in the marketplace.

And another indicator of that strength is really the 30%.

Digital volume growth add volume growth that we saw in the upfront.

So.

To your question of it being a price taker sure we play in the programmatic market that matters.

It's an important part of the equation, but again, we're not just selling <unk>, we're selling a full range of streaming product and multi platform product.

And.

Having great traction with advertisers and we think that is a tremendous positive for the company and will be even more so as the macro situation improves.

And in terms of the question around.

The stability of T V media earnings.

As we said we do expect the in the near term there'll be some impact.

The Mac.

Macro advertising environment, but longer term, we do still remain confident that once that advertising market recovers.

We can deliver television media stable T V media OIBDA and that's enabled by a combination of a few things.

Number one.

Rate increases in both the affiliate and advertising sides of the business and there has been evidence of that.

Over the last few quarters, we've done a very successful track record of.

Putting in place new affiliate deals that either have been.

Built in rate escalators or fixed fee components on the on the station side of the business and then obviously on the advertising side.

We're very happy with what we've seen in the upfront both in terms of price increases and.

What we've been able to do from a volume perspective, so right as an important part of the equation.

We also.

Expect to see continued meaningful contributions from the licensing side of that business, which is enabled by a combination of both.

Incredible catalog and unique production capabilities.

And of course, we will continue to have a lot of innovation and discipline on the cost side of the equation and that's true across programming, it's true across marketing.

And it's true across.

Our broader operations. So a combination of all those things will be key to delivering stable television media OIBDA.

Thanks, Steve next question.

We now turn to Ben Swinburne from Morgan Stanley . Your line is open.

Thanks, Good morning.

I just had a couple of questions on one topic, which is sort of the international opportunity with Paramount plus.

Bob could you talk a little bit about how the launch went in the UK and South Korea in the quarter.

Sort of the strategy to drive that business and.

And did you see the whole benefit of the initial launch in Q2 or some of that going to bleed into Q3 and as part of that can you talk about your international programing strategy I believe you guys have some.

Local productions for language productions in the works could you give us a sense of your appetite to build that out as a part of the offering as you grow the business outside the U S.

Yes sure Ben.

So a couple of things to say.

One.

We're very pleased well, let's start with we definitely are viewing streaming as a global opportunity and you're seeing us move against the international.

Opportunity, particularly western Europe here in 2022, two is with respect to Western Europe , We obviously launched the UK and Ireland in June .

The way, we also launched South Korea.

Week before.

Those launches are.

Our.

Performing above our expectations.

Both of those have.

Hard bundle elements to them, obviously, we're in business with Sky in the UK and Ireland.

And.

They are very pleased with what we brought to market by the way the response to the launch more broadly.

Very strong, including what we showed in London related to launch event same.

Same thing is true with South Korea there.

We're working with tier two with TVN, which is a local streamer.

Jay has a minority stake in it and.

There were really the global part of the global tier to their local offering and again, there very happy with what we brought to market and how it's performing.

And so we're off to a very good start to your question of is this a Q2 only boost subs or does that extend past that definitely extends past that.

Call that our international distribution strategy is focused on achieving ubiquity. It really has three fundamental components hard bundle plus channel stores like Roku and Amazon Apple and direct you to see on an <unk> basis. So we will be deploying all of that.

In those markets.

And therefore, we see sub growth not only coming from where we.

Early engagement from the hard bundles, where more and more people use it but we also see those other two pillars of the distribution strategy beginning to kick in and in fact, they already have.

A third point I'd make is this is a big year for Western Europe for US we have Italy.

In.

September that's another launch with Sky on a hard bundled basis.

And that's tracking very well and then we have Germany, and Austria, and Switzerland with Sky.

December I believe as well as.

France with canal plus all of those.

Hard bundle elements, but again.

Broader distribution to penetrate.

Broader distribution outlet strategy Tam last point your local content.

All of those markets do have local content dimensions.

We really have.

So you see a dual benefit there on the one hand.

With local content and local content for a long time from operating networks things like using a local format of the shores and making it for a market works very well were also have in the U K. We have channel five so it has a relationships that are triggering stories. There. So yes local content is one thing, but the second element.

I know, there's a lot of that we're going to use globally because on a <unk> basis.

The streaming world has proven that works.

So local is very much part of our strategy in the mix, it's not an overwhelming part but as part of it.

<unk>.

I think you've covered it I think you've got it alright. Thanks, Pat next question.

I will now turn to rich Greenfield from light chat partners. Your line is open. Please go ahead.

Hi, Thanks for taking the question so when Netflix published it.

Q2, It showed this chart.

That had minutes viewed and I think CBS was actually number two behind Netflix I it didn't have <unk>.

Mount plus or Pluto, but I would assume that would close the gap between Netflix and sort of the broader Paramount company, but I think the question that sort of every investor on this call is thinking about is as the business shifts from linear to digital meaning CBS sort of shrinks and share and Paramount plus include a growing their share.

Paramount maintained sort of aggregate time spend and what will the margin profile of that business looks like because I think if you think about everyone. In streaming today like you were talking about $1 8 billion of losses for the calendar year sort of everyone, but Netflix is losing billions a year on streaming and maybe just the way to think about this is on a.

Revenue basis, your linear TV business this quarter had $2 billion of advertising plots and Paramount plus was sort of in the $90 million range in Pluto at $2 65, or so so I guess the point is just as this business shifts can you capture enough time spend to have the similar profit look that your business has been legacy as you move to streaming.

That makes sense.

Yeah sure rich so a couple of points there.

I don't know exactly what chart, you're looking at but if you look at Q2 <unk>.

Mounts combined U S linear delivery was bigger than Netflix and.

And that's even more the case, if you combine linear and streaming but thats really neither here nor there the question on margins.

It's really the core of what you're asking and as we look at as streaming becomes bigger for us as we gain scale, we see operating margins from streaming approaching that of TV media remember rich we've only been in the streaming business for a short time, others have been there for years, we need to give us a bit of time to play out.

But there are real reasons.

That we see this path to superior margins and at the core of it is our differentiated as we say playbook.

You look at where we are in content. We're clearly advantaged, we've got a broad offering many many globally. We're now franchises backed up by a deep library.

Economic value of going and trying to replace that library I didn't even know what it would be.

We got tremendous engagement I E time spent off the library.

So that's one important economic advantage too.

We have a platform advantage the combination of streaming and traditional is significant helps our content economics. It helps our marketing economics.

And it shouldnt be discounted.

Third we are in the free streaming space and the pay streaming space. So what does that do it gives us a bigger Tam and.

We regularly see the value of serving consumers that don't pay for streaming as well as the ones that do and obviously the associated add access.

And fourth we have this global operating footprint I mean, we deployed it.

In the U K. The reason, we got the CJ deal done in South Korea is we've been there for years.

<unk> joint venture, but nonetheless, we have experienced we have assets, we have relationships and those are provide real leverage including in streaming. So you put all that together and we do see a superior financial envelope at comparable level of scale to someone else.

And we do see this tracking to television media like markets, which is at the core of your question.

We just have to let it play out a bit you know and yes, we got to manage through some near term macroeconomic headwinds.

But we will so we're very excited about this transformation journey that we're on.

Thanks, a lot rich next question.

Yeah.

Operator, we will take our next question please.

So.

Our next question is from Don Merril from RBC capital markets. Your line is open. Please go ahead.

Good morning, and thanks for taking the questions one on content spend and one on some entertainment if I could so on content spend some of your peers are clearly revisited their content spend budgets for the next few years as there is perhaps a greater focus on getting to profitable growth. I know you are in a unique position of being able to leverage your content investments.

Across a more diverse set of linear and digital platforms, but on the other hand, it sounds like OIBDA losses for DTC. This year are shaping up to be closer to $1 8 billion versus expectations for one five before so I was curious if you had an updated view on what the appropriate level of content spend is evolving into for <unk>.

Mount whether thats for the total company or just for TTC and <unk>.

Briefly on filmed entertainment.

<unk> success has been pretty remarkable and it seems like you have a very solid slate for the balance of this year and then of course more to come in 'twenty three 'twenty four.

I know it might take some time before we get to the more profitable windows for these films to really flow through the financials. So maybe not for this year, but are we approaching a period, where you could see more meaningful step function improvements in don't entertainments profitability.

Thanks.

Yeah, Sophie and I will.

Take both of those.

First on content spend.

The most important thing to remember is that when we think about our content investment we're always looking at it in the context of.

The growth and the return that it unlocks.

And so of course, when you think about it through that lens.

You have to focus on the fact that we added 5 million Paramount plus subs in the quarter Paramount plus revenue growth was 120% and we continue to be very bullish about growth going forward. So our content investment.

That is definitely working its producing very real results.

And the momentum that you've seen.

And at the same time, we're very committed to our long term growth objectives around the D to C business.

And we intend to continue to invest to support that growth opportunity continuing as we have to.

Make those decisions prudently with a real eye toward the ROI of the investments what we don't want to do is sacrifice our long term opportunity by overreacting to some of the short term headwinds.

That obviously exists, particularly in the advertising marketplace today.

So we're continuing to move forward, we're continuing to fund the growth. We think it has incredible opportunity and as you pointed out.

Our content dollars are used differently than many of our peers.

We leverage those those assets across many platforms and it's one of the reasons.

We can grow faster, while spending less than than others.

In terms of your question on.

The film Entertainment business.

Obviously, we have not provided any specific long term guidance, there but I.

I would encourage you to think about that business more broadly which is to say you know increasingly the value of our movies is not just about what they generated in the box office.

Those windows.

Are now expanding in terms of it's not just about box office and home Entertainment and then.

Go into third parties, we can generate a lot of value out of those assets on our streaming services.

We continue to monetize them from a catalog perspective, so it's for US it's really about continuing to build the asset value and we do that by having a great slate.

That will continue to be heavy on franchises.

And we're looking forward to what that does both for the box office business and also our other channels.

Thanks next question please.

We now turn to Jessica Reif from Bank of America Securities. Your line is open. Please go ahead.

Thank you.

I was wondering if you could give us color on IPL.

The dollar commitment your commitment is.

And what your goals out there and then just to go back to the content spend could you at least talk about like step function increase in content spend 23 versus <unk> 22, and 24 as well.

Sure Jessica so IPL.

India Cricket.

Hum.

No.

That's a deal that was done by our joint venture in India Viacom 18.

Which recently had a transaction where they brought in 43.

An investor in capital infusion.

Their intent.

And I'd really leave it to the joint venture, which by the way our other partners reliance to speak to that and they haven't spoke to it much but what they have said.

As you know, we obviously have the streaming rights there, it's going to be part of our streaming offering for the Indian market.

That Viacom 18 is going to launch in 2023.

We've also said that we.

We are going to pay.

Paramount plus is going to launch with it.

Essentially as another form of hard bundle of tier.

And therefore, we're really excited about it because we get the very material benefit of cricket and cricket is.

The top of the food chain in India.

And so it'll be a real engine for streaming and then kind of a plus.

We'll benefit by being part of that even though we're not directing directly investing on in Illinois basis.

Part of the joint venture so so that's the IPL answer it.

And Jessica with respect to the question on content spend in future years.

I'd point, you back to what we shared during our Investor day back in February .

Our goal is to.

Drive the growth on the D to C business to over $9 billion of revenue by the end of 2024, we said at that time that that would involve D to C content expense of around $6 billion.

We're still operating with that in mind, we haven't provided any kind.

Specific cadence of exactly what that looks like from from year to year, but we're continuing to invest and manage the business with those goals. Thanks, Jessica next question.

Our next question comes from Brett Feldman from Goldman Sachs. Your line is open.

Thanks, and just to sort of two related questions. The first is.

What extent are you seeing any inflationary cost pressures in the business and particularly interested in whether that is creeping into content production costs and then more broadly one of the questions. We get from investors as they think through the impact of inflation is pricing power. We have seen some price increases at different streaming services. I was wondering if you can give us your latest thoughts.

What's on when or whether you believe youll be in a position to potentially potentially start raising price on your streaming services, most notably Paramount plus thanks.

Yes, sure Brett so.

On your first question inflation.

In our business, we actually saw inflation, a while ago really more in the production side of the house related to talent and competition.

They are in.

So we've been managing with that for a while and thankfully.

We are viewed as a good place to work if you will and we have many partnerships with important people in front of and behind the screen working with us to make shows.

So the current inflation driving things like higher fuel prices and all is not really that much of a factor for us incremental.

We're watching it but I wouldn't think of that as a step function change for us like it is for example for.

Packaged goods company, that's buying raw materials that seeing those prices increase very different dynamic.

And in terms of pricing on a streaming services, specifically Paramount plus I think.

You really have to look at that in the context of <unk> more broadly because remember we have a dual revenue stream model, which means that we're not entirely dependent on price increases for growth.

And we are despite some of the short term headwinds we continue to be very bullish about the potential for continued at <unk> growth on our streaming services.

Fact, we've seen healthy double digit growth in <unk> on the essentials tier of Paramount plus despite some of the macro headwinds that's of course, driven by meaningful growth in engagement and continued innovation around the AD products that we make available.

Pricing will be a part of the equation.

And though we don't have any imminent price changes.

They will happen in the future and we will do it.

While also taking into account the evolution of of our content offering looking at what sort of bundles and other promotional opportunities are available to our customers.

And of course thinking about our value proposition relative to competing services, where I pointed out I think.

We offer a very strong value position today so.

We're continuing to look at pricing, we continue to look at how we optimize the touring along with that but.

But it's part of a broader overall RP story.

Thanks, a lot operator, we have time for one last question.

Our last question comes from Phil Cusick from Jpmorgan. Your line is open. Please go ahead.

Hi, guys. Thank you for squeezing me in I'll try not to abuse. It a.

A couple of clarifications and a question if I can thank you. It sounds like you are no longer targeting 60% plus growth in DTC revenue. This year is that right and is there a better level, we should look at.

And how is the composition of AD supported versus premium Paramount plus subs in gross add trends sort of changed since their release in June .

Is that AD load look like and revenue from here and does that grow over time in terms of outlook. Thanks very much.

Yeah.

Yeah, I'll take those svein.

So first in terms of DTC revenue growth for the year.

We continue to expect very healthy levels of D to C.

Growth, but obviously given the macro advertising headwinds and the fact that there is a little bit less visibility in the back half of the year.

It's possible, we may not get all the way to that 60%.

But.

I think it will.

It would be relatively close in either way, it's a very healthy number.

With respect to composition of subscribers at Paramount plus.

It's still a very balanced between.

The premium tier and the AD supported essentials tier.

That can bounce around a little bit from quarter to quarter based on promotions and bundles and things that we may be doing with partners, but I think it continues to be evidence that they are both very compelling products and they both serve you.

Unique and large markets.

So we like that strategy.

And in terms of the AD load specifically.

It's more a function of.

Are you willing to build out the AD products on on Paramount plus.

We've launched advertising very recently within that service.

And so for instance, there are certain parts of the product.

Where advertising is.

Not yet enabled and that'll continue to evolve over time.

Yeah, Let me just jump in here.

I want to thank everyone for their time today in closing I Hope you heard how we're deploying a very unique asset portfolio with a differentiated strategy.

To not only successfully compete in this challenging macroeconomic environment, but importantly take share and continue to have real momentum, particularly in the streaming space.

So we're very excited about the future we're going to continue to manage through it and we look forward to keeping you updated as we do.

In the interim thanks again for your time and be well everyone Bye bye.

Today's call is now concluded thank for your participation you may now disconnect your lines.