Q4 2023 Paramount Global Earnings Call
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Speaker Change: Good afternoon.
Speaker Change: My name is no idea and I'll be the conference operator today.
Operator: Operator Today. At this time, I would like to welcome everyone to Paramount Global's Q4 2023 Earnings Conference call. At this time, all lines have been placed on mute to prevent any background noise.
At this time I would like to welcome everyone to Paramount Global's Q4, 'twenty three earnings conference call.
Speaker Change: At this time all lines have been placed on mute to prevent any background noise.
Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by 2.
Speaker Change: After the Speakers' remarks, there'll be a question and answer session.
Speaker Change: If you would like to ask a question. During this time simply press star followed by the number one no telephone keypad.
Speaker Change: If you would like to withdraw your question. Please press star two.
Operator: 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 would like to turn the call over to Jaime Morris, Paramount Global's EVP of Investor Relations. You may now begin your conference call. Good afternoon, everyone.
Speaker Change: In order to get as many of your questions as possible. We ask that you. Please limit yourself to one question.
Speaker Change: At this time I would like to turn the call over to Jamie Morris Paramount Gley loose E V P.
Jaime Sue Morris: Shouldn't you May now begin your conference cool.
Jaime Sue Morris: Good afternoon, everyone. Thank you for taking the time to join US for our fourth quarter 2023 earnings call. Joining me for today's discussion are buyback ish, 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.
Jaime Sue Morris: Thank you for taking the time to join us for our fourth quarter 2023 earnings. Joining me for today's discussion are Bob Bakish, 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. Before we start this afternoon, I want to remind you that certain statements made on this call are forward-looking statements that involve risks and uncertainty. These risks and uncertainties are discussed in more detail in our filings with the FDA.
Jaime Sue Morris: They'll go on our website.
Jaime Sue Morris: Before we start this afternoon I want to remind you that certain statements made on this call are forward looking statements that involve risks and uncertainties.
Jaime Sue Morris: These risks and uncertainties are discussed in more detail in our filings with the SEC.
Jaime Sue Morris: Some of today's financial remarks will focus on adjusted results. Reconciliations of these non-GAAP financial measures can be found in our earnings release or in our trending, which contains 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 afternoon, everyone, and thank you for joining us.
Jaime Sue Morris: Some of today's financial remarks will focus on adjusted results Reconciliations 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'll turn the call over to Bob.
Bob: Good afternoon, everyone and thank you for joining US. There's no question. The 2023 was a dynamic and in many ways challenging year in our industry.
Robert Marc Bakish: There's no question that 2023 was a dynamic and, in many ways, challenging year in our industry. We saw two labors. Tough macroeconomic environment and continued evolution in the media, but we stayed focused on a disciplined execution aligned with our strategy, and we adapted as needed. In doing so, we position Paramount Global to deliver significant growth in total company earnings and growth in free cash flow in 2024. On today's call, I'd like to spend a few minutes speaking to our 23 accomplices.
Bob: We saw two labor strikes a tough macroeconomic environment and continued evolution in the media industry.
Bob: But we stayed focused on our disciplined execution aligned with our strategy adapting as needed.
Bob: Doing so we positioned Paramount global to deliver significant growth in total company earnings and growth in free cash flow in 2024.
Speaker Change: On today's call I'd like to spend a few minutes speaking to our twenty-three accomplishments then I'll provide more color on our 24 priorities before handing it over to intervene for a deeper dive on the financials.
Robert Marc Bakish: Then, I'll provide more color on our 24 priorities before handing it over to Naveen for a deeper dive on the finances. With that, let's start with 23, a year where our content clearly continued to deliver, driving every platform. In fact, Paramount Head, the number one show on all of television and the number one broadcast network for the 22-23 season, not to mention five number one debuts at the domestic box office.
Speaker Change: With that let's start with 23 a.
Speaker Change: A year, where content clearly continued to deliver driving every platform.
Speaker Change: In fact, Paramount head the number one show on all of television.
Speaker Change: And the number one broadcast network for the 'twenty two 'twenty three season.
Speaker Change: Not to mention five number one debuts at the domestic box office.
Robert Marc Bakish: And very importantly, we continue to scale streaming with Paramount Plus and Pluto TV. Subscribers and MAUs grew nicely. In 2023, audiences spent nearly 40% more hours on our streaming platforms compared to 2022, which, when combined with our mid-year Paramount Plus domestic price increase, delivered 37% D2C revenue. The disciplined execution of our strategy, including the integration of Showtime into Paramount Plus, led to a reduction in full-year D2C losses and Ment. We hit peak streaming losses in 2022, a year ahead of schedule, with further significant improvement expected in 2024. Disciplined execution has been a theme across the entire company to deliver both impact and efficiency.
Speaker Change: And very importantly, we continued to scale streaming.
Speaker Change: With Paramount plus in Pluto TV subscribers.
Subscribers.
Speaker Change: <unk> grew nicely in.
Speaker Change: In 2023 audiences spent nearly 40% more hours on our streaming platforms compared to 2022.
Speaker Change: Which when combined with our midyear of Paramount plus domestic price increase.
Speaker Change: Liberty, 37% DTC revenue growth.
Speaker Change: The disciplined execution of our strategy, including the integration of Showtime into Paramount plus led to a reduction in full year DTC losses and meant we had peak streaming losses in 2022, a year ahead of schedule with further significant improvement expected in 2024.
Speaker Change: Disciplined execution has been a theme across the entire company to deliver both impact and efficiency in.
Robert Marc Bakish: And that obviously extends to managing our cost base as we continue to streamline the organization. And that brings me to the year ahead, where we're focused on returning the company to sustainable, profitable growth in 2024 and beyond. And know that, regardless of current market sentiment, we're convinced that the value of our assets today, combined with the execution of our strategy as we move forward, represents a significant value creation opportunity, and we are dedicated to unlocking that value. To do so, we will focus on three key priorities.
Speaker Change: But obviously extends to managing our cost base as we continue to streamline the organization.
Speaker Change: That brings me to the year ahead, where we're focused on returning the company to sustainable profitable growth in 2024 and beyond.
Speaker Change: And know that regardless of current market sentiment, we're convinced that the value of our assets today combined with the execution of our strategy as we move forward represents a significant value creation opportunity.
Speaker Change: And we are dedicated to unlocking that value.
Speaker Change: To do so we will focus on three key priorities first we will continue to lean into content with the biggest impact.
Robert Marc Bakish: First, we will continue to lean into content with the biggest impact. Second, we're laser focused on driving direct consumer profitability, and third, we will continue to unlock synergies across the company. Naveen and I will unpack these further.
Speaker Change: We're laser focused on driving the direct to consumer profitability.
Speaker Change: Third we'll continue to unlock synergies across the company.
Speaker Change: To begin I will unpack these further.
Robert Marc Bakish: Let's start at the core, our concept. As we say, popularity is paramount. We create hits that the whole household, country, and world love to watch and that our partners need. That's the heart of our business. And in doing so, we've proven we can prioritize efficiency while still achieving viewership and revenue. As we've discussed in previous quarters, we continue to sharpen our ability to maximize our return on content investment, which informs how we approach our content, programming, and window. As we move into 2024, we're focused on producing content more efficiently and magnifying the impact of our slate. And let me give you some examples to illustrate.
Speaker Change: Let's start at the core our content.
Speaker Change: As we say popular is paramount.
Speaker Change: We create hits, but the whole household country in whole World Love to watch and.
Speaker Change: And then our partners need.
Speaker Change: That's the heart of our business and in doing so we've proven we can prioritize efficiency, while still achieving viewership and revenue goals.
Speaker Change: As we've discussed in previous quarters, we continue to sharpen our ability to maximize our return on content investment.
Speaker Change: Which informs how we approach our content programming and windowing.
Speaker Change: As we move into 2024, we're focused on producing content more efficiently and magnify the impact of our slate.
Speaker Change: Let me give you some examples to illustrate this in the film segment, we're improving ROI by lowering the average cost per title.
Robert Marc Bakish: In the film segment, we're improving ROI by lowering the average cost per type. This, by balancing high-budget tentpoles with more modest-cost titles, like Mean Girls and Bob Marley One Love, improving the financial return on the overall slate. And we're off to an excellent start with.
Speaker Change: This by balancing high budget tent poles with more modest cost titles like mean girls and Bob Marley, one low improving the financial return on the overall slate.
Speaker Change: And we're off to an excellent start on this.
Robert Marc Bakish: In TV media, at CBS, we have an increasingly efficient and targeted development. We've prioritized lower-cost formats, like unscripted and those shot abroad, while maintaining our strength in branding. NCIS, one of the world's most-watched shows and one that has been licensed in over 200 markets worldwide, is a great example. The latest iteration, NCIS Sydney, was produced in Australia at a much more efficient price point and was the most watched new show this season on any network in the U.S. until February's debut of Tracker, also on.
Speaker Change: In T V media at C. B S. We have an increasingly efficient and targeted development process.
Speaker Change: Prioritize lower cost formats, like unscripted and those shot abroad, while maintaining our strength in franchises N C. I S. One of the world's most watched shows and one that has been licensed in over 200 markets worldwide is a great example of this the latest iteration N C. I S. Sydney was produced in Australia.
Speaker Change: Yet at a much more efficient price point and was the most watched new show. This season on any network in the U S.
Speaker Change: Two February debut of tracker also on CBS and we are excited to announce today that the Ncis franchise will expand further with the first original for Paramount plus U S. Expected later this year.
Robert Marc Bakish: And we are excited to announce today that the NCIS franchise will expand further with the first original for Paramount Plus U.S. expected later this year. By the way, you will see us leaning even further into offshore production for our global franchise, including the upcoming London installment of Billions, the new Ray Donovan origin story with the Donovans, as well as new series like The Department from George Clooney. This benefits both TV media and DTC. Finally, we're focused on magnifying the impact of our, including through our combination of best-in-class sports and entertainment here in the U.S. Look no further than Super Bowl LIII, a blockbuster event. One that capped off a record-breaking NFL season.
Speaker Change: By the way you will see us leaning even further into offshore production for our global franchises.
Speaker Change: Clothing, the upcoming London installment of billions, the new Ray Donovan origin story with the Donovan's as well as new series like the Department from George Clooney.
Speaker Change: This benefits both T V media and D to C.
Finally, we're focused on magnifying the impact of our content, including through a combination of best in class Sports and entertainment here in the U S.
Speaker Change: Look no further than Super Bowl 58, a blockbuster event.
Speaker Change: One the capped off a record breaking NFL season.
Robert Marc Bakish: The game broke almost every record imaginable. The most watched telecast in television history, and the most streamed Super Bowl ever. The First Alternate Telecast with Nickelodeon and a new high-water mark for gross ad sales. The Super Bowl is a clear benchmark of the power of sport. But for us, it is more than that because we know that Paramount Plus subscribers who come into the service for live sports will ultimately spend nearly 90% of their viewing hours on non-sports content. Think about that as a nine times sports multiplier.
Speaker Change: The game broke almost every record imaginable, most watched telecast in television history.
Speaker Change: Most stream Super Bowl ever.
Speaker Change: First alternate telecast with Nickelodeon and a new high watermark for gross AD sales. The Super Bowl is a clear benchmark of the power of sports, but for US it is more than that.
Speaker Change: Cause we know the Paramount plus subscribers, who come into the service for live sports will ultimately spend nearly 90% of their viewing hours on non sports content.
Speaker Change: Think about that as a nine times sports multiplier.
Robert Marc Bakish: That's the power of an integrated sports and entertainment strategy, which is why we use the Super Bowl, one of the world's biggest stages, to showcase a whole range of our content with highly engaged fans, including launching the new CBS schedule and promoting our upcoming film. The results speak for themselves, with Bob Marley's One Love recently crossing an incredible $120 million worldwide after only 12 days at the box office, and viewership for the CBS slate got off to a turbocharged start, with audiences jumping 32% over last year on the network and 83% on streaming. Magnifying content extends well beyond the Super Bowl and leverages our entire ecosystem, like how we use CBS to drive new audiences to Yellowstone, or we brought 1883, a Paramount Plus original, to new audiences on linear cable as a second window. Among other things, it made 1883 the most-watched news series on cable last year. And looking ahead, we're excited to add the first season of Tulsa King to the CBS slate ahead of its season two premiere on Paramount Plus in the third quarter.
Speaker Change: That's the power of an integrated sports and entertainment strategy.
Speaker Change: Which is why we use the Super Bowl one of the world's biggest stages to showcase a whole range of our content with highly engaged fans, including launching the new CBS schedule and promoting our upcoming film slate.
Speaker Change: The results speak for themselves with Bob Marley, One love recently crossing an incredible 120 million worldwide. After only 12 days at the box office and viewership for the C. B S. Late got off to a turbocharged start with audience is jumping 32% over last year on the network and 83%.
Speaker Change: On streaming.
Speaker Change: Magnifying content extends well beyond the Super Bowl and Leverages, our entire ecosystem like how we use CBS to drive new audiences to Yellowstone or we brought 18 83 are paramount plus original to new audiences on linear cable as a second window.
Among other things, making 18 83, the most watched new series on cable last year.
Speaker Change: And looking ahead, we're excited to add the first season of Tulsa King to the CBS slate ahead of its season, two premier on Paramount plus in the third quarter.
Robert Marc Bakish: So that's where we are and where we're going with our conference. And that brings me to our second related priority, driving to D2C profitability. Here, we have already made meaningful progress. In 2020, our D2C revenue was $1.8 billion. In 2023, that number is $6.7 billion.
Speaker Change: So that's where we are and where we're going with our content and that brings me to our second related priority driving to DTC profitability.
Speaker Change: Here, we have already made meaningful progress in 2020, our DTC revenue was $1 $8 billion in 2023 that number is $6 $7 billion.
Robert Marc Bakish: Scaled revenue matters, and as I've said, we passed pre-streaming losses a year ahead of schedule. Perhaps more important, I'm pleased to say that we now expect Paramount Plus to reach domestic profitability in 2025, a significant and exciting milestone in the company's transformation. While Naveen will get into more detail, I want to preview the two parts of the story.
Speaker Change: Scaled revenue matters and as I've said, we passed preke streaming losses, a year ahead of schedule, perhaps more important I'm pleased to say that we now expect paramount plus to reach domestic profitability in 2025, a significant and exciting milestone in the company's transformation.
Speaker Change: Well, maybe we'll get into more detail I want to preview the two parts of the story domestic and international domestically increases in engagement reduction in churn and continued to add monetization as well as the flow through impact of last year's subscription price increase will continue to drive revenue growth.
Robert Marc Bakish: Domestically, increases in engagement, reduction in churn, and continued ad monetization, as well as the flow-through impact of last year's subscription pricing, will continue to drive revenue. All of which will be done on a more efficient slate. [inaudible] All driving meaningful D2C earnings improvement as we continue to gain operating leverage in the model. Internationally, it's become unquestionably clear that Hollywood hits are the biggest draw for our audiences and partners around the world, which means there's a clear opportunity to lean into our CBS slate, Paramount Plus Origins, and Paramount Films, while slowing spend on local content and associated marketing. Though the specific execution of this will vary by individual market, as one size does not fit all.
Speaker Change: All of which will be done on a more efficient fleet.
Speaker Change: Add to that the benefit to the Showtime Paramount plus integration.
Speaker Change: All driving meaningful D to see earnings improvement as we continue to gain operating leverage in the model.
Speaker Change: Internationally, it's become unquestionably clear that Hollywood hits are the biggest draw for our audiences and partners around the world.
Speaker Change: Which means there is a clear opportunity to lean into our CBS slate, Paramount plus originals and Paramount films, while slowing spend on local content and associated marketing.
Speaker Change: The specific execution of this will vary by individual market as one size does not fit all.
Robert Marc Bakish: Of course, we also recognize that sustainable growth requires the continued transformation of our costs, which leads me to our third theme, Unlocking Synergies Across Paramount. There is a lot of collective power behind Paramount Global, and we're unlocking that by aligning our assets to increase impact and drive greater efficiency. On the efficiency front, we'll continue streamlining the business to transform our costs. At the same time, we're excited about the potential to unlock more impact from this company, across content, marketing, partnerships, and more. I'm speaking of partnership.
Speaker Change: Of course, we also recognize that sustainable growth requires the continued transformation of our cost base, which leads me to our third priority unlocking synergies across Paramount.
There was a lot of collective power behind Paramount global and we're locking that by aligning our assets to increase impact and drive greater efficiencies on.
Speaker Change: On the efficiency front, we'll continue streamlining the business to transform our cost base, which devine will discuss in more detail shortly.
Speaker Change: At the same time, we're excited about the potential to unlock more impact from this company across content marketing partnerships and more.
Speaker Change: And speaking of partnerships advertising is a great example of where we're working to capture the power of one Paramount.
Robert Marc Bakish: Advertising is a great example of where we're working to capture the power of one Paramount. Yes, the ad market was challenging in 23. It isn't exactly where we want it to be, but we are encouraged by some signs of stabilization, including a healthy scatter premium. At the market level, many people are talking about increased supply and competition in the digital ad space. But what's not being discussed enough is the opportunity to grow the demand side. [inaudible] In addition to our focus on tapping into small and medium business budgets, something that historically was not accessible at the national TV level. We're now excited about being able to go toe-to-toe and bring retail media to connected TV, where we can incorporate purchase data from large-scale retailers to target and measure the impact of media investment on business outcomes. This is Fundamentally Reshaping the Marketing Landscape. Drawing budgets to connected TV previously reserved for other formats, like those associated with consumer and trade promotion, as well as social media, because CTV is not just a top-of-the-funnel awareness generator like its linear predecessor. It is also a one-to-one vehicle that can deliver the full funnel to the livery.
Devine: Yes, the AD market was challenging in 'twenty, three and still isn't exactly where we want it to be but we're encouraged by some signs of stabilization, including healthy scatter premiums.
Devine: At the market level. Many people are talking about increased supply and competition in the digital AD space, but what's not being discussed enough is the opportunity to grow the demand side of the equation, which is a big focus of ours and.
Devine: In addition to our focus on tapping into small and medium business budgets something that historically was not accessible at the national T. V level. We're now excited about being able to go toe to toe and bring in retail media to connected TV.
Devine: We can incorporate purchase data from large scale retailers to target and measure the impact of media investment on business outcomes.
Devine: This is fundamentally reshaping the marketing landscape drawing budgets to connected TV previously reserved for other formats like those associated with consumer and trade promotion as well as social media.
Devine: Because see T V is not just the top of the funnel awareness generator like its linear predecessor.
Devine: It is also a one to one vehicle that can deliver the full funnel to the living room, expanding the use case and addressable market for Paramount advertising.
Robert Marc Bakish: Expanding the Use Case, an Addressable Market for Paramount Average. We're testing these capabilities with Paramount Plus and Pluto. In fact, we're now partnering with Walmart Connect to bring the power of their data to streaming, and early results show this combination significantly enhances ad effectiveness.
Devine: We're testing these capabilities with Paramount plus in Pluto in fact, we're now partnering with Walmart connect to bring the power of their data to streaming.
Devine: And the early results show this combination significantly enhances ad effectiveness.
Robert Marc Bakish: We're excited about the potential of the opportunity, and more importantly, our clients are, too. Stepping back, I'd note that we love our multifaceted partnership with Walmart. Partnership that continues to evolve and grow, including by adding Paramount Plus subscribers and improving viewer engagement through our Walmart Plus relationship. In closing, these three priorities, maximizing our content, driving D2C profitability, and unlocking Paramount synergies, give us a clear roadmap. They balance revenue growth and cost management, all while demonstrating the power and efficiency of our content engine. And speaking of that content engine, I can't help but highlight the incredible momentum we have as we kick off 2024. That includes the Golden Globes, up over 50%. The Grammys, with their largest audience since 2020. A Super Bowl that was record-breaking on every level.
Devine: We're excited about the potential of the opportunity and more importantly clients are too.
Devine: And stepping back I'd note that we love our multifaceted partnership with Walmart, a partnership that continues to evolve and grow and including by adding Paramount plus subscribers and improving viewer engagement through our Walmart plus relationship.
Devine: In closing these three priorities maximizing our content driving the D to C profitability and unlocking Paramount synergies gave us a clear roadmap they balanced revenue growth and cost management.
Devine: All while demonstrating the power and efficiency of our content engine and speaking of that content engine I can't help but highlight the incredible momentum we have as we kick off 2024.
Devine: That includes the Golden Globes up over 50% the grammys with their largest audience since 2020, our Super Bowl that was record breaking on every level. The hugely successful debut of the new Cvs slate, where multiplatform viewership across broadcast and streaming sort of double digits.
Robert Marc Bakish: The hugely successful debut of the new CBS slate, where multi-platform viewership across broadcast and streaming soared double-digit. The return of Jon Stewart to The Daily Show, which is driving ratings, revenue, streams, and the cultural conversation, and our two-for-two start at the domestic box office, with both Mean Girls and Bob Marley opening at number one, significantly exceeding box office expectations, and both soon to be hits on Paramount. All of that in just the last eight weeks. With that, I'll hand it over to Naveen.
Devine: The return of Jon Stewart to the Daily show, which is driving ratings revenue streams and the cultural conversation.
Devine: And our two for to start at the domestic box office with both mean girls and Bob Marley opening number one significantly exceeding box office expectations and both soon to be hits on Paramount plus.
Devine: All of that and just the last eight weeks.
Speaker Change: With that I'll hand, it over to intervene.
Naveen K. Chopra: Thank you. Thank you, Bob. Good afternoon, everyone.
Speaker Change: <unk>.
Intervene: Thank you Bob good afternoon, everyone.
Naveen K. Chopra: As Bob mentioned, our full year 2023 results reflect a year of continued, and in my comments today, I'll provide insights on key elements of our Q4 results. Additionally, I'll discuss how we're making notable progress in scaling our D2C business, which will result in significant earnings growth for the company in 2024 and Drive Paramount Plus to reach domestic profitability in 2025. Let's begin with our Q4 results. Paramount delivered total company revenue of $7.6 billion and adjusted OEBDA of $520 million. Despite navigating a variety of challenges posed by the strikes, we were able to deliver strong performance in our direct-to-consumer business. As always, you'll find a comprehensive review of our financial results in our press release. Well, let me walk you through a few areas of... Starting With Average
Speaker Change: As Bob mentioned, our full year 2023 results reflect a year of continued execution.
Speaker Change: My comments today I'll provide insights on key elements of our Q4 results. Additionally, I'll discuss how we're making notable progress in scaling our D to C business, which will result in significant earnings growth for the company in 2024 and drive Paramount plus to reach domestic profitability in 2025.
Speaker Change: Let's begin with our Q4 results.
Paramount delivered total company revenue of $7 6 billion and adjusted OIBDA of $520 million.
Speaker Change: Despite navigating a variety of challenges posed by the strikes.
Speaker Change: We were able to deliver strong performance in our direct to consumer business and stable operating margins in TV media.
Speaker Change: As always you'll find a comprehensive review of our financial results in our press release, but let me walk you through a few areas of note.
Starting with advertising.
Naveen K. Chopra: In Q4, direct-to-consumer advertising delivered strong growth of 14%, benefiting from a 27% increase in total viewing hours across Paramount Plus and Pluto TV. This viewership is monetized through our iQ platform, already one of the largest premium digital video advertising platforms in the United States. And its value continues to grow as engagement expands and as we evolve our digital advertising capabilities to attract new sources. In linear advertising, we saw strong demand in sports due to a record NFL season and Incremental Big Ten Investors. Other components of linear advertising were negatively impacted by the strike, such as Fine and Political Spend, and Unfavorable Effort. On a total company basis, advertising declined 11% in the quarter, including a 400 basis point headwind from the decline in political advertising.
Speaker Change: In Q4 direct to consumer advertising delivered strong growth of 14%.
Speaker Change: Benefiting from a 27% increase in total viewing hours across Paramount plus and Pluto TV.
Speaker Change: This viewership is monetize through our IQ platform already one of the largest premium digital video advertising platforms in the United States and.
Speaker Change: And its value continues to grow as engagement expands and as we evolve our digital advertising capabilities to attract new sources of demand.
Speaker Change: In linear advertising, we saw strong demand in sports due to our record NFL season, and incremental big 10 inventory.
Other components of linear advertising were negatively impacted by the strikes a decline in political spend and unfavorable FX.
Speaker Change: On a total company basis advertising declined 11% in the quarter, including a 400 basis point headwind from the decline in political advertising.
Naveen K. Chopra: Looking forward, as Bob mentioned, we're seeing some signs of stabilization in the Admark, including Healthy Scatter. And based on what we've seen to date, we expect to report low- to mid-teens advertising growth in Q1, including the benefit of the Super Bowl. Next, let me turn to affiliate and subscription revenue, which grew 13% in Q4. As I've often noted, growth in total affiliate and subscription revenue shows that our multi-platform strategy, combining traditional and streaming, yields net growth for our business. TV Media's affiliate revenue declined 1%, reflecting a continuation of the trends we saw in the first three quarters of 2023.
Speaker Change: Looking forward as Bob mentioned, we're seeing some signs of stabilization in the AD market, including healthy scatter premiums.
And based on what we've seen to date, we expect to report low to mid teens advertising growth in Q1, including the benefit of the Super Bowl.
Speaker Change: Next let me turn to affiliate and subscription revenue, which grew 13% in Q4.
Speaker Change: As I've often noted growth in total affiliate and subscription revenue illustrates that our multi platform strategy, combining traditional and streaming yields net growth for our business.
Speaker Change: In TV media affiliate revenue declined 1%, reflecting a continuation of the trends we saw in the first three quarters of 2023.
Naveen K. Chopra: The D2C subscription revenue, on the other hand, grew 43% in the quarter. And that's in large part due to the impressive momentum at Paramount+, where subscription revenue increased nearly 80%. Thanks to subscriber growth and global ARPUs, Paramount Plus continues to reach new audiences, adding 4.1 million subscribers in Q4 for a cumulative total of 67.5 million subscribers globally.
Speaker Change: D to see subscription revenue on the other hand grew 43% in the quarter.
And that's in large part due to the impressive momentum at Paramount plus where subscription revenue increased nearly 80%.
Speaker Change: Thanks to subscriber growth and global <unk> expansion.
Speaker Change: Paramount plus continues to reach new audiences, adding $4 1 million subscribers in Q4 for a cumulative total of $67 5 million subscribers globally.
Naveen K. Chopra: Additionally... Our period for the quarter grew 31% over the prior year, reflecting a full quarter of our domestic pricing and the addition of international subscribers and higher ARPU marks. Q4 also benefited from strong performance of our Paramount Plus service with Showtime. The expanded content offering on our premium tier led to an increase in hours of engagement per subscriber. Monthly churn for these subscribers also improved both quarter over quarter and year over year, and we're seeing higher-than-expected cost synergies from the combination. In fact, Q4 marked the third consecutive quarter of year-over-year improvement in D-to-C OEB.
Speaker Change: Additionally, our <unk> for the quarter grew 31% over the prior year, reflecting a full quarter of our domestic domestic price increase.
Speaker Change: And the addition of international subscribers and higher <unk> markets.
Speaker Change: Q4 also benefited from strong performance of our Paramount plus with Showtime tier.
Speaker Change: The expanded content offering on our premiums here led to an increase in hours of engagement per subscriber.
Speaker Change: Monthly churn for these subscribers also improved both quarter over quarter and year over year.
Speaker Change: And we're seeing higher than expected cost synergies from the combination.
Speaker Change: In fact, Q4 marked the third consecutive quarter of year over year improvement in D to C. OIBDA.
Naveen K. Chopra: And on a full year basis, we grew Paramount Plus revenue over 60%, while content marketing and other expenses grew at a significantly lower rate. As we approach the third anniversary of the domestic launch of Paramount Plus, we are capturing operating leverage in streaming faster than..., and we intend to build on that moment. Paramount Plus's value proposition is strong, cornerstone original and library content, and top-tier movies and sports in an integrated package. This proposition allows us to continue to grow subscribers and drive revenue by Deepening Engage, Proving Retention, and Increasing Monetization. And we continue to believe that the key to deeper engagement and retention is savvy programming execution and a stable volume of original content. It's about smartly combining acquisition drivers like the NFL, blockbuster films, and our slate of hit Paramount Plus originals with lower-cost library and affinity programs. This strategy proved effective in 2023, when average monthly viewing hours per domestic subscriber grew 8%.
And on a full year basis, we grew Paramount plus revenue over 60% in 2023.
Speaker Change: While content marketing and other expenses grew at a significantly lower rate.
Speaker Change: Said differently.
Speaker Change: As we approach the third anniversary of the domestic launch of Paramount plus we're capturing operating leverage in streaming faster than expected.
Speaker Change: And we intend to build on that momentum.
Speaker Change: Paramount Plus's value proposition is strong cornerstone of original and library content and top tier movies and sports in an integrated package.
Speaker Change: This proposition allows us to continue to grow subscribers and drive revenue.
Speaker Change: Deepening engagement, improving retention and increasing monetization.
And we continue to believe that the key to deeper engagement and retention is savvy programming execution and a stable volume of original content.
Speaker Change: It's about smartly combining acquisition drivers like the NFL blockbuster films and our slate of hit Paramount plus original with lower cost library and affinity program.
Speaker Change: This strategy proved effective in 2023, where average monthly viewing hours per domestic subs grew 8% and helped us implement a price increase while also reducing average monthly churn by 70 basis points.
Naveen K. Chopra: And helped us implement a price increase while also reducing average monthly churn by 70 basis points. Outside the United States, we are similarly honing our Paramount Plus strategy by leaning into our global slate and identifying markets where we can reduce investment in local streaming content and marketing. We've learned that Paramount Plus subscribers outside the United States spend nearly 90% of their time with our global Hollywood hit. Meaning, we can keep them engaged while rightsizing our investment in content that does not travel around the world. In some cases, this change will result in slower international subscriber growth.
Speaker Change: Outside the United States, we are similarly, honing, our Paramount plus strategy by leaning into our global slate and identifying markets, where we can slow investment in local streaming content and marketing.
Speaker Change: We've learned that Paramount plus subscribers outside the United States spend nearly 90% of their time with our global Hollywood hits.
Speaker Change: Meaning we can keep them engaged while right sizing our investment in content that does not travel around the world.
Speaker Change: In some cases this change will result in slower international subscriber growth, but given what we now know about viewing behavior in certain international markets. We're confident the shift will be highly accretive to our D to C. P&L.
Naveen K. Chopra: But given what we now know about viewing behavior in certain international markets, we're confident the shift will be highly accretive to our D to C. Domestically and abroad, we are finding ways to enhance engagement, reduce the cost per hour of viewing, and unlock greater marketing efficiency. By executing on these initiatives, we expect Paramount Plus to deliver more than 20% global ARPU improvement in 2024, while programming expense will grow at a significantly lower rate. Ultimately, the ability to drive deeper engagement and our food growth, while slowing the rate of growth in content, is the path to profitability.
Speaker Change: Domestically and abroad, we are finding ways to enhance engagement reduce the cost per hour of viewing and unlock greater marketing efficiency.
Speaker Change: By executing on these initiatives, we expect Paramount plus to deliver more than 20% global <unk> improvement in 2024.
Speaker Change: While programming expense will grow at a significantly lower rate.
Speaker Change: Ultimately the ability to drive deeper engagement and ARPA growth.
Speaker Change: While slowing the rate of growth in content expense.
Speaker Change: Is the path to profitability in stream.
Naveen K. Chopra: In addition to improving the profitability of, we remain committed to optimizing the cost structure in other parts of our Programming for our TV media segment is the single biggest line item in our expenses, so it deserves particular attention. As you've heard, 2023 presented an opportunity to experiment with alternative, lower-cost entertainment programming across our linear network. The performance we saw gives us confidence that we can continue to reduce costs going forward while also delivering a consistent volume of high-quality content. And that's enabled by lower production costs, an evolving format mix, and optimizing and sharing content across linear. As Bob noted, we're also focused on using the collective power of Paramount Global to unlock synergies more broadly. This mindset enables headcount cost reductions, including the action we announced earlier this month, which eliminated nearly 750 domestic positions, or about 5% of our domestic employees, and represents approximately $200 million in annualized run rate cost savings.
Speaker Change: In addition to improving the profitability of streaming we remain committed to optimizing the cost structure in other parts of our business.
Programming for our TV media segment is the single biggest line item in our expense base. So it deserves particular focus.
Speaker Change: And as you've heard 2023 presented an opportunity to experiment with alternative lower cost entertainment programming across our linear networks.
Speaker Change: The performance we saw it gives us confidence we can continue to reduce costs going forward, while also delivering a consistent volume of high quality content.
And that's enabled by lower production costs evolving format mix, and optimizing and sharing content across linear and streaming.
Speaker Change: As Bob noted, we're also focused on using the collective power of Paramount global to unlock synergies more broadly.
Speaker Change: This mindset enables head count cost reductions, including the actions, we announced earlier this month, which eliminated nearly 750 domestic positions or about 5% of our domestic employees and represents approximately 200 million in annualized run rate cost savings the majority of which will benefit <unk>.
Naveen K. Chopra: The majority of which will benefit TV, media, and corporate, and we will continue to optimize our compensation expenses throughout the course of 2020. As you've now heard, we're making a variety of important changes to our global workforce and content. These moves reflect decisions we've made to transition our business and enhance our future value proposition. They will also result in a programming and restructuring charge in Q1, which we currently expect to be approximately $1 billion.
Speaker Change: Media and corporate expenses.
Speaker Change: And we will continue to optimize our compensation expenses throughout the course of 2024.
Speaker Change: As you've now heard were making a variety of important changes to our global workforce and content strategy.
Speaker Change: These moves reflect decisions, we've made to transition our business and enhance our future value proposition.
Speaker Change: They will also result in a programming and restructuring charge in Q1, which we currently expect to be approximately $1 billion.
Naveen K. Chopra: I'll close by sharing some guidance on how all this translates to our financial expectations for the current year. As you've now heard, we're executing against numerous initiatives designed to not only navigate ongoing ecosystems but also build operating leverage in our streaming business. This means significant OIBDA growth in 2024, largely driven by improvements to our D2C P&L, which also positioned Paramount Plus to reach domestic profitability in 2022, a significant milestone in our streaming journey. In addition, we're highly focused on continuing to reduce balance sheet leverage.
Speaker Change: I'll close by sharing some guidance on how all this translates to our financial expectations for the current year.
As you've now heard we are executing against numerous initiatives designed to not only navigate ongoing ecosystem changes.
Speaker Change: But also build operating leverage in Australia business.
Speaker Change: This means significant OIBDA growth in 2024.
Speaker Change: Largely driven by improvements to our D to C P&L, which also position Paramount plus to reach domestic profitability in 2025 a.
Speaker Change: A significant milestone in our streaming journey.
Speaker Change: In addition, we're highly focused on continuing to reduce balance sheet leverage.
Naveen K. Chopra: We finished 2023 with an approximately half-turn reduction in net leverage relative to Q3 following the sale of Simon & Schuster. Leverage in 2024 will benefit from material OIBDA growth and positive free cash. In fact, we expect free cash flow to grow in 2024 versus 23. Despite an increase in cash content spend as we restart production that was impacted by the strike. Despite a dynamic environment, our commitment to shareholder value remains paramount. We have conviction that the value of our assets today, and even more so with the benefit of strong ongoing execution, represents a significant value creation opportunity. And as Bob said, we are dedicated to unlocking that value. With that, Operator, let's open the line for questions. Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to remove your question, please press star followed by 2. If you are a parent who asked your question, please ensure your phone is unmuted locally.
Speaker Change: We finished 2023 with an approximately half turn reduction in net leverage relative to Q3, following the sale of Simon and Schuster.
Speaker Change: Leverage in 2024 will benefit from material OIBDA growth and positive free cash flow.
Speaker Change: In fact, we expect free cash flow to grow in 2024 versus 23, despite an increase in cash content spend as we restart production that was impacted by the strikes.
Speaker Change: Despite a dynamic environment, our commitment to shareholder value remains paramount.
Speaker Change: We have conviction that the value of our assets today.
Speaker Change: Even more so with the benefit of strong ongoing execution represents a significant value creation opportunity.
Speaker Change: And as Bob said, we are dedicated to unlocking that value.
Speaker Change: With that operator, let's open the line for questions.
Speaker Change: Okay.
Speaker Change: Thank you if you'd like to ask a question. Please press star followed by one no telephone keypad.
Speaker Change: If you would like to remove your question. Please press star followed by chain.
Speaker Change: Well the parent I'll ask a question. Please ensure you're finally from me Tonight Jay.
Operator: We ask you please to limit yourself to one question. Our first question today goes to Bryan Kraft of Deutsche Bank. Bryan, please go ahead; your line is open. Hi, good afternoon.
All he please go get yourself to one question.
Speaker Change: Our last question today, Bryan Kraft Deutsche Bank. Please go ahead your line is open.
Bryan D. Kraft: Hi, Good afternoon, I had a couple I guess would you talk about the content slate for TV and streaming this year on the TV side or are you shifting programming originally slated for the fall and to the first half of the year and therefore going to have higher than normal programming costs in the first half of the year ex Super Bowl or should we expect a more.
Robert Marc Bakish: I had a couple of questions. Would you talk about the content slate for TV and streaming this year on the TV side, or are you shifting programming originally slated for the fall and to the first half of the year, and therefore going to have higher than normal programming costs in the first half of the year at the Super Bowl, or should we expect a more normal level of programming costs for TV in the first half, and then on the streaming side, how would you compare the strength What are some of the more important titles that you think will drive customer acquisition for Paramount Plus? And then it would be really helpful if you could give us a sense of the mix between domestic and international Paramount Plus subscribers at this point, as well as where most of the growth came from in 2023 and any color just on your expectations for subscriber growth this year in total. Anything on mix would be helpful. And then just the last one was just if you could give us any sense of where the relative ARPUs are for domestic and international now. That'd be great. Thank you. Yeah, sure, Bryan. This is Bob.
Bryan D. Kraft: The level of programming costs for TD in the first half.
Bryan D. Kraft: Then on the streaming side, how would you compare the strength of this year's slate to last years, what are some of the more important titles that you think will drive customer acquisition per Paramount plus and then it would be really helpful. If you could give us a sense of the mix between domestic and international Paramount plus subscribers at this point as well as where most of it.
Bryan D. Kraft: The growth came from in 2023 and any color just on your expectations for sub growth this year.
Bryan D. Kraft: In total and anything on mix would be helpful. And then just the last one was just if you could give us any sense for where the relative <unk> Saar for domestic and international now that'd be great. Thank you.
Bryan D. Kraft: Yeah sure Brian This is Bob I'll take the first part of that with the content and let <unk> take the second part on what I'll call. The metrics. So with respect to content Paramount as you know has a robust content engine and it's really been delivering and now that we're through the strikes it's again in full operation.
Robert Marc Bakish: I'll take the sort of the first part of that with the content and let Naveen take the second part on what I'll call the metrics. So with respect to content, you know, Paramount, as you know, has a robust content engine, and it's really been delivering. And now that we're through the strikes, it's again in full operation.
Robert Marc Bakish: On the TV media side, we commented on the CBS slate earlier. Obviously, that was a delayed launch, but we're up and running now, and we will run a shorter slate in terms of the number of episodes, but I want to highlight just how strong it is. We had the top 16 shows, all of the top 16 in the first week, and we had 18 of the top 20, and that's really stunning for one network. So I'm really great about where CBS is, and we will have a traditional fall slate launching again in the fall. So that's CBS. In terms of the cable side, they also have a whole set of programming coming there. Things like Yellowstone and the new Yellowstone, call it Yellowstone 2024 for now, coming to Paramount Network in the fall. A bunch of animation coming to Comedy Central, plus Jon Stewart, by the way, which Episode 3 this week continues to grow nicely. That whole set of programming with MTV, et cetera. Moving to streaming, we feel... Very good things about the first half.
Speaker Change: <unk> on the TV media side, we commented on the Cvs slate earlier, obviously that was a delayed launch but.
Speaker Change: But we're up and running now and we will run shorter slate in terms of number of episodes, but I want to highlight just how strong. It is we had the top 16 shows all of the top 16 in the first week and we had 18 of the top 20, and Thats really stunning for one network.
Speaker Change: So feeling really great about where Cvs is and we will have a traditional fall asleep launching again in the fall.
Speaker Change: So that's CBS in terms of the cable side also have a whole set of programming coming there.
Speaker Change: Things like Yellowstone and the new Yellowstone called Yellowstone 'twenty 'twenty four for now come in at Paramount network in the fall.
Speaker Change: A bunch of animation come into comedy Central plus Jon Stewart by the way, which episode three this week continues to grow nicely.
Speaker Change: That whole set of programming with MTV et cetera are moving to streaming.
Speaker Change: We feel.
Speaker Change: Very good about the first half now the first half we are still dealing with some strike delays with respect to content. So we've been a bit creative but if you look at the first quarter, obviously, the NFL Super Bowl.
Robert Marc Bakish: Now, in the first half, we are still dealing with some strike delays with respect to content, so we've been a bit creative. But if you look at the first quarter, obviously, you had the NFL in the Super Bowl.
Robert Marc Bakish: That's performed very well for us. The CBS slate, I talked about that. Also, Halo, the Mean Girls movie.
Speaker Change: <unk> performed very well for us the CBS played I talked about that also halo the mean girls movie where back in the wafer business and we got March Madness. So Q1 looks good Q2.
Robert Marc Bakish: We're back in UEFA business, and we have March Madness, so Q1 looks good. Q2, Add the Masters, the Bob Marley movie, Star Trek Discovery, The Challenge, All-Stars, the reality show originally from MTV, now broadened, Dora's, a Sonic spin-out called Knuckles, The Return of the Shy. And then once we get into the back half of the year, we're really finally operating at full strength. And frankly, it's chock full.
Speaker Change: The Masters the Bob Marley movie Star Trek Discovery the challenge all stars reality show originally from MTV.
Speaker Change: Now.
Speaker Change: Broader.
Speaker Change: <unk>.
Speaker Change: Sonic Spinout called Knuckles, the return on the shy.
Speaker Change:
Speaker Change: And then once we get into the back half of the year, we're really finally operating at full strength and frankly, it's chock full.
Robert Marc Bakish: Things like Mayor of Kingstown, Season 3, a new Ninja Turtles series, SEAL Team, Tulsa Kings, Special Ops, Fraser, The Shy for Season 7, the Donovans, which we announced today, a spin-off of Ray Donovan, another Taylor series, Landman with Billy Bob Thornton, Jon Hamm, and Demi Moore, plus, of course, the NFL and Big Ten comeback. So we're Yeah, thanks.
Speaker Change: Things like Mayor Kingstown season, three a new new Ninja Turtles series C. L team Tulsa, King Special Ops Fraser, the shy perceiving seven donovan's, which we announced today a spinoff of Ray Donovan. Another Taylor series land man with Billy Bob Thornton, John Hammond Demi Moore.
Speaker Change: Plus of course, the NFL and Big 10 come back. So we're feeling very good about Paramount plus and frankly linear from a content perspective Levine.
Naveen K. Chopra: So Bryan, I'll try to give you a little insight on streaming subs. So maybe just starting with Q4, as you saw, we added 4.1 million subs to Paramount Plus in the quarter. I think it's fair to characterize that growth as being relatively balanced as between domestic subs and international subs. On the domestic side, I think the content slate performed really well, despite, obviously, some strike impact. I think that speaks to the benefit of having a balanced sports and entertainment portfolio. So it worked well for us. We also saw some nice performance in the quarter from partnerships like what we do with Walmart and the bundle with Walmart Plus. And then on the international side, we launched a new hard bundle with JCOMM in Japan.
Levine: Yes, thanks, So Brian I'll try to give you a little insight on.
Levine: Streaming subs.
Levine: So maybe just starting with Q4 as you saw we added $4 1 million subs to Paramount plus in the quarter.
Levine: I think it's fair to characterize that growth as being relatively balanced as between domestic subs and international subs on the domestic side I think the content slate performed really well despite.
Levine: Obviously, some strike impact I think that speaks to the benefit of having a balanced sports and entertainment portfolio.
Levine: So that worked well for us.
Levine: We also saw some some nice performance in the quarter from partnerships like what we do with Walmart and the bundle with Walmart plus.
Levine: And then on the international side, we launched a new hard bundle with J com in Japan, So that obviously contributed to sub growth.
Naveen K. Chopra: So that obviously contributed to sub growth. In terms of what we're seeing this year, 2024 sub-expectations, I do think sub-growth in 2024 will be lower than 2023, though, importantly, I'd point out we do still expect very healthy Paramount Plus revenue growth, and, of course, revenue is the more important metric than subs. But just to give you some color behind my comment on the sub-trends themselves, there are a number of factors at play. First, you've got the Super Bowl.
Levine: In terms of what we're seeing.
Levine: This year 2024 sub expectations I do think sub growth and 24 will be lower than 2023.
Levine: Importantly, I'd point out we do still expect very healthy Paramount plus revenue growth and of course revenue is the more important metric than subs.
Levine: But just to give you a little color behind my comment on the sub trends themselves.
Levine: There are a number of factors at play first you got the Super Bowl.
Naveen K. Chopra: We're very excited about the number of starts that we saw from the Super Bowl. I think it's a little early to assess exactly what that means in terms of how many we've retained. Obviously, you do have high churn on an event like that, but, you know, we're encouraged by what we've seen thus far. The content slate, because of the strike, as you heard Bob describe, is a little bit back half loaded, and so that kind of affects the timing of subs coming on.
Levine: We were very excited about the magnitude of starts that we saw from the Super Bowl I think it's a little early too.
Levine: Assess exactly what that means in terms of how many we retained obviously you do have high churn on an event like that.
Speaker Change: But we're encouraged by what we've seen thus far.
Speaker Change: The content slate because of the strike as you heard Bob described is a little bit back half loaded and so that kind of affects the timing of subs coming on.
Naveen K. Chopra: And then international, which, as you heard in our prepared remarks, we've made a number of changes. We talked about dialing back on local content and marketing, which has some impact on subs.
Speaker Change: And then international which as you heard in our prepared remarks.
Speaker Change: We've made a number of changes.
Speaker Change: We talked about dialing back on local content and marketing.
Speaker Change: That has some impact on subs.
Naveen K. Chopra: We will also likely be exiting some hard bundle relationships where, quite frankly, the economics just weren't that compelling. And that could probably represent a loss of a couple million subscribers, if you will. But in both of those cases, while it impacts subs, it doesn't have a material impact on revenue or EBITDA. And so that's why, as I said, there's a little bit of noise in the subtrends, but I feel very good about the revenue growth trend on Paramount. Oh, and sorry, you had a question on the relative ARPU between international and domestic.
Speaker Change: We will also likely be exiting some hard bundled relationships, where quite frankly, the economics just weren't that compelling.
Speaker Change: And that can.
Speaker Change: Probably represent a loss of a couple of million subs, if you will but in both of those cases, while it impacts subs doesn't have a material impact on revenue or EBITDA and so that's why as I said.
Speaker Change: There's a little bit of noise in the sub trends.
Speaker Change: Feeling very good about the revenue growth trend on Paramount plus.
Speaker Change: Oh, and sorry, you had a question on relative <unk> between international and domestic.
Naveen K. Chopra: As you know, we don't disclose specific numbers there, but I can tell you that domestic ARPU continues to be higher than what you see in international. The other thing to keep in mind is that international really has a number of different components to it. So there are territories in Western Europe, for example, where the ARPUs look a little more like they do in the United States.
Speaker Change: As you know, we don't disclose specific numbers, there, but I can tell you that domestic <unk> continues to be.
Speaker Change: Higher than what you see in international the other thing to keep in mind is that international really has a number of different components to it. So there's territories in Western Europe for example, where the <unk> look a little more like they do in the United States.
Naveen K. Chopra: And one of the things that contributed to overall ARPU growth, both in 2023 and will continue to do so in 2024, is the fact that we'll be seeing more growth in those, call it higher ARPU international markets, than we did in the early days of Paramount. Thanks, Bryan. Operator, next question, please. Thank you. The next question goes to Michael Morris of Guggenheim Partners. Michael, please go ahead; your line is open.
Speaker Change: And one of the things that has contributed to overall <unk> growth both in 'twenty three and we will continue to do so in 'twenty. Four is the fact that we will be seeing more growth in those call it higher ARPA international markets.
Speaker Change: And then what we've seen in the early days of Paramount plus.
Speaker Change: Thanks, Brian Operator next question please.
Speaker Change: Thank you. The next question guys two Michael Morris of Guggenheim Partners. Michael. Please go ahead. Your line is open.
Robert Marc Bakish: Thank you. Good afternoon, guys. Two topics, one on sports and one on content. If I can, on sports. The sports JV between Disney, Fox, and Warner Brothers has been pretty high profile. I'm curious if you can share your thoughts on what you think that means for the competitive marketplace, whether you expect it to impact you, and whether it might spur you to look for a partnership yourself. So that's my first question.
Michael C. Morris: Thank you good afternoon, guys too.
Michael C. Morris: Two topics one on sports and one on content if I can.
Michael C. Morris: On sports.
Michael C. Morris: The.
Michael C. Morris: Sports JV between Disney.
Michael C. Morris: Fox and Warner Brothers has been pretty high profile I'm curious if you can share your thoughts on what you think that means for the competitive marketplace, whether you expect it to impact you and whether it might spur you to look for a partnership yourself.
Michael C. Morris: So that's my first question and then my second on content as.
Robert Marc Bakish: And then my second question on content, as we talk about kind of repopulating the slate, you know, the licensing revenue at the company has been pretty stable until this past year when it came down. I think during the strikes, do you expect it to return to a level that you saw in 2021-2022? And just one other thing, Bob, when you were talking about windowing, you mentioned Tulsa King and maybe putting that on linear before you put it on streaming, which seems a little inverted from what we would expect. So did I hear that right? And maybe if you could speak to that strategy a little bit, I would appreciate it. Yeah, I'm sure, Michael.
Michael C. Morris: As we talked about kind of repopulating the slate.
Michael C. Morris: Licensing revenue at the company has been pretty stable until this past year. When it came down I think during the strikes do you expect it to return to a level that you know.
Michael C. Morris: You saw in 2021 2022.
Michael C. Morris: And just one other thing Bob when you were talking about windowing, you mentioned, Tulsa, King and maybe putting that on linear before you put it on streaming which seems a little converted from from what we would expect so did I hear that right and maybe if you could speak to that strategy a little bit I would appreciate.
Speaker Change: Got it thank you.
Bob Marley: Yeah sure Michael So starting with the sports topic, let's start with the fact that Theres still a lot. We don't know about this service things like price packaging consumer appetite and to the consumer point for a true sports fan this product only.
Robert Marc Bakish: So starting with the sports topic, look, start with the fact that there's still a lot we don't know about this service, things like price, packaging, consumer appetite. And to the consumer point, you know, for a true sports fan, this product only has a subset of sports. It's missing half the NFL, a lot of college sports, has virtually no soccer or golf, you know, etc.
Bob Marley: There's a subset of sports it's missing half the NFL a lot of college has virtually no soccer golf et cetera. So look that's hard to believe that ideal, especially at the price points that have been speculated.
Robert Marc Bakish: So look, that's hard to believe that it's ideal, especially at the price points that have been speculated. In terms of our view on sports, first, we serve true sports fans through our MVPD and virtual MVPD partnership. That provides the full complement of sports really year round.
Bob Marley: In terms of our view on sports.
Bob Marley: First.
Bob Marley: We serve true sports fans through our Mvpds and virtual Mvpds partnership.
Bob Marley: That provides the full complement of sports really year round and second we see clear value to an integrated sport payment strategy true both for CBS and Paramount plus by the way, but if you look at the streaming side Paramount plus we clearly see consumers watching both.
Robert Marc Bakish: And second, we see clear value in an integrated sports payment strategy. True, both for CBS and Paramount Plus, by the way. But if you look at the streaming side, Paramount Plus, we clearly see consumers watching both. I referenced this 90% factor, i.e.
Michael C. Morris: I referenced is 90% factor I E people to come in for sports on Paramount plus 90% of their engagement is with non sports. So that's a clear.
Robert Marc Bakish: people that come in for sports on Paramount Plus, 90% of their engagement is with non-sports. So that's a clear, that's a clear opportunity that we're continuing to exploit, and we like it. And our sports, our marquee, NFL, NCAA, UEFA, those are locked up into the next decade.
Michael C. Morris: That's clear opportunity that we're continuing to exploit and we like.
Michael C. Morris: And our sports our Mark key NFL NCWA UEFA those are locked up into the next decade. So we have a real sustainable advantage here Bottomline, we very much like where we are with respect to sports execution.
Robert Marc Bakish: So we have a real sustainable advantage here. Bottom line, we very much like where we are with respect to sports execution and see the Paramount strategy creating substantial value therein. Let me briefly comment on Tulsa.
Michael C. Morris: And see the Paramount strategy.
Michael C. Morris: Creating substantial value there in let me briefly comment on Tulsa.
Robert Marc Bakish: You missed it, Hrdy, what we're going to do is we're going to put the first season of Tulsa on CBS prior to the second season of Tulsa dropping on Paramount+, really using it as a broad marketing engine, and as you know, we did a variant of that idea with Yellowstone, and we really saw continued broadening of the audience, and so we think that's a real opportunity for And we also think it's attractive from an economic perspective. Do you want to comment on the licensing thing, Naveen? Yeah, sure. Mike, I think, for the most part, your thesis is correct on licensing.
Speaker Change: You misheard, what we're going to do is we're going to put the first season of Tulsa.
Michael C. Morris: Prior to the second season of Tulsa, dropping on Paramount plus really using it as a broad marketing engine and as you know we.
Michael C. Morris: We did a variant of that idea with Yellowstone and we really saw continued broadening of the engage the audience.
Michael C. Morris: So we think that's a real opportunity for Tulsa, as well given stallone et cetera, and we also think it's attractive from an economic perspective do you want to comment on the licensing thing Yeah sure Mike I think for the most part your thesis is correct on licensing we do expect our licensing to grow this year.
Naveen K. Chopra: We do expect licensing to grow this year. But, you know, as I've flagged in the past, the quarter-to-quarter trends on licensing can be lumpy just because there are a lot of timing elements that can affect revenue recognition. But you know, given that licensing was impacted by the strike last year, this should be, call it a more normal year from a licensing perspective. Probably does mean it's a little bit back half loaded because it will take a little time to be able to produce and then deliver all of that content.
Michael C. Morris: Sure.
Speaker Change: As I flagged in.
Speaker Change: In the past.
Speaker Change: The quarter to quarter trends on licensing can be lumpy just because there's a.
Speaker Change: A lot of timing elements that can affect.
Speaker Change: Our revenue recognition.
Speaker Change: But you know given that licensing was impacted by the strike last year.
Speaker Change: This should be call. It a more normal year from a licensing perspective, probably does mean its a little bit.
Speaker Change: Back half loaded because it will take a little time to be able to produce and then deliver all of that content.
Naveen K. Chopra: But in general, you know, we're looking forward to the year. I'd also note that, you know, our licensing revenue includes things like studio rental, which was also impacted by the strike, so that's another place where we get a benefit in 24 versus 25. Thanks, Mike.
Speaker Change: But in general.
Speaker Change: We're looking forward to that.
Speaker Change: The year I'd also note that.
Speaker Change: In our licensing revenue includes things like.
Speaker Change: Studio rentals, which were also impacted by the strike. So that's another place where we get a benefit in 24 versus 23.
Speaker Change: Thanks, Mike Operator next question please.
Operator: Operator, next question, please. The next question goes to Ben Swinburne of Morgan Stanley. Ben, please go ahead; your line is open. Thank you.
Speaker Change: The next question goes to Ben Swinburne of Morgan Stanley. Please go ahead. Your line is open.
Benjamin Daniel Swinburne: Thank you.
Naveen K. Chopra: Questions are on Paramount+. Thank you for all the guidance you have laid out in your prepared remarks. Maybe for Naveen, you haven't talked about sort of international versus domestic, eBid, or EBITDA in the past, and if there's any way to help us think about what domestic profitability means, segment level, or any way to dimensionalize that disclosure. And then on the $1 billion charge, it sounded like that was programming and restructuring. I just wanted to make sure that it was true.
Benjamin Daniel Swinburne: As Ron Paramount plus thank you for all the guidance that you laid out in your prepared remarks.
Benjamin Daniel Swinburne: Maybe for <unk>, you haven't talked about sort of international versus domestic.
Benjamin Daniel Swinburne: EBIT or EBITDA in the past and if there's any way to help us think about what domestic profitability means at the segment level or any way to dimensionalize that disclosure.
Speaker Change: And then on the $1 billion of charge sounded like that was programming and restructuring I just wanted to make sure that was true. If you had any rough sense of relative sizing and if you could just tell us is that programming tied to this sort of international strategy shift that you guys did you guys have talked about.
Naveen K. Chopra: And if you had any rough sense of relative sizing, and if you could just tell us, is that programming tied to this sort of international strategy shift that you guys have talked about? And then, also, in Paramount Plus. You said programming cost growth at Paramount Plus or D2C should be significantly lower than the ARPA growth of over 20%. That's a pretty wide range of outcomes. I just wonder if maybe you could put a finer point on your expectations for Paramount Plus programming costs for 24... Yeah, thanks, Ben. Let me try to hit all those.
Speaker Change: And then lastly, all of a sudden paramount plus.
Speaker Change: You said programming cost growth at parent plus or DTC should be significantly lower than the ARPA growth of over 20%. That's a pretty wide range of outcomes I just wonder if maybe you could put a finer point on your expectations for Paramount plus programming costs are.
Speaker Change: 24, thank you.
Speaker Change: Yeah. Thanks, Ben let me try to hit all of those so first of all in terms of.
Naveen K. Chopra: So, first of all, in terms of our comments on Paramount Plus profitability, and in particular, sort of the domestic trend, if you will, versus the linear, I'd say a few things. So, first of all, you know, most of the year-over-year improvement in the D2C P&L in 2024 will be driven by the domestic Paramount Plus business. You know, that is, driven by benefits, we talked about sub-growth, ARPU growth, and, to a slightly lesser extent, content efficiencies. You know, while domestic is the bigger contributor, I do also expect to see some pretty material improvement in profitability at Paramount plus International. The drivers there are a little bit different.
Benjamin Daniel Swinburne: Our comments on Paramount plus profitability and in particular sort of the domestic.
Benjamin Daniel Swinburne: Trend, if you will versus the linear.
Benjamin Daniel Swinburne: I'd say a few things so first of all.
Benjamin Daniel Swinburne: Most of the year over year improvement in the D to C P&L.
Benjamin Daniel Swinburne: In 24 will be driven by the domestic Paramount plus business.
Benjamin Daniel Swinburne: That is.
Benjamin Daniel Swinburne: Driven by benefits, we talked about sub growth <unk> growth to a slightly lesser extent content efficiencies.
Benjamin Daniel Swinburne:
Benjamin Daniel Swinburne: While domestic is the bigger contributor.
Benjamin Daniel Swinburne: I do also expect to see some pretty material improvement in profitability at Paramount plus international.
Benjamin Daniel Swinburne: The drivers there a little bit different that's going to be more about.
Naveen K. Chopra: That's going to be more about the evolving submix and what that does to ARPU. I kind of touched on that in the prior question, along with the benefits that we get from the content and marketing efficiencies related to really leaning into global content and dialing back on local. There are some significant dollars to be saved there, not just on the content side of it but on the marketing side as well, because the local stuff typically requires a pretty healthy dose of marketing to get to, call it, sufficient levels of awareness. So, you know, I think the international business is generally thought of as being, call it, 12 to 18 months behind the domestic business. We obviously launched outside of the United States later than we did domestically.
Benjamin Daniel Swinburne: The evolving sub mix and what that does to <unk> kind of touched on that on the prior question.
Benjamin Daniel Swinburne: Along with the benefits that we get from the content and marketing efficiencies related to it.
Benjamin Daniel Swinburne: Really leaning into global content and dialing back on on local.
Benjamin Daniel Swinburne: There are some significant dollars to be saved there not just on the content side of it but on the marketing side as well because the local stuff typically requires a pretty healthy doses of marketing to get to.
Benjamin Daniel Swinburne: Call it sufficient levels of awareness.
Benjamin Daniel Swinburne: So.
Benjamin Daniel Swinburne: I think the international business, we generally think of as being.
Benjamin Daniel Swinburne: Call It 12 months to 18 months.
Benjamin Daniel Swinburne: Behind the domestic business, we obviously launched outside the United States later then.
Benjamin Daniel Swinburne: We did domestically.
Naveen K. Chopra: And you know, we're continuing to optimize that business in the same way we are on the domestic side to get it to profitability soon. So, that's sort of the first part of your question. Your second question on the billion-dollar charge: you're correct, that includes programming charges as well as restructuring charges. I think you'll see some of the details around that in the K, but you should assume there's about $200 million of restructuring charges in that number.
Benjamin Daniel Swinburne: And we're continuing to optimize that business in the same way we are the domestic side to get it to profitability.
Benjamin Daniel Swinburne: Soon after.
Speaker Change: So that's sort of the first part of your question.
Speaker Change: Your second question on the $1 billion charge.
Speaker Change: You are correct that includes programming charges as well as restructuring charges I think youll see some of the details around that in the K, but you should assume.
Speaker Change: There's about $200 million of restructuring charge in that number.
Naveen K. Chopra: And the programming piece does include charges related to the changes that we're making in international. And then with respect to your last question on the trend line of programming costs relative to ARPU, we weren't trying to be cute with sort of the 20%. You should assume that the growth rate on, I'll say, cash programming for Paramount Plus is going to be significantly lower than the growth rate we talked about for ARPU. The Amore piece will also be lower than ARPU, but we'll still see some, call it slightly abnormal growth because of the unwind from the strike in 2020. Thanks, Ben.
Speaker Change: And the programming piece does include.
Speaker Change: Charges related to the changes that we're making in international.
Speaker Change: And then.
Speaker Change: With respect to your last question on the call it trend line of programming costs relative to <unk>.
Speaker Change: We weren't trying to be cute in the towards the 20%.
Speaker Change: You should assume that the growth rate.
Speaker Change: On.
Speaker Change: I'll say.
Speaker Change: Cash programming.
Speaker Change: For Paramount plus is going to be.
Speaker Change: Significantly lower than the growth rate, we talked about on <unk>.
Speaker Change: The <unk> piece will be.
Speaker Change: Also lower than the <unk>, but we'll still see some call it slightly abnormal growth because of the unwind from the strike in 'twenty three.
Operator: Operator, next question, please. The next question goes to Steven Cahall of Wells Fargo. Steven, please go ahead; your line is open.
Speaker Change: Thanks, Ben Operator next question please.
Benjamin Daniel Swinburne: The next question Betsy Steven Cahill of Wells Fargo. Stephen. Please go ahead. Your line is open.
Robert Marc Bakish: Yeah, thanks. So first, I was wondering if I could just get your comment on skinny bundles and how you're thinking about an industry push towards more skinny bundles, which kind of follows on the earlier question about the sports streaming JV. It seems like MVPDs are going to continue to look for this. I think you traditionally often looked for CBS to be distributed with a lot of your cable networks, and I was wondering if you had any change in thinking, you know, in terms of sort of meeting MVPDs or consumers, especially as you have some renewals, I think, coming up this year. And then on the advertising market, I think after Q3, you said that you were seeing some modest improvement in domestic ads. But it seems like that in Q4, that didn't quite come through.
Stephen Cahill: Yeah. Thanks, So first I was wondering if I could just get your comment on skinny bundles, and how youre thinking about an industry push towards more skinny bundles kind of follows on the earlier question about the sports streaming JV. It seems like Mvpds are going to continue to look for this I think you've traditionally often looked for CBS.
Stephen Cahill: Be distributed with a lot of your cable networks I'm wondering if you have any change in thinking in terms of sort of meeting mvpds are consumers, especially as you have some renewals I think coming up this year and then on the advertising market I think after Q3, you said that you were seeing some modest improvement in domestic AD. It seems like that in Q4 that didn't.
Robert Marc Bakish: You seem more positive about stabilization in the Q1 outlook that you gave, so we'd love to just hear about what's changed to cause that and then specifically anything on Pluto's sequential advertising growth trends as well. Thank you.
Stephen Cahill: Might come through you seem more positive on stabilization.
Stephen Cahill: The Q1 outlook that you gave so would love to just.
Stephen Cahill: I hear about what's changed to cause that and then specifically anything on pluto's sequential advertising growth trends as well. Thank you.
Robert Marc Bakish: Yeah, sure, Steve. So, on the skinny bundle side, since we brought the companies together, we've obviously been distributing a full package, CVS plus the cable networks, and, by the way, including streaming products, advanced ad sales, et cetera. We are in some of the skinny bundles, if you will, Charter Spectrum Essentials, Sling, et cetera, with a set of cable networks. That is from deals that were done a while ago, which we continue to roll forward. So, it is a piece of the market we participate in, and look, we've seen some nice growth, particularly at Charter, but, you know, that's the point. Second, in terms of domestic advertising, look, in terms of the current ad market, strikes and politics were clearly a headwind in Q4, and thankfully, we're through the strikes, and that's behind us.
Speaker Change: Yeah sure Steve So on the Skinny bundle side since we brought the companies together.
Stephen Cahill: You've obviously been distributing a full package.
Stephen Cahill: Cvs plus the cable networks and by the way, including streaming products advanced AD sales et cetera.
Stephen Cahill: And some of the skinny bundles, if you will charter spectrum essentials.
Stephen Cahill: Sling et cetera, with a set of cable networks.
Stephen Cahill: That is from deals that were done a while ago, which we continue to roll forward.
Stephen Cahill: So it is a piece of the market we participate in.
Stephen Cahill: And look we've seen some nice growth, particularly of charter.
Stephen Cahill: But.
Stephen Cahill: That's that 0.2nd in terms of domestic advertising.
Stephen Cahill: Look in terms of the current AD market strikes and political were clearly a headwind in Q4, and thankfully where through the strikes.
Stephen Cahill: It's behind Us.
Robert Marc Bakish: As I indicated in my remarks, we are seeing signs of stabilization, notably healthy scatter premiums. Sports clearly remains a bright spot, the NFL, and Super Bowl, and I'm thrilled that we have the NCAA and UEFA and Masters as we get into this continuing in 2024. And more broadly, we are seeing healthy growth in many categories, including consumer products, quick service restaurants, and retail. And I'd also say that that's all domestic. The international side was tough last year.
Stephen Cahill: He came into my remarks, we are seeing signs of stabilization, notably healthy scatter premiums sports clearly remains a bright spot NFL Super Bowl and I'm thrilled that we have the NC double a and UEFA and masters.
Stephen Cahill: As we get into this continue in 2024 and more broadly we are seeing healthy growth in many categories, including consumer products quick service restaurants, and retail I'd also say that that's all domestic the international side was tough last year, we are seeing stabilization, there as well but currency.
Robert Marc Bakish: We are seeing stabilization there as well, but currency does really remain a headwind. In terms of Pluto, that's really part of our broader digital business, digital ad sales. I'd start by noting we have strong trends in digital ad revenue. We were up 14% in the fourth quarter.
Stephen Cahill: <unk>.
Stephen Cahill: Does really remain a headwind.
Stephen Cahill: In terms of Pluto, that's really part of our broader digital business did.
Stephen Cahill: Digital AD sales there I'd start by noting we have strong trends in digital AD revenue, we were up 14% in the fourth quarter.
Robert Marc Bakish: And while it's true, there's more competition in the connected TV space. That's a $25 billion plus business, a lot of spend out there, and we're certainly not standing still. We like our positioning. If you want to take it in pieces, look at content.
Stephen Cahill: And while it's true there is more competition in the connected TV space.
Stephen Cahill: That's a 20 $25 billion plus business a lot of spend out there.
Stephen Cahill: And we're certainly not standing still we like our positioning.
Stephen Cahill: If you want to take it in pieces.
Stephen Cahill: Look at content in the eyes of advertisers content matters, and our offering of Hollywood content, plus sports, which by the way is true on <unk> being more of a library service Paramount plus being first run plus library service.
Robert Marc Bakish: In the eyes of advertisers, content matters, and our offering of Hollywood content plus sports, which, by the way, is true on Pluto too, Pluto being more of a library service, Paramount Plus being a first run plus library service. But our content resonates, and people like to be in those environments. IQ, which is how we sell our digital product, a combination of Paramount Plus and Pluto and some other full episode video, is one of the industry's largest high quality digital video platforms. So we have real scale that no one can beat there, and that's a very good thing. And third, we're doing a lot of work as we evolve more and more into the performance space, advancing our data and measurement. We talked about this a bit in the script, but working with retail media networks, and attribution providers to really enhance the bottom of the funnel piece of our offering. We've already talked about what we're doing there with Walmart Connect, combining Walmart's first-party data with our premium inventory, and seeing early benefit there. Beyond that, there are other attribution players in the pipeline that have real scale.
Stephen Cahill: Our content resonates with people like to be in those environments IQ, which is how we sell our digital product the combination of Paramount plus and <unk> and some other full episode video. It's one of the industry's largest high quality digital video platforms. So we have real scale to compete there.
Stephen Cahill: And that's a very good thing and third we're doing a lot of work as we evolve more and more into the performance space.
Stephen Cahill: Advancing our data and measurement, we talked about a bit in the script, but working with retail media networks attribution providers to really enhance the bottom of the funnel piece of our offering.
Stephen Cahill: We've already talked about what we're doing there with Walmart connect combining Walmart first party data with our premier premium inventory.
Stephen Cahill: In early benefit there beyond that there are other attribution players in the pipeline that have real scale that includes retailers credit card providers, so theres more to come there.
Robert Marc Bakish: That includes retailers and credit card providers, so there's more to come there. And you'll really see this all come together in the next upfront. But we continue to be very excited about the digital space in general and positioning Paramount ad sales for success in what is and continues to be an expanding market. Thanks, Steve. Operator.
Stephen Cahill: And you'll really see this all come together in the next upfront.
Stephen Cahill: But we continue to be very excited about the digital space in general and positioning Paramount AD sales for success and what is and continues to be an expanding market.
Stephen Cahill: Yeah.
Speaker Change: Thanks, Steve Operator next question please.
Operator: Next question, please. The next question goes to Jessica Reif-Erlich of Bank of America Securities. Jessica, please go ahead; your line is open.
Speaker Change: The next question go to Jessica Reif Ehrlich with Bank of America Securities. Jessica. Please go ahead. Your line is open.
Robert Marc Bakish: Press on M&A. I was just wondering if you could..., about. And within that, maybe Compass.
Speaker Change: Alright. Thank you a couple of things one I mean, there's tons of press on M&A interest.
Speaker Change: If you could maybe talk about.
Speaker Change: How are you thinking about strategic options and what the timeframe would be to put the society or move on.
Speaker Change: And within that maybe some bundling options for Paramount plus how are you thinking about that.
Speaker Change: And then on the restructuring charge that you're taking in first quarter it sounds like.
Robert Marc Bakish: Reporter. It sounds like you're there. Do you feel like there's more to go? [inaudible] And finally, you do have... University. Like if you think about what, News, and the Washington Post. Yeah, sure, Jessica.
Speaker Change: Youre attacking cost I'm. Just wondering is there do you feel like there's more to go and post close to $1 billion charge, how much will the cost base to be produced and then finally, you do have a big contract coming up in the spring.
Speaker Change: Can you give us some help in how you're thinking about.
Speaker Change: Like if you if you think about what happened with Disney if that <unk> go away can.
Speaker Change: Can you size or help us think about what what what's the financial impact.
Robert Marc Bakish: Let me take the first part of this, and Naveen will pick up some of it. So first, in terms of M&A, look, at Paramount, we're always looking for ways to create shareholder value, and to be clear, that's for all shareholders. But I'm not going to get into commenting on any speculation or timeline, etc., but it's obviously something we are focused on. But this call is really about talking business, which goes to your second question. I guess bundling or options for Paramount+. As you know, we're big believers in bundling. It is one of the tried and true methods of value creation in media. And that's certainly the case in streaming.
Speaker Change: Okay.
Speaker Change: Yeah sure Jessica let me take the first part of this and maybe it will pick up some of it.
Speaker Change: So first in terms of M&A look at Paramount, we're always looking for ways to create shareholder value and to be clear that's for all shareholders.
Speaker Change: But I'm not going to get into commenting on any speculation or timeline etcetera, but it's obviously something we are focused on but this call is really about talking business.
Speaker Change: Which goes to your second question.
Speaker Change: I guess bundling or options for Paramount plus.
Speaker Change: As you know we're big believers in bundling. It is one of the tried and true methods of value creation and media. It's certainly the case in streaming when you think about streaming the benefits or potential benefits bundling include look at strengthening our consumer proposition that allows you to drive subscribers enhance your share.
Robert Marc Bakish: When you think about streaming, the benefits or potential benefits of bundling include strengthening your consumer proposition. That allows you to drive subscribers, enhance your share, and reduce your churn. You get access, potentially, to an existing subscriber base. That lowers or potentially eliminates SAC.
Speaker Change: Share reduce your churn.
Speaker Change: You get access potentially to an existing subscriber base that lowers or potentially eliminate sac.
Robert Marc Bakish: As an offset, it does require some form of revenue concession, might be a revenue share, or might be wholesale pricing. So it does have an ARPU effect, but If you look at LTV, the result is a clear win. And I'd point out that this is not just a theoretical theory for us. We already have substantial experience with the power of bundling and streaming. As you know, we have hard bundles internationally with people like Sky, Canal, and others. They've been key to our market entry strategy. They're unquestionably additive to our Paramount Plus sub-base and economics. There are also things like Walmart Plus in the U.S., which is another form of a bundle.
Speaker Change: As an offset it does require some form of revenue concession might be a revenue share might be wholesale pricing. So it does have an <unk> effect, but.
Speaker Change: If you look at LTV. The result is a clear win.
Speaker Change: And I'd point out that this is not a conceptual theory for us.
Speaker Change: Already have substantial experience with the power of bundling and streaming as you know we have hard bundles internationally with people like Sky Canal.
Speaker Change: Others, they have been key to our market entry strategy. They are unquestionably additive to our Paramount plus sub base am economics, There's also things like Walmart plus in the U S, which is another form of a bundle that partnership has been incremental to our overall Walmart relationship, it's clearly additive to subs and engagement.
Robert Marc Bakish: That partnership has been incremental to our overall Walmart relationship. It's clearly additive to subs and engagement. And by the way, it's now creating incremental opportunity in ad sales as we expand into retail media. Even Sky Showtime is another version of a bundle, albeit in a joint venture structure. That, again, enhances the consumer proposition and actually allows us to reduce investment levels in a set of markets because it's a combined product we're going at. So, NatNet, we strongly believe in bundling and the associated value creation opportunity. And we continue to look for incremental opportunities in that regard. Naveen, do you want to talk about the restructuring point? Yeah,
Speaker Change: And by the way it is now creating incremental opportunity and add sales as we expand into retail media even.
Speaker Change: Even sky Showtime's another version of a bundle, albeit in a joint venture structure that again enhances the consumer proposition and actually allows us to reduce investment levels in a set of markets because it's a combined product were going up so net net we strongly believe in in bundling and the associated value creation opportunity.
Speaker Change: And we continue to look to incremental opportunities in that regard, maybe and you want to talk about the restructuring point, yes. So look I think the short answer is that we believe there is.
Naveen K. Chopra: So, look, I think the short answer is that we believe there is continued opportunity to find efficiencies in the business. That's true both on the traditional linear side of the business and on the streaming side. On the streaming side, it's really more about how we grow even more efficiently. And on the linear side, it's really about how we preserve the margins in that business. And you've seen us take a variety of actions, not just the elements that we spoke about today, but over the past few years, when we have combined organizations, we've taken out overhead, and you know, in some cases, we've leveraged programming across different platforms.
Speaker Change: Continued opportunity too.
Speaker Change: Find efficiencies in the business that's true both on the traditional linear side of the business and on on the streaming side.
Speaker Change: On the streaming side, it's really more about how we grow even more efficiently and on the linear side, it's really about how we preserve the margins in that business and you've seen us take a variety of actions not just.
Speaker Change: The elements.
Speaker Change: That we.
Speaker Change: Spoke about today, but over the past few years, where we have combined organizations, we've taken out overhead.
Speaker Change: In some cases we've.
Speaker Change: We've leveraged programming across different platforms.
Naveen K. Chopra: And you'll see us continue to do more of all of that going forward. You know, content is still the single biggest cost item for us, and that's one of the reasons why, as I noted, we're focused on programming our linear nets as efficiently as we can while maintaining a strong volume of high-quality content. And on the streaming side, we're using what we've learned about viewership to really figure out where to place our bets and how to continue to drive engagement without having to significantly increase the amount of cash content spend that we're using for Paramount+. So, you know, this is something that we continue to be focused on, and you will see us unlock further efficiencies across the board going forward. And then, Jessica, in terms of your last question, we don't really comment on individual deals, but I'd ask you to remember three things. First, our content offering is strong. It's really a must-have in the eyes of U.S. pay TV consumers.
Speaker Change: And you'll see us continue to do more of all of that going forward.
Speaker Change: Content is still the single biggest cost item for us and that's one of the reasons why as I noted were were focused on programming our linear nuts.
Speaker Change: As efficiently as we can while maintaining a.
Speaker Change: Ah.
Speaker Change: Strong volume of high quality content.
Speaker Change: And on the streaming side, we're using what we've learned about viewership too.
Speaker Change: It really figure out where to place our bets and how to continue to drive engagement.
Speaker Change: Without having to significantly increase the amount of.
Speaker Change: Call it cash content spend that.
Speaker Change: We are using for Paramount plus so.
Speaker Change: You know this is something that we continue to be focused on and you will see us unlock further efficiencies across the board going forward.
Speaker Change: And then Jessica in terms of your last question.
Jessica: We don't really comment on individual deals, but I.
Jessica: I'd ask you to remember three things first our content offering is strong it's really must have in the eyes of U S pay TV consumers.
Robert Marc Bakish: Second, as you know, we have many levers to pull in these distribution deals to address client objectives, linear networks, advanced advertising, streaming products, both free and paid, et cetera. And, as you know, objectives vary across companies, so it's important that you can get to, if you will, bespoke solutions. And third, it's allowed us to get all of our deals done. In fact, we've now lapped every client multiple times over my tenure as CEO. So there is a lot to work with there. In terms of a U.S. deal that potentially involves D2C, I'd say the following. It is along the lines of our international hard bundle deals.
Jessica: Second as you know we have many levers to pull in these distribution deals to address client objectives linear linear networks advanced advertising streaming products, both free and pay et cetera, and as you know objectives vary across company. So it's important that you can get to if you will bespoke solutions and third.
Jessica: It's allowed us to get all of our deals done.
Jessica: In fact, we've now lapped every client multiple times over my tenure as CEO.
Jessica: So there's a lot to work with there in terms of our USD all that potentially involves D to C.
Jessica: Say the following.
Jessica: It is along the lines of our international hard bundled deals as we just said we like the benefits of that structure benefits are increased reach AD monetization opportunity reduce churn lower sac, yes trade offs of lower wholesale rate, but net net LTV can be compelling.
Robert Marc Bakish: As we just said, we like the benefits of that structure. Benefits are increased reach, ad monetization opportunity, reduced churn, and lower SAC. Yes, there are trade-offs, a lower wholesale rate, but net-net, the LTV can be compelling. And again, beyond D2C, there'll be lots of levers to pull in this discussion.
Jessica: And again beyond D to C there'll be lots of levers to pull in this discussion and in terms of the carriage question. The reality is these deals represent a combination of factors. So that's not necessarily the way future deals will play out.
Robert Marc Bakish: And in terms of the carriage question, the reality is these deals represent a combination of factors, so that's not necessarily the way future deals will play out. Net-net, lots to work with, and demonstrated ability to get things done.
Jessica: Net net lots of work with demonstrated ability to get things done and we're always focused on getting to a win win solution for a partner.
Operator: And we're always focused on getting to a win-win solution for a partner. And we'll get there. Operator, we have time for one last question, please. The next question goes to Robert Fishman of Moffitt Nathanson. Robert, please go ahead; your line is open.
Jessica: We will get there.
Speaker Change: Operator, we have time for one last question. Please.
Robert S. Fishman: The next question goes to Walmart's Fishman of Moffett Nathanson.
Robert S. Fishman: Please go ahead your line is open.
Robert S. Fishman: Hey, good afternoon, I have one for Bob and one for Nadeem. Please.
Robert Marc Bakish: Bob, can you talk more about the potential licensing opportunities? I'm thinking specifically about Paramount+. Exclusive Original Content to Potentially Third Parties, and your view on keeping that original content and even your bigger library that's already in Paramount Plus to yourselves versus looking to monetize that content to help drive upside to cash flows going forward. And then, Naveen, any way to help frame how much the Hollywood Strikes benefited from the quarter or the full year 23? And on a related note to the first question, as you think about growing free cash flow in 24, despite the increase in content spending, just if you can help us think about how much licensing helps drive that growth. Yeah, sure, Robert.
Fishman: Bob can you talk more about the potential in licensing opportunities I'm thinking specifically for Paramount plus exclusive original content.
Fishman: Potentially third parties and your view on keeping that original content and even your bigger library that is already in Paramount plus to yourselves versus looking to monetize that content to help drive upside to cash flows going forward and then navin.
Fishman: Any way to help frame how much the Hollywood strikes benefited either the quarter or the full year 'twenty three and then on a related note to the first question.
Robert S. Fishman: As you think about growing free cash flow in 'twenty four despite the increase in content spending just if you can help us think about how much licensing helps to drive that growth.
Speaker Change: Yeah sure Robert So start with the fact that we continue to believe building a scaled streaming business is an attractive value creation path.
Robert Marc Bakish: So, start with the fact that we continue to believe building a scaled streaming business is an attractive value creation path. You know, historically, networks, of which streaming is the next or current iteration, have had superior value characteristics relative to studios. They allow more control over monetization, particularly in success. They allow control over marketing and promotion, which importantly allows you to use one hit to build another. Think of the old concept of lead-in.
Speaker Change: If you think about it historically networks of which streaming is the next or current iteration have had superior value.
Speaker Change: Characteristics relative to studios they allow more control over monetization, particularly in success they allow control over marketing and promotion, which importantly allows you to use one hit to build another think the old concept of lead in.
Robert Marc Bakish: And you have direct connectivity with viewers, and that's particularly true in streaming. And I'd remind you that Paramount Plus, our network, really has sustained momentum. It's ahead of tie-in in terms of past profitability, and it is poised for domestic profitability in 2025. That being said, we recognize the inherent value of our content, and we know that others do too. And that is an option we maintain, which we believe has real value, because the market for high-quality content, feature films, signature series, kids' franchises, which is really our wheelhouse in general, and certainly with respect to Paramount Plus, that market remains strong.
Speaker Change: And you have direct connectivity with viewers and Thats, particularly true in streaming.
Speaker Change: And I would remind you that Paramount plus our network really has sustained momentum.
Speaker Change: Ahead of plan in terms of the past profitability and it is poised for domestic profitability in 2025 that being said, we recognize the inherent value of our content and we know that others do too.
Speaker Change: And that has optionality, we maintain which we believe has real value because the market for high quality content feature films signature series Kids franchises, which is really our wheelhouse in general and certainly with respect to Paramount plus that market remains strong.
Robert Marc Bakish: Countless clients that I met with, and the whole team was there, you know, we're looking for great content and needing our partnership, if you will. So there is a tremendous opportunity there. Again, we think using our content to drive asset value creation in the form of Paralampus, given the momentum we have, is the right plan A. But we have optionality in that regard, and we clearly have valuable products. Please see the complete disclaimer at https://sites.google.com or at www.sites.google.com. Let me try to hit your questions, Rob, on free cash flow, licensing, strikes, etc. And I'd start by just saying, you know, we are intending to deliver free cash flow growth in 2024. That's very important.
Speaker Change: And then just relate back to being at MIPCOM in October where.
Speaker Change: Countless clients that I met with and the whole team was there.
Speaker Change: We're looking for great content and meeting our partnership if you will so there is tremendous opportunity. There again, we think using our content to drive asset value creation in the form of Paramount plus given the momentum we have is the <unk>.
Speaker Change: Right plan a but.
Speaker Change: But we have optionality in that regard and we clearly have valuable product.
Speaker Change:
Speaker Change: Let me try to hit your questions Rob on.
Speaker Change: Free cash flow licensing strikes et cetera.
Speaker Change: And I'd start by just saying we.
Speaker Change:
Speaker Change: We are intending to deliver.
Speaker Change: Free cash flow growth in 2024, that's very important.
Naveen K. Chopra: And the biggest driver of that is a significant improvement in OIBDA, and we've talked about the various contributors to that. I, you know, licensing is one of the contributors. As I said, I expect licensing revenue to grow in the year, and that benefits both OIBDA and cash flow. But I wouldn't say that it's sort of an inordinate impact relative to what it has been in prior years. Um, I'd also note that, you know, our cash spend in 23 came in at about 16 and a half billion dollars. That was lower than the prior year as a result of the strikes.
Speaker Change: And the biggest driver of that is significant improvement in OIBDA.
Speaker Change: And we've talked about the various contributors to that licensing is one of the contributors as I said I expect licensing revenue to grow in the year and that benefits both.
Speaker Change: OIBDA and cash flow.
Speaker Change: But I wouldn't say that it's sort of a.
Speaker Change: In order to impact relative to what it has been in prior years.
Speaker Change: I'd also note that.
Speaker Change: Our cash spend in 'twenty three came in at about 16 $5 billion that was lower than the prior year as a result of the strikes.
Naveen K. Chopra: And our plan for 24 contemplates spending only about 50 percent of, call it, the strike savings back. And that's a critical ingredient in our ability to drive healthy growth in free cash flow in the year. So, you know, that's something we're looking forward to implementing. Yeah, so in closing, we're really proud of what we accomplished in 2023. And as we look ahead to 2024 and beyond, we're focused on disciplined execution and, in doing so, positioning the company to return to significant total company earnings growth this year and Paramount Plus domestic profitability next, generating more value for our shareholders.
Speaker Change: And our plan for 'twenty four.
Speaker Change: Contemplate spending really only about 50% of call. It the strike savings back and that's that's a critical ingredient in.
Speaker Change: Our ability to drive.
Speaker Change: Healthy growth in free cash flow in the year so.
Speaker Change: Yeah.
Speaker Change: Something we're looking forward to executing against.
Speaker Change: So in closing, we're really proud of what we accomplished in 2023 and as we look ahead to 2024 and beyond we're focused on disciplined execution and in doing so positioning the company to return a significant total company's earnings growth this year and Paramount plus domestic profitability next.
Speaker Change: Generation more value for our shareholders with that thank you for joining us be well and we'll talk to you soon.
Robert Marc Bakish: With that, thank you for joining us. Be well, and we'll talk to you soon. Thank you. This now concludes today's call. Thank you for joining us.
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Speaker Change: Thank you. This now concludes today's call. Thank you for joining you may now disconnect your lines.
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Speaker Change: Good afternoon my.
Speaker Change: My name is <unk> and I'll be the conference operator today.
Speaker Change: At this time I would like to welcome everyone to <unk> Q4, 'twenty three earnings conference call.
Speaker Change: At this time all lines have been placed on mute to prevent any background noise.
Speaker Change: After the Speakers' remarks, there'll be a question and answer session.
Speaker Change: If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
Speaker Change: If you would like to withdraw your question. Please press star followed by Chase.
Speaker Change: In order to as many of your questions as possible. We ask that you. Please limit yourself to one question.
Speaker Change: At this time I would like to turn the call over to Jamie Morris Paramount Glazes Edp.
Jaime Sue Morris: You May now begin your conference call.
Jaime Sue Morris: Good afternoon, everyone. Thank you for taking the time to join US for our fourth quarter 2023 earnings call. Joining me for today's discussion are Bob <unk>, our president and CEO and Naveen Chopra, our CFO. Please note.