The operator, Nadia, welcomes everyone to Paramount Global's Q4 2023 Earnings Conference Call and introduces the speakers, Jaime Morris, Bob Bakish, and Naveen Chopra. Morris reminds listeners of the risks and uncertainties involved in the company's forward-looking statements and provides information on where to find reconciliations for non-GAAP financial measures. Bakish acknowledges the challenges faced in the industry in 2023 but emphasizes the company's focus on disciplined execution and alignment with their strategy, leading to significant growth in total company earnings and free cash flow in 2024.

The speaker discusses the accomplishments of the company in 2023, highlighting the success of their content and streaming platforms. They also mention their focus on disciplined execution and cost management. Moving forward, the company's priorities include focusing on impactful content, driving profitability in their streaming services, and unlocking synergies within the company. They believe that their assets and strategy will lead to significant value creation.

The company prioritizes creating popular content that appeals to a wide audience and generates revenue. They are focusing on producing content more efficiently, with examples of lowering costs for films and prioritizing lower cost formats for TV shows. They are also expanding their popular franchise, NCIS, with a new original series for their streaming service and are leaning towards offshore production for their global franchises.

The combination of sports and entertainment on TV Media and D2C platforms has proven to be successful, with the Super Bowl breaking records and driving viewers to non-sports content. This integrated strategy has also led to the success of other shows and films, such as Bob Marley: One Love and the CBS slate. The company plans to continue leveraging their entire ecosystem to magnify their content, including using CBS to promote shows like Yellowstone and bringing Paramount+ originals to linear cable. Upcoming releases, such as season 2 of Tulsa King, are expected to further drive viewership across platforms.

The article discusses the company's second priority, which is driving profitability for its direct-to-consumer (D2C) streaming service. The company has already made progress in this area, with a projected revenue of $6.7 billion in 2023 and expected profitability for Paramount+ in 2025. This will be achieved through increased engagement, reduced churn, and monetization, as well as the integration of Showtime and Paramount+. The company also plans to focus on Hollywood hits and its own original content for international markets, while cutting back on local content. The company also aims to unlock synergies and streamline its cost base to drive greater efficiency.

The company is optimistic about their potential for impact in content, marketing, and partnerships. They are focused on growing the demand side of the advertising market, particularly in the digital space, by targeting small and medium businesses and incorporating purchase data from large retailers. This is reshaping the marketing landscape and drawing budgets to Connected TV. The company is testing these capabilities with Paramount+ and Pluto, and has partnered with Walmart Connect to enhance ad effectiveness.

In summary, the paragraph discusses the success of ViacomCBS's partnership with Walmart, their three priorities for growth, and their recent momentum in content. It also mentions the company's Q4 results, including their revenue and adjusted OIBDA, and their progress in scaling their D2C business for future earnings growth and profitability.

In the fourth quarter, despite challenges, the company performed well in their direct-to-consumer business and maintained stable operating margins in TV Media. Advertising saw strong growth due to increased viewing hours on Paramount+ and Pluto TV, and their IQ platform continues to attract new sources of demand. Linear advertising was impacted by strikes, a decline in political spend, and unfavorable FX, resulting in an 11% decline in total company advertising. However, the company expects to see stabilization in the ad market and low to mid-teens advertising growth in the first quarter. Affiliate and subscription revenue grew by 13%, with D2C subscription revenue growing by 43% and TV media affiliate revenue declining by 1%. This showcases the success of their multi-platform strategy.

Paramount+ has seen impressive growth in subscription revenue and subscriber numbers, with a total of 67.5 million subscribers globally. The addition of international subscribers and a price increase in the domestic market have contributed to a 31% increase in ARPU. The Paramount+ with Showtime tier has also performed well, with increased engagement and improved churn rates. The company is seeing cost synergies from the combination and has experienced year-over-year improvement in D2C OIBDA for the past three quarters. As they approach the third anniversary of the domestic launch, Paramount+ is capturing operating leverage in streaming faster than expected. The streaming service's value proposition, which includes a mix of original and library content, top movies, and sports, has allowed for continued growth in subscribers and revenue. The key to deeper engagement and retention is smart programming execution and a stable volume of original content, combined with lower-cost library and affinity programs.

In 2023, the company implemented a successful strategy to increase viewing hours and reduce churn, leading to a price increase and lower investment in local content for Paramount+. They expect this to result in a 20% global ARPU improvement in 2024. They are also focused on optimizing cost structures, particularly for their TV Media segment, and have seen success in experimenting with lower cost entertainment programming while maintaining high-quality content.

In this paragraph, the speaker discusses the company's efforts to lower production costs, optimize content, and unlock synergies through the collective power of Paramount Global. They also mention recent headcount cost reductions and future plans to continue optimizing compensation expenses. These changes are expected to result in a programming and restructuring charge in Q1 of approximately $1 billion. The company is also focused on achieving significant OIBDA growth and reducing balance sheet leverage in 2024, with the goal of reaching domestic profitability for Paramount+ in 2025. Despite an increase in cash content spend due to production delays, the company expects free cash flow to grow in 2024.

The company remains committed to creating value for shareholders despite a changing environment. They believe that their assets have significant potential for value creation and are dedicated to unlocking that value. The operator then opens the line for questions, with the first one asking about the company's content slate for TV and streaming this year. The speaker discusses the potential for higher programming costs in the first half of the year due to shifting programming schedules, and highlights the strength of their content engine. Another question asks about the mix of domestic and international subscribers for Paramount+ and the company's expectations for subscriber growth and average revenue per user. The speaker defers to another speaker for this information.

The company is now fully operational after dealing with strikes. The CBS slate is strong and has performed well. The cable side also has a lot of programming coming, including Yellowstone and new animation. The first half of the year has been successful with the NFL, Super Bowl, and other content. The second quarter will also have a strong lineup, including the Masters and Star Trek: Discovery. The back half of the year will have even more content as the company is finally operating at full strength.

Paramount+ is expecting a strong lineup of new content, including Mayor of Kingstown season 3, a new Ninja Turtles series, and Frasier, among others. The streaming service added 4.1 million subscribers in Q4, with balanced growth between domestic and international markets. The company expects lower subscriber growth in 2024, but remains confident in healthy revenue growth. The Super Bowl resulted in a high number of new subscribers, but it is too early to determine retention rates.

The speaker discusses two topics, one on sports and one on content. On the topic of sports, they mention a high-profile sports joint venture between Disney, Fox, and Warner Brothers.

The interviewer asks the CEO for their thoughts on the impact of the competitive marketplace and if they are considering a partnership. They also ask about the company's licensing revenue and if it will return to previous levels, as well as the CEO's comment on potentially releasing content on linear before streaming. The CEO responds by saying there is still a lot of unknowns about the competitor's sports streaming service, but they believe their current partnerships provide a better overall sports experience. They also see value in an integrated sports strategy for both CBS and Paramount+. The CEO notes that consumers are watching both sports and non-sports content on Paramount+.

The speaker discusses the company's sports properties and their sustainable advantage, as well as their plans for promoting the show Tulsa on CBS and Paramount+. They also mention the impact of the strike on licensing revenue and provide guidance for the future. A question is then asked about the breakdown of EBIT/EBITDA between international and domestic for Paramount+.

The speaker responds to a question about domestic profitability at the segment level by stating that most of the improvement in the D2C P&L in 2024 will be driven by the domestic Paramount+ business. They also expect to see some material improvement in profitability at Paramount+ International, with different drivers such as evolving sub mix and content and marketing efficiencies.

The speaker discusses the potential savings in the international business and the $1 billion charge, which includes both programming and restructuring costs. They also mention that the growth rate of programming costs for Paramount+ will be lower than the growth rate of ARPU. The next question asks for their thoughts on the industry trend towards Skinny Bundles and the potential impact on MVPDs.

The speaker is asked about the distribution of CBS with their cable networks and any changes in thinking, as well as the advertising market. They mention that they have been distributing a full package of CBS and cable networks, but also participate in Skinny Bundles. They also note that the domestic advertising market has been impacted by strikes and political events, but they are seeing signs of stabilization and healthy growth in certain categories. The international market was tough last year.

Steve discusses the stabilization of their digital business and the challenges they face with currency. He mentions their strong trends in digital ad revenue and their positioning in the $25 billion connected TV space. He also talks about the importance of content and their large scale in the industry. They are also working on improving their data and measurement for better performance. He concludes by expressing excitement for the digital space and their positioning for success in the expanding market.

Jessica Reif Ehrlich from Bank of America Securities asks several questions about ViacomCBS's strategic options, bundling opportunities for Paramount+, cost reduction efforts, and the impact of a upcoming contract. CEO Robert M. Bakish responds by stating that they are always looking for ways to create shareholder value, but he will not comment on any speculation or timeline for potential M&A. He also emphasizes the company's belief in bundling as a method of value creation in media and discusses the potential benefits of bundling for their streaming service. He also mentions their focus on reducing costs and the upcoming contract.

The paragraph discusses the benefits of bundling and streaming services, which can provide access to an existing subscriber base and lower costs. This may require some revenue concessions, but the overall result is a clear win in terms of lifetime value. The company has already seen success with bundling internationally and with partnerships like Walmart Plus. They also believe in finding efficiencies in the business through restructuring, both on the traditional linear side and on the streaming side.

The company has taken various actions to reduce costs, including combining organizations and leveraging programming. Content remains the biggest expense, but they are focused on programming efficiently and using what they've learned about viewership to drive engagement without increasing spending. The CEO also mentions the strength of their content offering and the various levers they have in distribution deals. They have been successful in getting all their deals done and are open to potential hard bundle deals in the US.

The speaker discusses the benefits of the company's current structure, which include increased reach, ad monetization opportunities, reduced churn, and lower SAC. They also mention potential licensing opportunities for exclusive original content on Paramount+, and the potential for this to drive growth in free cash flow in 2024. They believe that building a scaled streaming business is an attractive value creation path and that historically, networks have had superior value characteristics compared to studios.

The company has more control over monetization, marketing, and promotion with their content, which has led to sustained momentum for their streaming service, Paramount+. However, they also recognize the value of their content and have optionality in terms of how they use it. The market for high-quality content remains strong, and the company has opportunities to drive asset value creation with their content. The company is aiming for free cash flow growth in 2024, with significant improvement in OIBDA being the main driver. Licensing revenue is expected to grow and contribute to this improvement, but it is not the only factor. In 2023, the company spent around $16.5 billion in cash.

In 2023, the company's earnings were lower due to strikes, but they plan to spend only 50% of the strike savings in 2024. The company is focused on disciplined execution and returning to significant earnings growth and domestic profitability for Paramount+ in the future. The call has now ended.

This summary was generated with AI and may contain some inaccuracies.