Is Paramount Global (PARA) making money from Streaming?

Paramount Global’s low-rent subsidiary Pluto TV is the first Free Ad-Supported Streaming television (FAST) named on Nielsen’s streaming-ranker The Gauge. Consequently, investors will wonder if Paramount Global (NASDAQ: PARA) makes money from streaming?

To explain, The Gauge estimates Pluto TV viewers accounted for 1% of all US television viewers in September 2022, The Hollywood Reporter notes. Hence, Pluto is the first FAST to join streaming’s Big Leagues, Vulture observes.

Pluto TV had almost 70 million monthly active viewers in August 2022, Vulture notes. Hence, Pluto’s viewership is over three times that of Comcast’s Peacock, which had 28 million viewers in August 2022.

Streaming is Growing Fast

Streaming is now the largest segment of American television. Nielsen’s Gauge estimates streamers comprised 36.9% of US TV use in September 2022.

Streaming viewership grew by almost 2% in September 2022, The Hollywood Reporter estimates. Interestingly, Paramount’s subscription service Paramount+ does not appear on the Gauge. Here are the Gauge’s rankings of streaming services for September 2022.

America’s largest streaming service is Alphabet’s YouTube with 8% of viewership. Netflix (NFLX) is number two with 7.3%, Disney (DIS) subsidiary Hulu is third with 3.8%, Amazon’s Prime Video is fourth with 2.9%. Warner Discovery’s HBO Max is fifth with 1.3%, and Pluto TV is sixth with 1%. The Hollywood Reporter estimates all other streamers comprised 10.7% of viewers.

Streaming was the most popular method of TV consumption in the USA with 36.9% of viewership in September 2022. Cable was second with 33.8%, broadcast (over-the-air) TV was third with 24.2%. Other methods comprised 5.1%.

Broadcast TV’s desperation

Broadcast viewership rose from 22.1% in August 2022 to 24.2% in September 2022, The Gauge estimates. The Hollywood Reporter attributes the increase to the start of the football season.  American Football is the USA’s most popular sport.

Notably, broadcast TV is declining so fast that something they call the Free TV Project is trying to convince Americans to get “free TV” with an antenna. In other words, broadcasters are trying to tell Americans broadcast TV exists.

Pathetically, the Free TV Project is running ads for free TV on FAST streaming channels such as Freevee. Moreover, The Los Angeles Times reports television station operator The E. W. Scripps Company owns the Free TV Project. Notably, E. W. Scripps owns 61 television stations in 41 US markets.

I predict the Free TV Project will fail for two big reasons. First, an antenna will not pick up broadcast television in many areas because stations have lowered power. Second, the number of stations is small in many areas. Thus, the Free TV Project’s claims of 30 free channels are a lie in many areas. The 30 free channels are only available in big cities.

Third, broadcast television’s programming selection is terrible. I predict many viewers will take one look at the infomercials, daytime talk shows, religious programming, and local news and throw the antenna in the garbage can. In particular, one hour of CBS prime time will convince people to renew their Netflix subscription.

I think the Free TV Project demonstrates streaming is the future of television. I do not think broadcasters would waste money on the Free TV Project if they were not desperate. Sadly, I think the Free TV Project will hurt broadcast TV with its false claims.

What is a FAST?

Essentially, a Free Ad-Supported Television (FAST) streamer brings the broadcast television model to streaming. To explain, a FAST is free to watch, but they insert ads into the programs that a viewer has to sit through.

Hence, Paramount Global (PARA) is now competing directly with broadcast TV stations through Pluto TV. I cannot see how local TV stations can compete with Pluto.

For example, Pluto claims to offer over 100 free channels that provide over 150,000 hours of content. Moreover, Pluto TV claims to work with over 400 global content partners and have over 50 million global viewers.

Pluto TV

Pluto TV’s content library includes many old shows such as Mystery Science Theater 2000, and many British programs. Popular classics on Pluto include Leverage, The Walking Dead, Star Trek, Family Ties, Happy Days, Three’s Company, CSI, The Amazing Race, Cops, and Baywatch. Essentially, Pluto TV is a giant library of TV shows and movies.

Pluto TV offers foreign language programs, and live TV including news. For example, Pluto TV offers CBS News for Minnesota, Philadelphia, New York, Chicago, Boston, the Bay Area, Dallas-Fort Wroth, Denver, Los Angeles, and Pittsburgh. Paramount Global (PARA) owns the historic CBS television network.

You can access some popular cable networks including MTV, Nickelodeon, TBN, Court TV, TV Land, BET, VH1, CNN, WE, Comedy Central, and NewsmaxTV. There are also channels dedicated to genres including 70s Cinema, Westerns, thrillers, horror, SciFi, etc. Some sports, including pro wrestling and boxing, are available. Pluto lists the NFL as one of its’ content providers, but it is unclear if any games are available.

Pluto TV is available through the Amazon App Store, the Apple App Store, GooglePlay, Android TV, Playstation, Amazon’s FireTV, Cricket Wireless, Xfinity, Xbox, Google TV, Samsung TV, LG, VIZIO, Cox, and  Roku.

Pluto content providers include Sky, the BBC, Paramount Studios, Fuse, Nickelodeon, Sony, Columbia Studios, Discovery, Fox Sports, the Associated Press, and Bloomberg. Pluto TV arrogantly claims its mission is to “entertain the planet.”

I have to wonder how a local TV station showing game shows, daytime talk shows, M*A*S*H reruns, and prime-time network garbage is supposed to compete with that? My prediction if Pluto TV or one of its competitors adds sports, such as NFL football, broadcast operators such as E. W. Scripps are toast.

Will Paramount Global Win the Streaming Wars?

I think Pluto could be Paramount Global’s secret weapon in the streaming wars. The Hollywood Reporter claims Pluto TV is reaching 70 million viewers and few people notice it.

In addition to PlutoTV. Paramount Glaboals’s media properties include CBS, CBS News, CBS Sports, CBS Television Stations, Comedy Central, CMT, MTV, Paramount+, the CW, VH1, TVLand, BET, Paramount Pictures, the Paramount Network, Nickelodeon, The Smithsonian Channel, Paramount Streaming, ShowTime, Simon & Schuster, Vicon, and Telefe. Paramount Global (PARA) even owns the Bellator Mixed Martial Arts fighting venue.

Paramount’s crown jewels include the Star Trek franchise, the prestigious CBS broadcast network, and a historic Hollywood Studio, Paramount Pictures. Famous shows at Paramount Global include South Park, the various Star Trek series, and CBS’s programming library.

They created Paramount Global by folding Viacom and CBS into one company. Mr. Market was paying $22.28 for Paramount Global’s Class A stock (PARAA) and $19.34 for Paramount Global’s Class B (PARA) stock on 26 October 2022.

Is Paramount Global (PARA) Making Money?

Paramount Global (PARA) makes some money. It reported a $2.579 billion quarterly gross profit and an $819 million quarterly operating income on 30 June 2022.

Paramount Global is capable of revenue growth. Stockrow estimates Paramount’s revenues grew by 18.51% in the quarter ending on 30 June 2022. Paramount’s quarterly revenues grew from $3.96 billion on 30 June 2021 to $5.2 billion on 30 June 2022.

However, Paramount burns cash. It reported a -$1.265 billion quarterly ending cash flow, a -$1.227 billion quarterly financing cash flow, and a quarterly operating cash flow of $194 million on 30 June 2022.

Yet Paramount can generate enormous amounts of cash. It reported a quarterly ending cash flow of $5.302 billion on 31 March 2022. Paramount Global had $4.037 billion in cash and short-term investments on 30 June 2022. The cash and short-term investments fell from $5.375 billion on 30 June 2021.

Notably, Paramount has less debt. The Total Debt fell from $19.192 billion on 30 June 2021 to $17.62 billion on 30 June 2022.

What Value Does Paramount Global Offer?

I think Paramount Global (PARAA) is a value investment. It had a low stock price of $19.34 for class B shares on 26 October 2022.

Yet Paramount had $56.961 billion in total assets on 30 June 2022. The total assets grew from $55.204 billion on 30 June 2021 and fell from $58.62 billion on 31 December 2021.

Paramount Global class B shares will pay a 24₵ quarterly dividend on 3 January 2023. They mention no further dividends. Paramount Global class B shares offered a 96₵ forward dividend and a 4.96% forward dividend yield on 26 October 2022.

Interestingly, streamers, such as Pluto TV, could take ad revenue from the mighty YouTube. YouTube’s ad revenue fell from $7.21 billion in the third quarter of 2021 to $2.707 billion in the third quarter of 2022, CNBC reports.

Although the idea of a value investment in entertainment sounds crazy. I think Paramount Global (PARA) could be a cheap but cash-rich value investment in entertainment. Particularly, if Pluto TV generates enormous amounts of advertising revenue.