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ViacomCBS Streaming Push Sends Stock Tumbling Off Paramount Mountain

NEWS ANALYSIS — ViacomCBS is doing more than putting all of its eggs into the Paramount brand basket. The media giant is spending money it doesn’t have in an effort to match competing streaming services’ (i.e., Netflix, Disney+ and HBO Max) content spend on original content.

The day after ViacomCBS senior management announced a corporate name change to Paramount and plans to increase content spending to $6 billion from $4 billion, investors responded by driving the share price down 20% in Feb. 16 premarket trading.

Analysts piled on their concerns despite the Paramount+ streaming platform adding 7.3 million subscribers in the quarter to bring its total sub count to 32.8 million since launching in 2014 as CBS All Access.

“While we can see how Paramount+ with its breadth of content, including sports, kids, general entertainment and news offerings, helps differentiate the streaming service from its peers, we have a hard time looking at the [direct-to-consumer] revenues and investments on a standalone basis,” analyst MoffettNathanson wrote in a note.

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Indeed, streaming subscription revenue grew 84% year-over-year, reflecting strong sub growth from the company’s streaming subscription services. Streaming advertising revenue grew 26% year-over-year, driven by growth in advertising on Pluto TV and Paramount+.

At the same time, expenses related to over-the-top video distribution skyrocketed. Costs at Paramount’s TV production and pay-TV operations increased 38% and 32%, respectively, to $3.5 billion each. Revenue increased around 18% to $3.7 billion and $4 billion, respectively.

“We see another transitional cycle of ratcheted streaming investments at Paramount+, alongside Showtime Anytime and Pluto TV,” Tuna Amobi, analyst with CFRA Research, wrote in a separate note. “We see modest progress on the road to recovery from the pandemic disruption of the ads and TV/film content businesses.”

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