Paramount earnings: Streamers' growth is 'certainly slowing,' analyst explains

Paramount (PARA) tops earnings expectations, with revenue of $7.62 billion and earnings of $0.10 per share, while narrowing direct-to-consumer losses. "Good news is it's going in a positive direction, [and] the challenge still is getting streaming to replicate the profits of that dual revenue stream from linear cable," Sunday Gravy Entertainment President Peter Liguori told Yahoo Finance Live.

Liguori, who is also a VideoAmp Board Member and Former Tribune Media CEO, believes subscriber is slowing in the overall streaming landscape. He looks at digital advertising potential for other streamers, like Netflix (NFLX), Warner Bros. Discovery (WBD), and Disney (DIS), whose CEO Bob Iger's plans for its linear television networks have become "really a matter of value." Liguori also comments how the Hollywood writers and actors' strikes continue to impact media companies and studios.

Video Transcript

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- It's a big week of earnings reports from media giants, Paramount posting Q2 results on Monday. The stock initially popping on stronger than expected results and progress in its streaming business. Now, the company also announced the sale of Simon & Schuster for $1.6 billion. And these results putting some pressure on Disney to deliver. Investors are awaiting those results after the bell tomorrow.

For more on the streamers and the future of TV, we want to turn to Peter Liguori. He's a Sunday Gravy Entertainment president and former Tribune Media CEO. Peter, it's great to see you. So let's talk about what we've learned from Paramount, and what it means for the broader media landscape. So Paramount Global beating expectations, strong growth in its streaming business. What does this tell us just about how the broader media landscape looks right now, and how Paramount's positioned within that very, very competitive industry?

PETER LIGUORI: Well, I think the good news is they've narrowed their loss. They were able to gain 700,000 new subs. They cut their losses. But in fact, they still have losses. And it's reflective of what's going on overall in the industry, where the income coming in for-- the revenue for streamers is much different and much less than what it is in the typical linear cable model, where you have the dual revenue streams of affiliate fees and advertising.

So good news is it's going in the positive direction. Challenge still is getting streaming to replicate the profits of that dual revenue stream from linear cable.

DIANE KING HALL: And Peter, Diane here. I want to ask you just about streaming in general, whether we're talking about a Paramount or recently Warner Brothers Discovery, which saw loss of subscribers. And when you're talking about streaming, in general, whether they're growing at slow growth or some are losing subscribers, and you have Disney coming up in terms of its quarterly results. Has streaming hit a wall in terms of its growth?

PETER LIGUORI: Well, certainly slowing. And I'd like to take a step back on Warner's. Yes, Warner's did lose some subscribers, but I would credit that to the friction of them combining their services. There's no indication that this has anything to do with the quality of their content or the quality of their offering. But there's no doubt that there is some plateauing.

There's zero doubt that streaming services will-- I used to work at HBO, no matter what our program offering was, we wound up consistently having a 50% churn rate-- new subscribers, subscribers leaving. I think with the maturity of streaming, you're going to wind up noticing those levels of churn and a kind of leveling off of the growth. But there's still growth, there's still a trajectory there.

- Peter, how much pressure does this place on Disney just in terms of we've heard from Bob Iger, he sounds like he's weighing almost all options at this point when it comes to the media strategy going forward, what he you should do with ABC, FX, the roadmap, what that looks like for ESPN going forward. How do you see that moving forward, and what those best options would look like?

PETER LIGUORI: Well, the claim that got the most press was his discussion about his linear networks-- FX, ABC, the local stations. And look, everything should be on the table here, but it's really a matter of value. Those linear assets are even knowing cord cutting is happening, those are some very, very profitable businesses and they throw off a lot of cash. So the question would be, what's the-- if they're going to sell, what's the offer? What's the present value of that money versus looking at the profits these businesses throw off over time?

DIANE KING HALL: And Peter, then speaking just more directly about Disney, what pieces of the business does it-- where it looks weaker where they need to sell that off?

PETER LIGUORI: Look, I think Disney's pretty strong across the board. I don't think there is a need. Disney, much like Warner Brothers, much like Comcast with the Sky acquisition, each of these companies have a fair amount of debt. And you saw David and Gunnar at Warner Brothers do a very good job of figuring out how to activate their free cash flow. They prepaid some debt. They wound up with $100 million extra in free cash flow to activate in various elements of the business.

So you know, I don't think there's any, quote-unquote, "needs," but every one of the legacy media entities should be looking at their assets and seeing how they can be activated to take care of the balance sheet and invest in the future.

- Peter, who are the buyers in this scenario? Who would want to own some of these assets?

PETER LIGUORI: So traditionally, I think we've seen some of the private equity companies take a look at them. When I was at Tribune, we had Oaktree heavily involved in the station group. We've seen Apollo. So what private equity does is they sit there and they do value the cash flow that these businesses throw off. You know, it's a little bit more challenging when you try to combine station groups because you run into FTC issues.

DIANE KING HALL: And Peter, I want to ask you about the strike, whether we're talking about both the writers and the actors strike. Right now it's been kind of accretive to these media companies. Paramount talking about some of the cash they've been able to serve as a result. But when does this become a problem? There was concern expressed ahead of some of these earnings coming out. When does this become a problem for these big media giants?

PETER LIGUORI: Well, I think you have to work backwards. It becomes a problem when they start noticing a softening of advertising. It becomes a problem when they start softening viewership, usership, and subscribers-- subscriber growth. But we're not there yet. Look, there are 600 scripted shows out there right now. So there's always something fresh for someone to watch.

Eventually, you do run out of something-- something new or something that speaks to you, but, you know, these are some smart people. They will get a deal done. What's going to be interesting, you know, about how this strike is handled is when you look at the studios, it's almost-- the challenge is almost three layers, three constituents. There's Netflix, which is kind of an Island unto itself, there is Silicon Valley, the Amazons of this world who have content kind of as an ancillary strategy, and then you have legacy media. So there kind of needs are a little bit different.

And from the actors' and the writers' perspective, look, this is an existential issue when they're looking at AI. But I'm somewhat hopeful. You know, clearly, there was progress being made on the SAG front because they kept extending the negotiations. That means that there were practical issues that were being addressed and some progress being made, and I'm hopeful that the WGA will look at the DGA's agreement and say there's some analogous situations there that will lead to an issue-by-issue resolution for both sides.

- Hopefully there is a resolution sooner rather than later. Peter Liguori, great to have you, Sunday Gravy Entertainment president.

PETER LIGUORI: Thank you.