We all know Paramount is in debt and bleeding money, but how do companies like WBD and Disney survive? Aren't shareholders getting upset with them too? I do not understand how WBD could even potentially be in the business of buying, but mainly don't know gow businesses stay afloat while in debt like that.
-
Get involved.
We want your input!
Apply for Membership and join the conversations about everything related to broadcasting.
After we receive your registration, a moderator will review it. After your registration is approved, you will be permitted to post.
If you use a disposable or false email address, your registration will be rejected.
After your membership is approved, please take a minute to tell us a little bit about yourself.
https://www.radiodiscussions.com/forums/introduce-yourself.1088/
Thanks in advance and have fun!
RadioDiscussions Administrators
Media companies and debt.
- Thread starter tall_guy1
- Start date
Companies have... for centuries... known that if they have an opportunity for expansion or acquisition where the cost of a loan is less than the profit margin of the business it is prudent to use someone else's money.
Debt is not a major concern for profitable companies that make more than the debt costs to service and pay down.
When a business is in decline or when it improperly projected the potential for a new enterprise, then debt can be destructive. But in such cases, the decline in the business would have, alone, destroyed them anyway.
Not that badly. They lost $600 million last year, a profit margin of -2%.
They haven't run out of money yet.
Paramount has $30 billion in liabilities (debts and accounts payable), but $52 billion in cash and assets.
WB-Discovery has $77 billion in liabilities, but $123 billion in assets.
Disney has $97 billion in liabilities but $205 billion in assets.
There are two basic rules in finance:
1. Profitable companies don't go bust
2. Until your debts exceed your assets, you can borrow additional funds.
Of the three, only Disney was profitable last year, but all three have significant assets.
There may be a question as far whether the film studios (Paramount Pictures, Warner Bros., Disney/Pixar) and the television assets belong together long-term, but there is little chance of insolvency right now.
Ah, the stories I can tell now that I'm retired.
Back in 2017 when iHeart was $20 billion in debt, Bob Pittman and Rich Bressler called an all-markets "Town Hall", where they told us, with a straight face:
"It's nothing to worry about. It's just like your mortgage. Let's say you owe $400,000 on your house. Do you have $400,000 in cash?
Probably not.
But you have cash flow. You're able to make the payments.
It's just like that."
They filed for bankruptcy less than 90 days later.
Back in 2017 when iHeart was $20 billion in debt, Bob Pittman and Rich Bressler called an all-markets "Town Hall", where they told us, with a straight face:
"It's nothing to worry about. It's just like your mortgage. Let's say you owe $400,000 on your house. Do you have $400,000 in cash?
Probably not.
But you have cash flow. You're able to make the payments.
It's just like that."
They filed for bankruptcy less than 90 days later.
I noticed the clever dodge, at least in what you've quoted. They didn't say that they were able to make their payments!
I know Paramount has some kind of town hall on June 25 to discuss their strategy going forth, but it seems like they need a more immediate solution than WBD since they are bleeding more money, but from those figures they are much better off than WBD, so I don't understand how WBD is not in the kind of dire situation Paramount is in.
My view is there's stability of leadership at WBD, and there's a vacuum at Paramount.
Again, Paramount is not in a dire situation financially -- today.
But they could be if they don't fix their leadership. The Paramount Global stock is in trouble is because Shari Redstone won't let the professionals who she hired to run the business actually run the business. Shareholders have lost confidence in her leadership and bailed on the stock.
The town hall you mention for Paramount will be as hollow as the one Michael Hagerty mentioned at iHeart, because the executives leading that town hall are not actually in charge.
Its the same basic reason many sports franchises have consistently struggled. The billionaire who owns the Los Angeles Angels (of Anaheim) insists on running the team a certain way, so the baseball people he hires keep leaving for greener pastures.
Last edited:
So Redstone could do nothing and have the company be okay? So a lot of media change is the result of shareholders demanding change in the company to increase profits? (TBS/TNT around 2015/2016 tried skewing younger for a few years and inveating more in programming, so perhaps that was to please investors.)
Dude. At least read the second sentence (ideally, the whole comment) before replying. PTBoardOp93 went on to say:
Had that honestly not occurred to you before?
If you are in a publicly-held business, it's all about the stock price.
I certainly wouldn't say that. Business is always changing. Specifically, Paramount needs to continuously determine how much focus and investment to put into motion pictures versus the TV side of the business.
But why do stockholders see Paramount so negatively when other comanies (like WBD) have far more debt? (They also own cable channels too.)
It occurred to me, just never had the chance to discuss my thoughts on here as it never came up.
MAX (WBD's premier streaming service) was profitable last year---$103 million in the black.
Paramount+ lost $490 million the same year.
Paramount+ (as I've said many times here) is the second biggest money loser of the major streaming services (Netflix, Amazon Prime, MAX, Disney+/Hulu, Apple, Paramount+, Peacock).
Peacock managed to lose $2.8 billion last year---$825 million in the fourth quarter alone. But Comcast/NBCUniversal is a healthier overall business.
All that said, stockholders aren't really happy with WBD, either. At the close of trading today, WBD stock is $7.12 a share. Paramount's is $10.10. Compare that with Comcast at $38.58, Disney at $102.15, Amazon at $187.15 and Apple at $210.45.
Two years ago, Paramount was in the upper $20 range, WBD was upper teens. So they're both in the hole.
They each own a lot of obsolete assets like cable channels.
Max looks very expensive to run. They have Big Bang, Friends, South Park, Game of Thrones, all of HBO's back catalogue, live sports, live news from CNN, a lot of huge WB films. It seems like it would cost them a lot in residuals, and I know at least South Park and Friends was very expensive for them, so not sure if huge purchases hurt or help the bottom line or them in Wall Street. It is rumored Peacock and Paramount might merge.
Dude, owning the rights to those shows makes them money, not the other way around.
Residuals are negotiated before the production of the shows even starts for a predetermined length of time.
That rumor has been going on for the past two years. We won't know anything until it's announced.
I am wondering though if it is underpriced for everything they are pouring into that service. A lot of the Max figures include HBO subscribers. Was a broadcast major, not an finance major, but seems like it would take a lot of subscribers and higher price on the service to break even as it seems like they are doing loss leader pricing.
Loss-leading pricing has been the way you start a streaming or online business. Amazon.com lost money for several years before becoming profitable. Same with Netflix mailing out DVDs and then eventually becoming the profitable leader in streaming. Nobody doing anything online, let alone with competition, goes from zero to profitable instantly.
- Status