Jaime Morris:

Good afternoon, everyone. Thank you for taking the time to join us for our second quarter 2024 earnings call. Joining me for today's discussion are Paramount's Co-CEOs, Brian Robbins, Chris McCarthy and George Cheeks; and our CFO, Naveen Chopra. Please note that in addition to the earnings release, we have trending schedules containing supplemental information available on our website. Before we start this afternoon, I want to remind you that certain statements made on this call are forward-looking statements that involve risks and uncertainties. These risks and uncertainties are discussed in more detail in our filings with the SEC. Some of today's financial remarks will focus on adjusted results. Reconciliations of these non-GAAP financial measures can be found in our earnings release or in our trending schedules which contain supplemental information and in each case, can be found in the Investor Relations section of our website. Now, I will turn the call over to Brian.

Chris McCarthy:

Thank you, Brian and good afternoon, everyone. We are pleased with our upfront results, particularly in the context of the evolution of the ad market and the scale of new entrants. Linear volume trends were in line with last year and CPMs were up on a blended basis, driven by sports and broadcast which were relatively strong. The digital marketplace was also healthy. We secured commitments in excess of $1 billion across our streaming portfolio, reflecting both the quality and the scale of our assets. With our mix of pay and free, we offer the most efficient reach across premium video. Now let's walk through the progress we're making against our strategic plan, starting with streamlining the organization. We announced in June that we've identified $500 million in annual run rate cost savings across the company. This $500 million is included in the $2 billion of cost efficiencies identified by Skydance. To realize these savings, we are reducing our U.S.-based workforce by approximately 15%. And we are primarily focused on 2 areas

Naveen Chopra:

Thank you, George and good afternoon everyone. Our Q2 results demonstrate strong execution, continued evolution of our distribution and monetization strategies and the ongoing power of our creative engines. Financially speaking, this translated to 43% growth in adjusted OIBDA, reflecting significant improvement in our D2C business which is delivering healthy top line growth and improved operating margin. Additionally, balance sheet leverage improved by 1/3 of a turn since the end of Q1. As always, you'll find a comprehensive review of Q2 results in our press release. So today, I'm going to focus on a few areas of note. First, advertising. In Q2, Direct-to-Consumer advertising grew 16%, benefiting from increased viewing hours across Paramount+ and Pluto TV, along with higher CPMs. In TV Media, overall domestic advertising trends were negatively impacted by the fact that sports comprised a smaller share of inventory than it has in recent quarters. This dynamic somewhat masked the fact that year-over-year growth in nonsports domestic advertising improved relative to Q1. On a total company basis, advertising declined 6% in the quarter. Looking ahead, we expect D2C advertising growth in Q3 to be similar to Q2. And in linear, we expect advertising trends in the second half of '24 to improve with the return of live sports, new fall programming and contribution from political spend. Next, let me turn to affiliate and subscription revenue which grew 1% in Q2. As a reminder, last year's second quarter included a Showtime pay-per-view event that did not take place this year due to our exit from Showtime Sports at the end of 2023. This comparison reduced the Q2 growth rate by 250 basis points. D2C subscription revenue grew 12% in the quarter, with Paramount+ subscription revenue up 50% year-over-year. Paramount+ finished the quarter with 68.4 million subscribers which is 2.8 million lower than the end of Q1. Now 2 factors impacted subscriber growth this quarter, both of which were built into our expectations for the full year. The biggest factor by far was the planned exit of our hard bundle partnership with Tving in South Korea which contributed a sizable number of subs but limited revenue and OIBDA. Second, domestic sub growth, though still positive, was hindered by elevated churn from the cohort of subscribers that joined for the Super Bowl in Q1. We expect Paramount+ to return to net subscriber growth in the second half of the year as we benefit from a more consistent cadence of original content now that we're beyond the impacts of the strike. We also expect normalized international subscriber growth for the remainder of the year. Paramount+ global ARPU expanded 26% in the quarter, reflecting the impact of the price increase that took effect in Q3 of 2023 as well as a shift in the mix of our international subscriber base to higher ARPU markets. And as we announced in June, a subsequent domestic price increase will take effect later this month. Monthly pricing for new Paramount+ customers on our ad-supported tier will move to $7.99. Existing customers will be grandfathered at the current $5.99 price. Monthly pricing on our Paramount+ with Showtime tier will increase by $1 to $12.99 for both new and existing customers. We don't expect a meaningful financial impact from the new price increase until Q4 given the time required to implement the price changes across our distribution channels and because the pricing increase on the ad-supported tier only applies to new customers. In the TV Media segment, affiliate revenue declined 5% year-over-year, largely reflecting ecosystem trends. Recognizing ongoing changes in the pay TV ecosystem, in Q2, we announced an important multiyear distribution agreement with Charter which seeks to modernize our long-standing relationship. Starting in Q3, Charter will be the first U.S. MVPD to make the ad-supported tier of Paramount+ available to basic cable subscribers with no incremental cost to the consumer. Accordingly, users who activate a Paramount+ essential subscription through an MVPD bundle will be counted as Paramount+ subscribers and the revenue from Charter and future MVPD distribution deals that bundle Paramount+ will be shared between our TV Media and D2C segments. We believe this type of bundle is an efficient way to grow Paramount+ and can yield many of the same benefits we've experienced in the international markets where we've adopted a similar approach. These bundles ensure that Paramount and our distributors are full participants in the transition of viewing from linear to streaming. Looking ahead to Q3, we expect TV Media affiliate revenue growth to decelerate modestly relative to Q2, reflecting the dynamics I just mentioned and the impact of exiting Showtime Sports. Next, I'll touch on licensing. Our licensing and other revenue declined 35%. As I've noted previously, licensing revenue growth tends to be bumpy due to the timing of deliveries. And that continued to be the case in Q2 as there were fewer deliveries in the period relative to Q2 of 2023. For example, Q2 of last year included delivery of the final season of Jack Ryan. The quarter was also impacted by a lower volume of licensing in the secondary market. We expect licensing revenue to return to growth in the second half of the year, particularly with the return of a new fall slate on CBS in Q4, although we do expect a modest decline in licensing revenue for the full year. In parallel with our efforts to maximize revenue, we're also highly focused on unlocking incremental cost savings. And as you've heard Chris, George and Brian described, we've identified opportunities to streamline the organization that are expected to yield $500 million of annualized cost reductions. Importantly, this $500 million is included in the $2 billion of cost efficiencies identified by Skydance and we're aligned in moving quickly to realize them. We expect to execute these actions in the coming weeks such that we can reach the full $500 million run rate expense reduction as we enter 2025. And in connection with these actions, we expect to incur a restructuring charge of approximately $300 million to $400 million in Q3, the cash impact of which will occur over the next several quarters. The last part of our Q2 results I want to address is the goodwill impairment charge recorded in the quarter. During Q2, we assessed the relevant factors that could impact the fair value of our reporting units, including the estimated total company market value indicated by the Skydance transactions and recent indicators in the linear affiliate marketplace. As a result, we recorded a $6 billion noncash goodwill impairment charge for our cable network supporting unit at TV Media. Now before moving on to questions, I'd like to share some additional information regarding our expectations for the remainder of the year. Our D2C segment was profitable this quarter, our first profitable quarter since Paramount+ launched 3.5 years ago. And although the segment will generate losses in Q3 and Q4 due to the timing of content expenses, we're on course to achieve Paramount+ domestic profitability in 2025. And for the full year 2024, the progress in D2C profitability means we continue to expect significant growth in total company OIBDA. And free cash flow will grow relative to 2023. We continue to operate in a dynamic environment but it's clear that our focus on execution is producing results. We're not standing still during this interim period before the transaction closes. We remain focused on achieving our goals for 2024 which means investing in key content assets, finding expense efficiencies, improving profitability, deepening partnerships and deleveraging our balance sheet. We believe this approach will create value for shareholders over the long term. With that, operator, please open the line for questions.

Michael Morris:

I wanted to follow up first on Brian's comments about operating the business during the period between now and when the Skydance transaction will close. How are you ensuring that these steps that you're taking on things like strategic partnerships that you referenced, how are you making sure that those are aligned with the long-term goals after that transaction is completed? Is Skydance involved in these things during the interim period? And then also, how do you keep the teams motivated when there's some uncertainty about what the future may hold for the business? So that's my first question. And then maybe for Naveen, on the goodwill charge, you noted the recent indicators in the linear affiliate marketplace were part of what triggered that. Could you expand on that at all? What were the recent indicators? Did it have to do with the Charter agreement? And given that cord cutting has been going on for quite a while, why was now the time that, that was triggered beyond just the transaction as you mentioned?

Naveen Chopra:

Thanks, Brian. And so Mike, let me respond to your question on the goodwill impairment charge. There's really a couple of things going on there. So first, obviously, linear declines are part of the analysis here. But the other part of this is that really drives the magnitude of the goodwill impairment charge, is the value that's implied by the Skydance transaction because the way the accounting works on this is we need to reconcile the value of our individual reporting units with the enterprise value for the entire company that's implied by the transaction. So it's really the combination of those things. And what that results in is the basically $6 billion noncash goodwill impairment charge that is specific to our cable network reporting unit.

Robert Fishman:

Anything more that you all can share on how you're approaching exploring the licensing of Paramount+ content? Maybe just originals or just broadly speaking. Or are you evaluating that licensing in the context of the other JV structures that you were talking to? And then on a separate note, just trying to understand any updated thoughts or how you guys are thinking about using premium sports as part of Paramount+ and whether or not the Charter deal or future distribution agreements that include Paramount+ influence those strategies given the importance that NFL and other content is to the -- within the pay TV ecosystem.

George Cheeks:

Thanks, Chris. So on the sports point, so basically, our strategy here and our focus is that broadcast and streaming together drive an unduplicated audience and really resolve linear and streaming growth. So when we look at our sort of sports portfolio, we're looking at it through both angles because the beauty of this is that we're seeing growth on both sides. For example, last NFL season, NFL on CBS was up 5% year-over-year and the streaming audience on Paramount+ is up more than 50%. So we're seeing growth for our affiliates and we're seeing growth in streaming.

Ben Swinburne:

Naveen, could you tell us a little bit about how you're thinking about free cash flow second half of the year and kind of where you think leverage might end at year-end, to the extent you can share that with us? And then, I think one of the areas that you guys have talked about kind of re-evaluating or evaluating are your international streaming plans. And I know you mentioned the changes in South Korea. But what's the update there? Do you guys see an opportunity to kind of optimize this business outside the United States and maybe improve the profitability or reduce the losses there? Just would be interested in an update on that front as well.

Chris McCarthy:

Thanks, Naveen. Ben, listen, today, we have a global footprint with Paramount+ and Pluto. And moving forward, we continue -- we expect to have -- or we plan to have, excuse me, a global footprint. Now how that footprint looks may change. We're going to be very opportunistic about exploring all of our options here. The overwhelming majority of the economics are going to be driven out of the U.S. market as they are today in the content space. And so we want to be -- take a thoughtful approach about how we look at each market internationally. Now that can come in the form of strategic partnerships with maybe platforms who already have a great, tremendous amount of reach and a platform, in which case, we'll be reducing our cost by not having to have our own platform. Or they could come in the form of a joint venture with one or more SVOD players, in which case, we could get greater scale and increase long-term value and drive greater profits. So we have lots of interest from many different partners in this area and we're exploring all of that. And we look forward to updating you as we progress.

Richard Greenfield:

I got a couple. First, just from a very high level, I think you've all talked about the $500 million being inclusive of the $2 billion from Skydance. Skydance is a pretty small company in the scheme of the media world. Could you help us understand what of the $2 billion couldn't you accomplish without Skydance, meaning could the $500 million be more like $1.5 billion on your own? Just trying to understand the difference between those 2 cost-cutting numbers. And then on the Charter agreement that you referenced, you're going to obviously now be giving Paramount+ to, I think, about 9 million to 10 million Charter's video subscribers. Do you actually shift the allocation, meaning if I think about how you account for this between your various divisions, is there now a reduction in how much affiliate revenue is going to the linear networks with a commensurate allocation of dollars to Paramount+? I'm just trying to understand as you turn this on to those subscribers. And then just a housekeeping point, I think you mentioned, is it only Charter's or subs that activate that you get -- that are counted? Or does every subscriber get Paramount+ and is treated as a subscriber on Paramount's books?

Operator:

The next question comes from John Hodulik from UBS.

Naveen Chopra:

Yes, sure, John. It's Naveen again. Let me try to clarify that a little bit. I think it may be helpful to remember that the way that we structure our deals with distributors and I'm not going to get into any specific deal, is with a focus on total company economics. That used to be largely about cable and broadcast and premium linear networks. Now it includes all of those things plus, obviously, Paramount+. And so independent of how those things may be delineated for contractual purposes, for our financial reporting, we allocate those fees between, as I said earlier, our TV Media segment and our D2C segment. So the revenue that we receive is not contingent on whether somebody activates or not. It's all part of the overall economics of our arrangement with the distributor.

Steven Cahall:

So Naveen, just a few more on Paramount+ profitability. Can you talk about the value of content that you expect on Paramount+ this year from an amortization perspective, especially as you move into the back half of the year when it's a little heavier? And with the guidance you have for next year, how much do you think that content value is going to grow in '25? And just a housekeeping one on it. You said you'll be profitable for Paramount+ in 2025. Is that different from -- for 2025 [ph] as in a positive number for the full year? And then also, George, CBS affiliates, some out there have been indicating that reverse comp fees should really start to moderate or even decline because of the shift to streaming with things like Paramount+. How do you think about those station affiliate relationships and what their fair cost is of CBS national programming? I think a lot of TV station margins are a lot higher than the CBS networks margin. So I'm just wondering about what you think is a fair way to share those economics, especially as the company is entering into this cost cutting and more cash-generative mode that you all talked about.

George Cheeks:

Sure. So Steve, we're keenly aware of the changing industry dynamics and the challenges that our affiliates are facing. Now our role as a network in this partnership is to provide best-in-class content with maximum reach. And this means we've got to continue to invest in producing hit shows, our news programming and investing in sports rights. Now in terms of the fair value, the fair value is really determined by the strength of our content offering. And the good news here is that CBS is delivering on all fronts. I mean we're number 1 in prime, number 1 in daytime, number 1 in late night. We have an incredible sports portfolio led by the NFL but including college football, NCAA and golf. So again, our job is to make sure that we're providing best-in-class content for our affiliates to justify the content fees that we charge them.

Operator:

The last question comes from Bryan Kraft from Deutsche Bank.

Brian Robbins:

Sure, Bryan. This is Brian. I'll take the first part of the question. For us, licensing is not either/or. It's actually more. It's about driving more revenue, more reach and more relevance for our content. But first and foremost, I think we're focused on maximizing the first-run value of our content on our owned and operated platforms and channels, whether that's through advertising, affiliate or subscription revenues. And then, of course, windowing is key and it always has been key. And we will still continue to license our content to third-party platforms. And fortunately for us, our content is in demand. It's in demand from consumers and it's in demand from other platforms. And we believe that not only do we drive more revenue by licensing to third-party platforms but it also increases the demand of that content on our own platforms by opening it up to new eyeballs on other people's platforms and then driving back to our own. So we will continue to license. We're very focused on creating the greatest opportunity while continuing to control our IP. And there's always going to be timing dynamics that are reflected in performance but given the power of our content and IP, long term, licensing is a compelling business for us.

Chris McCarthy:

Thanks, George. And this is Chris. I'm going to close it out. And on behalf of my fellow co-CEOs, we'd like to thank you for joining us for our call today. As you can see from our results, we're off to a very strong start in the first half of the year, executing well against our strategic plan. We continue to deliver some of the biggest, broadest hit TV series and blockbuster films with a high hit ratio. And our performance this quarter reflects the power of that content and the actions that we've taken to strengthen the company. Now looking ahead, we're clear-eyed about the additional work that needs to happen and we are confident we will deliver. We look forward to updating on our progress. Thank you everyone for joining us and have a good evening.

George Cheeks:

Thanks, Jaime. First, we want to thank Bob for his many years of leadership and steadfast support for all Paramount Global businesses, brands and people. Now Chris, Brian and I want to speak briefly on our partnership, our excitement about this collaboration and what we're addressing is our first order of business.

On that note, we're finalizing a long-term strategic plan to best position the stored company to reach new and greater heights in our rapidly changing world. The plan is focused on 3 pillars:

first, make the most of our hit content; second, strengthen our balance sheet; and third, optimize our streaming strategy.

Brian Robbins:

Thank you, Chris. George, Chris and I have been collaborating with each other for years. transforming our businesses and most importantly, making hit films and television, which is the core of Paramount Global. Each of us has deep industry knowledge, relationships and experience as business leaders and creative executives. We will bring all of that to bear as we chart a course forward for our company. We look forward to coming back to you in short order to share our plan and discussing it all in detail at that time.

Naveen Chopra:

Thank you, Brian, and good afternoon, everyone. In Q1, we generated significant growth in earnings and free cash flow and improved our balance sheet.

Jaime Morris:

Good afternoon, everyone. Thank you for taking the time to join us for our fourth quarter 2023 earnings call. Joining me for today's discussion are Bob Bakish, our President and CEO; and Naveen Chopra, our CFO. Please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our website. Before we start this afternoon, I want to remind you that certain statements made on this call are forward-looking statements that involve risks and uncertainties. These risks and uncertainties are discussed in more detail in our filings with the SEC. Some of today's financial remarks will focus on adjusted results. Reconciliations of these non-GAAP financial measures can be found in our earnings release or in our trending schedules, which contain supplemental information and in each case can be found in the Investor Relations section of our website. Now, I will turn the call over to, Bob.

Naveen Chopra:

Thank you, Bob. Good afternoon, everyone. As Bob mentioned, our full-year 2023 results reflect a year of continued execution. In my comments today, I'll provide insights on key elements of our Q4 results. Additionally, I'll discuss how we're making notable progress in scaling our D2C business, which will result in significant earnings growth for the company in 2024 and drive Paramount+ to reach domestic profitability in 2025. Let's begin with our Q4 results. Paramount delivered total company revenue of $7.6 billion and adjusted OIBDA of $520 million. Despite navigating a variety of challenges posed by the strikes, we were able to deliver strong performance in our direct-to-consumer business and stable operating margins in TV Media. As always, you'll find a comprehensive review of our financial results in our press release. Let me walk you through a few areas of note, starting with advertising. In Q4, direct-to-consumer advertising delivered strong growth of 14%, benefiting from a 27% increase in total viewing hours across Paramount+ and Pluto TV. This viewership is monetized through our IQ platform, already one of the largest premium digital video advertising platforms in the United States, and its value continues to grow as engagement expands and as we evolve our digital advertising capabilities to attract new sources of demand. In linear advertising, we saw strong demand in sports due to a record NFL season and incremental Big 10 inventory. Other components of linear advertising were negatively impacted by the strikes, a decline in political spend and unfavorable FX. On a total company basis, advertising declined 11% in the quarter, including a 400 basis point headwind from the decline in political advertising. Looking forward, as Bob mentioned, we're seeing some signs of stabilization in the ad market, including healthy scatter premiums. And based on what we've seen to date, we expect to report low to mid-teens advertising growth in Q1, including the benefit of the Super Bowl. Next, let me turn to affiliate and subscription revenue, which grew 13% in Q4. As I've often noted, growth in total affiliate and subscription revenue illustrates that our multi-platform strategy, combining traditional and streaming, yields net growth for our business. In TV media, affiliate revenue declined 1%, reflecting a continuation of the trends we saw in the first three quarters of 2023. D2C subscription revenue, on the other hand, grew 43% in the quarter. And that's in large part due to the impressive momentum at Paramount+, where subscription revenue increased nearly 80%, thanks to subscriber growth and global ARPU expansion. Paramount+ continues to reach new audiences, adding 4.1 million subscribers in Q4 for a cumulative total of 67.5 million subscribers globally. Additionally, ARPU for the quarter grew 31% over the prior year, reflecting a full quarter of our domestic price increase and the addition of international subscribers in higher ARPU markets. Q4 also benefited from strong performance of our Paramount+ with Showtime tier. The expanded content offering on our premium tier led to an increase in hours of engagement per subscriber. Monthly churn for these subscribers also improved both quarter-over-quarter and year-over-year, and we're seeing higher than expected cost synergies from the combination. In fact, Q4 marked the third consecutive quarter of year-over-year improvement in D2C OIBDA. And on a full-year basis, we grew Paramount+ revenue over 60% in 2023, while content marketing and other expenses grew at a significantly lower rate. Said differently, as we approach the third anniversary of the domestic launch of Paramount+, we're capturing operating leverage in streaming faster than expected, and we intend to build on that momentum. Paramount+'s value proposition is strong, cornerstone, original and library content and top tier movies and sports in an integrated package. This proposition allows us to continue to grow subscribers and drive revenue by deepening engagement, improving retention and increasing monetization. And we continue to believe that the key to deeper engagement and retention is savvy programming execution and a stable volume of original content. It's about smartly combining acquisition drivers like the NFL, blockbuster films and our slate of hit Paramount+ Originals with lower cost library and affinity program. This strategy proved effective in 2023, where average monthly viewing hours per domestic sub grew 8% and helped us implement a price increase while also reducing average monthly churn by 70 basis points. Outside the United States, we are similarly honing our Paramount+ strategy by leaning into our global slate and identifying markets where we can slow investment in local streaming content and marketing. We've learned that Paramount+ subscribers outside the United States spend nearly 90% of their time with our global Hollywood hits, meaning we can keep them engaged while rightsizing our investment in content that does not travel around the world. In some cases, this change will result in slower international subscriber growth. But given what we now know about viewing behavior in certain international markets, we're confident the shift will be highly accretive to our D2C P&L. Domestically and abroad, we are finding ways to enhance engagement, reduce the cost per hour of viewing and unlock greater marketing efficiency. By executing on these initiatives, we expect Paramount+ to deliver more than 20% global ARPU improvement in 2024, while programming expense will grow at a significantly lower rate. Ultimately, the ability to drive deeper engagement and ARPU growth, while slowing the rate of growth in content expense, is the path to profitability in streaming. In addition to improving the profitability of streaming, we remain committed to optimizing the cost structure in other parts of our business. Programming for our TV Media segment is the single biggest line item in our expense base, so it deserves particular focus. As you've heard, 2023 presented an opportunity to experiment with alternative lower cost entertainment programming across our linear networks. The performance we saw gives us confidence we can continue to reduce costs going forward while also delivering a consistent volume of high-quality content. And that's enabled by lower production costs, evolving format mix and optimizing and sharing content across linear and streaming. As Bob noted, we're also focused on using the collective power of Paramount Global to unlock synergies more broadly. This mindset enables headcount cost reductions, including the action we announced earlier this month, which eliminated nearly 750 domestic positions or about 5% of our domestic employees and represents approximately $200 million in annualized run rate cost savings, the majority of which will benefit TV Media and corporate expenses. And, we will continue to optimize our compensation expenses throughout the course of 2024. As you now heard, we're making a variety of important changes to our global workforce and content strategy. These moves reflect decisions we've made to transition our business and enhance our future value proposition. They will also result in a programming and restructuring charge in Q1, which we currently expect to be approximately $1 billion. I'll close by sharing some guidance on how all this translates to our financial expectations for the current year. As you've now heard, we're executing against numerous initiatives designed to not only navigate ongoing ecosystem changes, but also build operating leverage in our streaming business. This means significant OIBDA growth in 2024, largely driven by improvements to our D2C P&L, which also position Paramount+ to reach domestic profitability in 2025, a significant milestone in our streaming journey. In addition, we're highly focused on continuing to reduce balance sheet leverage. We finished 2023 with an approximately half turn reduction in net leverage relative to Q3, following the sale of Simon and Schuster. Leverage in 2024 will benefit from material OIBDA growth and positive free cash flow. In fact, we expect free cash flow to grow in 2024 versus 2023, despite an increase in cash content spend as we restart production that was impacted by the strikes. Despite a dynamic environment, our commitment to shareholder value remains paramount. We have conviction that the value of our assets today and even more so with the benefit of strong ongoing execution represents a significant value creation opportunity. And as Bob said, we are dedicated to unlocking that value. With that, operator, let's open the line for questions.

Bryan Kraft:

Hi, good afternoon. I had a couple. I guess, would you talk about the content slate for TV and streaming this year on the TV side? Or are you shifting programming originally slated for the fall and to the first half of the year and therefore going to have higher than normal programming costs in the first half of the year at Super Bowl? Or should we expect a more normal level of programming costs for TV in the first half? And then on the streaming side, how would you compare the strength of this year's slate to last year's? And what are some of the more important titles that you think will drive customer acquisition for Paramount+? And then, it would be really helpful if you could give us a sense of the mix between domestic and international Paramount+ subscribers at this point, as well as where most of the growth came from in 2023? And any color just on your expectations for sub growth this year, in total and anything on mix would be helpful. And then just the last one was just, if you could give us any sense for where the relative ARPUs are for domestic and international now, that'd be great? Thank you.

Naveen Chopra:

Yes. Thanks. So Bryan, I'll try to give you a little insight on streaming subs. So, maybe just starting with Q4, as you saw, we added 4.1 million subs to Paramount+ in the quarter. I think it's fair to characterize that growth as being relatively balanced as between domestic subs and international subs. On the domestic side, I think the content slate performed really well despite, obviously, some strike impact. I think that speaks to the benefit of having a balanced sports and entertainment portfolio. So that worked well for us. We also saw some nice performance in the quarter from partnerships like what we do with Walmart and the bundle with Walmart+. And then on the international side, we launched a new hard bundle with JCom in Japan. So that obviously contributed to sub growth. In terms of what we're seeing this year, 2024 sub expectations, I do think sub growth in 2024 will be lower than 2023. Though importantly, I'd point out we do still expect very healthy Paramount+ revenue growth. And of course, revenue is the more important metric than subs. But just to give you a little color behind my comment on the sub trends themselves, there are a number of factors at play. First, you got the Super Bowl. We were very excited about the magnitude of starts that we saw from the Super Bowl. I think it's a little early to assess exactly what that means in terms of how many we retained. Obviously, you do have high churn on an event like that. But we're encouraged by what we've seen thus far. The content slate, because of the strike, as you heard Bob describe, is a little bit back half loaded and so that kind of affects the timing of subs coming on. And then international, which as you heard in our prepared remarks, we've made a number of changes. We talked about dialing back on local content and marketing. That has some impact on subs. We'll also likely be exiting some hard bundle relationships where, quite frankly, the economics just weren't that compelling. And that can probably represent a loss of a couple million subs, if you will. But in both of those cases, while it impacts subs, doesn't have a material impact on revenue or EBITDA. And so that's why, as I said, there's a little bit of noise in the sub trends, but feeling very good about the revenue growth trend on Paramount+. Oh, and sorry, you had a question on relative ARPU between international and domestic. As you know, we don't disclose specific numbers there, but I can tell you that domestic ARPU continues to be higher than what you see in international. The other thing to keep in mind is that international really has a number of different components to it. So there's territories in Western Europe, for example, where the ARPUs look a little more like they do in the United States. And one of the things that has contributed to overall ARPU growth, both in 2023 and will continue to do so in 2024, is the fact that we'll be seeing more growth in those call it, higher ARPU international markets than what we've seen in the early days of Paramount+.

Operator:

Thank you. The next question goes to Michael Morris with Guggenheim Partners. Michael, please go ahead. Your line is open.

Robert M. Bakish:

Yes. Sure, Michael. So starting with the sports topic, look, start with the fact that there's still a lot we don't know about this service, things like price, packaging, consumer appetite. And to the consumer point, for a true sports fan, this product only has a subset of sports. It's missing half the NFL, a lot of college, has virtually no soccer or golf, etcetera. So look, that's hard to believe that's ideal, especially at the price points that have been speculated. In terms of our view on sports, first, we serve true sports fans through our MVPD and virtual MVPD partnership that provides the full complement of sports really year round. And second, we see clear value to an integrated sports payment strategy, true both for CBS and Paramount+ by the way, but if you look at the streaming side, Paramount+, we clearly see consumers watching both. I referenced this 90% factor, i.e., people that come in for sports on Paramount+, 90% of their engagement is with non-sports. So that's a clear opportunity that we're continuing to exploit and we like. And our sports are Marquee, NFL, NCAA, UEFA, those are locked up into the next decade. So we have a real sustainable advantage here. Bottom line, we very much like where we are with respect to sports execution and see the Paramount strategy creating substantial value therein. Let me briefly comment on Tulsa. You missed, Herdie. What we're going to do is we're going to put the 1st season of Tulsa on CBS prior to the second season of Tulsa dropping on Paramount+, really using it as a broad marketing engine. And as you know, we did a variant to that idea with Yellowstone and we really saw continued broadening of the audience. And so we think that's a real opportunity for Tulsa as well, given Stallone, etcetera. And we also think it's attractive from an economic perspective. You want to comment on the licensing thing, Naveen?

Jaime Morris:

Thanks, Mike. Operator, next question please.

Ben Swinburne:

Thank you. Questions are on Paramount+. Thank you for all the guidance that you laid out in your prepared remarks. Maybe for Naveen, you haven't talked about sort of international versus domestic EBIT or EBITDA in the past. And if there's any way to help us think about what domestic profitability means at the segment level or any way to dimensionalize that disclosure? And then on the $1 billion charge, it sounded like that was programming and restructuring. I just wanted to make sure that was true and if you had any rough sense of relative sizing. And if you could just tell us, is that programming tied to the sort of international strategy shift that you guys have talked about? And then lastly, also in Paramount+, you said programming cost growth at Paramount+ or D2C should be significantly lower than the ARPU growth of over 20%. That's a pretty wide range of outcomes. I was wondering if maybe you could put a finer point on your expectations for Paramount+ programming costs for ‘24. Thank you.

Jaime Morris:

Thanks, Ben. Operator, next question please.

Steven Cahall:

Yeah. Thanks. So first, I was wondering if I could just get your comment on, Skinny Bundle and how you're thinking about an industry push towards more Skinny Bundle. Kind of follows on the earlier question about the sports streaming JV. It seems like MVPDs are going to continue to look for this. I think you traditionally, often looked for CBS to be distributed with a lot of your cable networks. I'm wondering if you have any change in thinking in terms of sort of meeting MVPDs or consumers, especially as you have some renewals, I think, coming up this year. And then on the advertising market, I think after Q3, you said that you were seeing some modest improvement in domestic ads. It seems like that in Q4, that didn't quite come through. You seem more positive on stabilization, in the Q1 outlook that you gave. So would love to just, hear about what's changed to cause that and then specifically, anything on Pluto's sequential advertising growth trends as well? Thank you.

Jaime Morris:

Thanks, Steve. Operator, next question please.

Jessica Reif Ehrlich:

Thank you. Couple of things. One, I mean, there's been tons of press on M&A interest. I was wondering if you could maybe talk about how you're thinking about strategic options and what the time frame would be to put this aside or move on. And within that, maybe some bundling options for Paramount+, how are you thinking about that? And then on the restructuring or the charge that you're taking in first quarter, it sounds like you're attacking costs. I'm just wondering is there do you feel like there's more to go? And post the $1 billion charge, how much will the cost base be reduced? And then finally, you do have a big contract coming up in the spring. Can you give us some help in how you're thinking about, if you think about what happened with Disney, if the diginets go away, can you size or help us think about what's the financial impact?

Naveen Chopra:

Yes. So look, I think the short answer is that we believe there is continued opportunity to find efficiencies in the business. That's true both on the traditional linear side of the business and on the streaming side. On the streaming side, it's really more about how we grow even more efficiently. And on the linear side, it's really about how we preserve the margins in that business. And you've seen us take a variety of actions, not just the elements that we spoke about today, but over the past few years where we have combined organizations, we've taken out overhead, in some cases, we've leveraged programming across different platforms, and you'll see us continue to do more of all of that going forward. Content is still the single biggest cost item for us, and that's one of the reasons why, as I noted, we're focused on programming our linear nets as efficiently as we can while maintaining a strong volume of high-quality content. And on the streaming side, we're using what we've learned about viewership to really figure out where to place our bets and how to continue to drive engagement without having to significantly increase the amount of cash content spend that we're using for Paramount+. So this is something that we continue to be focused on, and you will see us unlock further efficiencies across the board going forward.

Jaime Morris:

Operator, we have time for one last question, please.

Robert Fishman:

Hi. Good afternoon. I have one for Bob and one for Naveen, please. Bob, can you talk more about the potential licensing opportunities? I'm thinking specifically for Paramount+ exclusive original content, to potentially third parties, and your view on keeping that original content and even your bigger library that's already in Paramount+ to yourselves versus looking to monetize that content to help drive upside to cash flows going forward? And then, Naveen, any way to help frame how much the Hollywood strikes benefited either the quarter or the full-year 2023? And then on the related note to the first question, as you think about growing free cash flow in 2024 despite the increase in content spending, just if you can help us think about how much licensing helps drive that growth?

Naveen Chopra:

Let me try to hit your question, Rob, on free cash flow, licensing, strikes, etcetera. And I'd start by just saying we are intending to deliver free cash flow growth in 2024. That's very important. And the biggest driver of that is significant improvement in OIBDA, and we've talked about the various contributors to that. Licensing is one of the contributors. As I said, I expect licensing revenue to grow in the year, and that benefits both OIBDA and cash flow. But I wouldn't say that it's sort of an inordinate impact relative to what it has been in prior years. I'd also note that our cash spend in '23 came in at about $16.5 billion. That was lower than the prior year as a result of the strikes. And our plan for '24 contemplates spending really only about 50% of, call it, the strike savings back. And, that's a critical ingredient in our ability to drive healthy growth in free cash flow in the year. So, that's something we're looking forward to executing against.

Operator:

Thank you. This now concludes today's call. Thank you for joining. You may now disconnect your lines.

Jaime Morris:

Good afternoon, everyone. Thank you for taking the time to join us for our third quarter 2023 earnings call. Joining me for today's discussion are Bob Bakish, our President and CEO; and Naveen Chopra, our CFO. Please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our website. Before we start this afternoon, I want to remind you that certain statements made on this call are forward-looking statements that involve risks and uncertainties. These risks and uncertainties are discussed in more detail in our filings with the SEC. Some of today's financial remarks will focus on adjusted results. Reconciliations of these non-GAAP financial measures can be found in our earnings release or in our trending schedules, which contain supplemental information and in each case can be found in the Investor Relations section of our website. Now I will turn the call over to Bob.

Naveen Chopra:

Thank you, Bob, and good afternoon, everyone. As Bob outlined, we've made substantial progress in improving DTC earnings year-to-date and now expect to deliver lower full year DTC losses in 2023 than in 2022. The with further improvement next year as we return to consolidated earnings growth. Broadly speaking, Paramount's Q3 results reflect two important takeaways strong momentum in our D2C business, and our ability to navigate in a challenging environment by focusing on operational efficiencies across the company. In my comments today, I will provide additional insights on key elements of our Q3 results. I'll also discuss our expectations for Q4 and outline our path ahead. Let's begin with our Q3 results. We delivered total company revenue of $7.1 billion and adjusted OIBDA of $716 million. You'll find a comprehensive review of our key financial results in our press release. But let me walk you through a few important areas. First, affiliate and subscription revenue, which grew 14% in Q3. This demonstrates the power of our multi-platform strategy and affirms that the combination of traditional and streaming continues to yield growth for our business. In TV media, affiliate revenue reflects a continuation of the trends we saw in the first half of the year. This quarter, affiliate and subscription revenue included two pay-per-view events, which benefited both our TV media and D2C segments. D2C subscription revenue grew 46% in Q3, anchored by over 60% growth in Paramount+ subscription revenue. This growth was achieved through a combination of healthy subscriber additions and global ARPU expansion. Paramount+ added 2.7 million subscribers this quarter, even as we lost 1.3 million Latin American subs due to the restructuring of a legacy hard bundle deal, which we previewed on our last earnings call. Q3 was also the first full quarter in which the new Paramount+ with Showtime service was operational. As expected, this offerings expanded content proposition led to increased engagement among premium tier subscribers. In fact, for premium subs, hours of engagement grew 17%. Simultaneous with the launch of Paramount+ with Showtime we increased monthly pricing, which helped Paramount+ ARPU grow 16%. I should note here that the price increases took effect at different times for different subscriber cohorts throughout the quarter. meaning we won't see the full ARPU benefit of the price increase until Q4. In addition, we were pleased that domestic monthly churn continued to improve year-over-year despite the price increase demonstrating the popularity and stickiness of our content. From a bottom line perspective, strong revenue trends, together with significant improvements in our D2C operating leverage contributed to a 31% year-over-year improvement in D2C OIBDA in the quarter. Looking ahead, we expect strong D2C revenue growth with another quarter of healthy sub growth. That said, Q4 D2C losses will be similar to the year ago period. This reflects higher sports costs as well as higher marketing costs to support our broader geographic footprint as most of our Western European launches occurred late in the fourth quarter of 2022. Nonetheless, as I noted earlier, we now expect full year D2C losses in 2023 to be lower than 2022. Meaning we are ahead of plan in moving the D2C business toward profitability. The ongoing execution of our streaming strategy will yield further improvement in 2024 as we continue to drive subscriber growth user engagement and Paramount+ global ARPU growth in excess of 20%. In addition, we remain focused on building operating leverage by capturing the benefits of integrating Paramount+ and Showtime, optimizing our programming strategy to efficiently target key audience segments and further expanding our international footprint in a financially efficient way. Now let's discuss advertising. Direct-to-consumer advertising growth remained strong at 18%, benefiting from 46% growth in total viewing hours across Paramount+ and Pluto TV. This quarter's growth continues to position Paramount as one of the largest digital video advertising platforms with a unique direct programmatic business that leverages deep relationships with advertisers and agencies. TV media advertising revenue declined 14%. We did see strong sports demand and healthy year-over-year growth in key categories like automotive, CPG and alcohol. But significant categories like tech and pharma were weaker than we would like. Additionally, reduced political spend, strike-related impacts and international headwinds, including from FX negatively impacted the year-over-year performance. Looking ahead to Q4, advertising growth will continue to be impacted by a sizable decline in political advertising. We're seeing modest improvement in domestic linear advertising, but we continue to deal with strike impact and international weakness, which will limit improvement in the year-over-year trend. Shifting gears a bit, I'd like to provide additional detail regarding the financial impact of the strikes. In Q3, total company OIBDA included nearly $60 million of strike-related idle costs. These are incremental expenses incurred to retain production capabilities while the strike is ongoing. These costs impacted both our TV media and filmed entertainment segments. We expect to incur additional strike-related idle costs in Q4. However, the magnitude of these incremental expenses will depend on when the active strike is resolved, which, of course, we hope happens soon. Now I'll turn to Filmed Entertainment. Revenue was up 14%, benefiting from the theatrical performance of Mission Impossible-Dead Reckoning and Teenage Mutant Ninja Turtles

Michael Morris:

Thank you. Good afternoon, guys. Thank you for all the details. Bob, you talked about the carriage agreement. The new agreement between Disney and Charter and the streaming app side of the business. But can you share thoughts about the elimination of carriage of some channels that came in with that agreement and whether that's something that you expect to work through as you do renewals in the future and how that might impact the business? And sorry, if I could just add one other. If we look at the 2024 outlook for returning to earnings growth, Naveen, could you maybe talk a little bit about what that assumes for the advertising environment and cost growth at direct-to-consumer? Thank you.

Naveen Chopra:

Yes. Mike, with respect to earnings in 2024, I'd note a few things. I mean, first, we remain very focused on delivering consolidated earnings growth next year. In terms of the composition of that, the TV media side of the business, we assume we'll continue to benefit from cost reductions. Obviously, get some tailwind on the advertising side from the Super Bowl and political, all of which help offset continued evolution in the linear ecosystem. I would say that we -- with respect to the advertising market specifically, we do expect it to improve in 2024. Obviously, the exact magnitude of that would be a little too early to call but we have a number of levers that we can pull to adjust our plan depending on what we see in the advertising market to ensure that we're achieving our desired level of earnings. On the B2C side of the business, we continue to expect significant improvement in the D2C P&L. That is a combination of both top-line growth and improved operating leverage. I've talked about some of the drivers there in the past, includes things like growth in subs, continued improvement in engagement and ARPU both on the subscription and advertising side. It improves -- it involves continued improvement in churn as well as lower growth in content, marketing and operational expenses. So those are the drivers. It's, I think, too early to put specific numbers around that, given some of the uncertainty, both in the advertising marketplace as well as timing of content availability, but doesn't change the fact that there are a number of levers that contribute to year-over-year earnings growth.

Operator:

Our next question goes to you, Ben Swinburne of Morgan Stanley. Ben, please go ahead. Your line is open.

Bob Bakish:

Yes. Sure, Ben. Obviously, let me start there. When you look at Paramount and you look at the slate, the word that comes to my mind is balance. And what I mean by that is a mix of titles for target market and a genre perspective -- by the way, they saw five titles opened at number one in this year. We've obviously got a range of budget levels in there from modest to larger and a mix of franchises and new ideas. And so let's talk a little about franchises since I think that's part of your question. Look, we continue to believe in them. We have seen our franchises contribute significant value really across the business because, again, we use Paramount Pictures as part of an integrated strategy. Theatrical window is very much a launch pad, but it yields other benefits beyond theatrical. Look at the kids and family genre, clearly, a strong point in the quarter. You had Turtles and PAW Patrol. Those are both successful feature films, but they really drove a broader ecosystem of consumption on our platforms and at retail. In terms of consumption, it's worth noting that, but again, both in linear and streaming, we saw a significant library benefit as well as traction from the new releases. And the retail value creation has been significant. On the Turtle side, it's actually the fastest-growing action figure brand in the U.S., and it was number one in August. And on the PAW side, we've got the biggest pre -- brand in merchandise. So that's clearly additive, it's part of the reason we feel great about our franchise strategy. In terms of where we go over the next couple of years, we like the slate. It continues to be balanced. It continues to have range from genre and target market perspective, it continues to have range from -- on budget. And again, it's a mix of franchises and new ideas. If you look in the near term, we have Bob, the Bob Marley picture, One Love. That looks like a good sort of original idea, but clearly, a topic that people know. We got another Gladiator movie that we're very excited about and then more franchises, A Quiet Place, Mean Girls, Smile, Transformers, Sonic. So there's a lot going on there in the near term. But again, you can assume the slate continues in that vein, but scales a bit. We're probably in the 8-ish release volume in the last year or two, that number probably ticks up marginally over time. Maybe we get up to a dozen in a couple of years. But again, I think we're going to -- I know we're going to feel a very balanced slate. We're going to continue to drive franchises. We're going to get value across the business. And we're going to demonstrate what an incredible asset Paramount Pictures continues to be. Naveen?

Jaime Morris:

Thanks, Ben. Operator, next question please.

Jessica Reif Ehrlich:

Two may retail. So first, impairment appears to have walked away from a number of potential asset sales in the last year or so. What would you consider the optimal portfolio mix for Paramount? And then just on advertising, advertising for DTC grew 18%, but you're viewing hours were up 46%. I'm not sure what's Paramount+ and what's Pluto, but maybe you can talk about what -- it is a tepid market, but how do you think you can close that gap?

Naveen Chopra:

And Bob, if I could just add one thing to clarify. Jessica, with respect to the numbers you mentioned. Just keep in mind that the engagement growth that you saw there at 46%. That includes a significant amount of engagement growth in the premium ad-free tier of Paramount+. So you should not expect that to necessarily be a proxy for advertising growth.

Operator:

Thank you. Our next question goes to Rich Greenfield of LightShed Partners. Rich, please go ahead, your line is open.

Bob Bakish:

Yes. Sure, Rich. So, a couple of points. One, as you know, sports is integral to our strategy, but it's not a stand-alone business. It's a slice of the wheel, so to speak, both for our CBS network and for streaming. Second, as you point out, the NFL in that is clearly a Juggernaut and I can give you chapter and verse on how it's driving our business, but you already know that, so I'll skip that. But it's not the only sport that matters. One of the great things about Paramount is our collection of sports is truly A caliber. And so if you look at other element, it's college football, like now the Big 10, which is going to be the best college football league in the U.S., the NCAA and golf, like the Masters, I mean, the fact of the matter is -- and I know this because Ray Hopkins, who runs Distribution regularly brings clients to them. Those events matter from a distribution standpoint to, AKA retrans and reverse comp. It's not strictly the NFL. And clearly, to your point, they're also valuable in the ad business. The third point I'd make is, for us, remember, sports is a piece of the wheel. And we're actually in excellent place where we don't really -- we don't need nor are we active in looking at any more sports. Instead, what we're focused on is kind of the conjoint use piece, getting people who come in for sports to consume other products, be that on linear or on streaming and because, again, we're in a great place. We have the volume of A caliber sports that we need, and we've got stability too. Our deals are locked in the U.S., the vast majority of them and the ones that matter, through 2030 and beyond. So, with respect to these other sort of auctions in the marketplace, we'll watch them. But again, we're in a very fortunate place that we got what we need and they're working really great for us.

Operator:

Our next question goes to Brett Feldman of Goldman Sachs. Brett, please go ahead, your line is open.

Naveen Chopra:

Yes. So maybe in reverse order, Brett, in terms of the impact of the pay-per-view events in the quarter. I think if you were to adjust for those, what you'd see is the linear affiliate revenue trend would look pretty similar to sort of the trends you've seen in the last couple of quarters where you've got some ecosystem decline being partially offset by rate increases. So, really no change the trend there. With respect to a premium ad-supported tier, that's really not something that has been a major priority for us. We like the configuration that we have right now as between an ad-supported tier at six spots and then Paramount+ with Showtime at $12. I think, if anything, one of the places where you are seeing some traction in the market is even higher-priced tiers, which we're going to continue to assess because those could be quite incremental from an ARPU perspective. So -- but we're really not focused on a more expensive ad-supported tier.

Jaime Morris:

Thanks, Brett. Operator, next question please.

Phil Cusick:

Hi, guys. Thank you. A couple of follow-ups. Nice move on the DTC ARPU growth and cost. Can you think about the further impact of pricing from here, both in the U.S. and international? How should we think that carry through in the fourth quarter, which you talked about a little bit? And then with this lower level of DTC drag, how do you think about the path to DTC EBITDA breakeven over time? And then just finally, Naveen, you had talked in the past about an improvement in free cash flow in '24 outpacing the improvement in EBITDA. I wonder if that's still the case or if the strikes are sort of going to move those things around. Thank you.

Jaime Morris:

Thank, Phil. Operator, we’ll take the next question, please.

John Hodulik:

Great. Maybe a quick follow-up and then another question. First on the cost side, you are making a lot of progress, obviously, on both media and in D2C. On the D2C side, is the full $700 million in synergies that you guys laid out from the combination of Showtime and Paramount+ already in the numbers at this point. And then, Bob, in your prepared remarks, you guys seem to talk a little bit about sort of leaning more into licensing. Just maybe update us on your view on further licensing and maybe how that should progress, especially coming out of the strike, just given the sort of softness in the market today. Thanks.

Naveen Chopra:

Yes. Just briefly on your question regarding the $700 million synergies related to the Showtime, P+ integration. Short answer, we're not done capturing the benefits of that. Those synergies are important ingredient in the earnings improvement that we expect to deliver next year in the D2C segment. And in fact, -- as I think I've said recently, I believe we will exceed the $700 million in future expense savings.

Operator:

Thank you. The final question goes to Bryan Kraft of Deutsche Bank. Bryan, please go ahead. your line is open.

Bob Bakish:

So start, Bryan, with -- we're feeling great about Paramount+ in general. As you can see in the quarter, again, real momentum. We continue to grow. The Paramount+ with Showtime integration is clearly working for us. We see value from that Showtime content being added to Paramount+ and we see usage kind of in both directions, Showtime users using Paramount+ content and vice versa. So that's totally working. And as we look forward, including into Q4, we definitely see continued growth of Paramount+, both at the Essentials and the premium level. So we're feeling great about growth. Again, as we look at it on a year-to-year basis, also churn continues to improve. And that's a good thing for our sub base. And as we look at the content slate, yes, there's a bit of uncertainty given the strength, but our fourth quarter content slate is very strong. We got another piece of the Yellowstone universe coming very shortly in batteries. We got Frasier, obviously, NFL is working. We got the PAW Patrol movie coming and some other goodies. So we're good there. And as we look into 2024, we're feeling very good about that as well. So again, overall, great on the Paramount Plus growth trajectory. And importantly, we're accomplishing that while accelerating our path to profitability, which we also talked about today. Naveen?

Bob Bakish:

Yes. And look, everyone, in closing, we're really proud of our progress in the quarter, particularly given the dynamic environment we're operating in. As you can see, we continue to execute on our strategy prioritizing prudent investment in streaming and continuing to maximize the earnings from our traditional business, know that we remain confident in our plan to achieve significant total company earnings growth in 2024, and we're laser-focused on delivering value for our shareholders. And with that, thank you for joining us. Be well, and we'll talk to you soon.

Kristin Southey:

Good afternoon, everyone. Thank you for taking the time to join us for our second quarter 2023 earnings call. Joining me for today’s discussion are Bob Bakish, our President and CEO; and Naveen Chopra, our CFO. Please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our website. Before we start this afternoon, I want to remind you that certain statements made on this call are forward-looking statements that involve risks and uncertainties. These risks and uncertainties are discussed in more detail in our filings with the SEC. Some of today’s financial remarks will focus on adjusted results. Reconciliations of these non-GAAP financial measures can be found in our earnings release or in our trending schedules, which contain supplemental information, and in each case, can be found in the Investor Relations section of our website. Now I will turn the call over to Bob.

Naveen Chopra:

Thank you, Bob. Good afternoon, everyone. Our Q2 results reflect strong momentum in our D2C business and continued focus on company-wide expense management. In my comments today, I’ll provide additional insights on key elements of our Q2 results and discuss our expectations for the remainder of 2023. Then before we take your questions, I’ll share some more color on our path to streaming profitability and improved financial leverage. In Q2, we delivered total company revenue of $7.6 billion and adjusted OIBDA of $606 million. In our press release, you’ll find a comprehensive review of our key financial results. What I’d like to focus on today are 4 important areas

Jessica Reif Ehrlich:

Thank you. Hi, everybody. You – since you talked about a lot, but just focused on asset sales. With the sale of Simon & Schuster, you said you’d pay down debt. Can you give us an update on other potential asset sales, including BET or anything else? It just feels like this is time where industry assets may move around. Other companies have talked about maybe doing stuff with their sports portfolio, linear assets. Can you just talk about where you see your assets in the next couple of years and what you would do with the proceeds?

Kristin Southey:

Thank you. Operator?

Michael Morris:

Thank you. Good afternoon. I want to ask you maybe a couple of questions about the direct-to-consumer business. I appreciate all the details you just gave us. First, so your subscription revenue growth in the second quarter outpaced your subscriber growth. So it seems like you’re already seeing that ARPU benefit or ARPU acceleration. Can you talk about what drove the acceleration in the second quarter. And then as we look to the back half of the year, I know this year is – you’ve guided us to peak losses, but given these top line drivers and the fact that you’re already pretty similar year-over-year in your level of losses, what’s going up on the cost side in the back half of the year that’s making you think that 2023 will be peak losses instead of ‘22? And maybe if I could just ask lastly, strategically, Bob, there is some discussion about potentially seeing different media companies looking to possibly bundle their streaming services in the future for consumer benefit. Do you see that on the horizon? Is that something that you think could happen? Thanks.

Naveen Chopra:

Yes. So with respect to the questions on ARPU and what it means in terms of the D2C trends in ‘23 versus 24, I’d point out a few things. So first, the ARPU growth in Q2 was really driven primarily by improvements in, I’ll say, subscriber mix, particularly in international markets, but also a little bit as between our ad-supported and premium tiers here in the U.S. And also was benefited by growth in digital advertising, which obviously enhances ARPU for both Paramount – for Paramount+ and also in Pluto. The thing to realize about the trajectory sort of on more of a full year basis is that there is some seasonality in content expense. So as an example, in Q3 and Q4, we have more sports in season. And so you tend to see slightly higher content expense there, which is the answer to your question of why is ‘23 expected to be peak losses as opposed to 2022. Now that being said, I think the important takeaway here is that there is significant earnings improvement expected in D2C as we move into next year. There are a number of levers that will contribute to that, obviously, continued subscriber growth, significant ARPU growth. I’ve talked about that a bit in my prepared remarks. That’s a combination of the price increase continued, what I’ll call, accretive sub mix, continued improvement in advertising ARPU, churn reduction and very importantly, getting more leverage on our content investments. We’ve already made a lot of progress on that front. And I expect to see additional large efficiency gains there next year, particularly as we focus on our key audiences, our key franchises, and find more ways to leverage content across platforms. So we’re really looking forward to what we will be able to deliver next year, but also encouraged by what we’re seeing in 2023.

Operator:

Thank you. The next question goes to Ben Swinburne of Morgan Stanley. Ben, please go ahead. Your line is open.

Naveen Chopra:

Yes. Thanks, Ben. There’s a few questions in there, so I’ll try to hit all of those. First, with respect to ARPU, I think we laid out most of the drivers in our prepared remarks. But just as a reminder, there’s a significant benefit there from price increase, which we will get a full year of benefit in that in 2024. We do also expect subscriber mix to be favorable, particularly in international markets. Our base historically started in some, I’ll say, some lower ARPU markets and a lot of the growth next year will be in higher ARPU markets. That probably explains some of the delta between our ARPU growth rate versus what you may have seen elsewhere. And also advertising. We pointed to the fact that we are delivering very high levels of digital advertising growth. There’s a significant piece of that is driven by Paramount+, and we expect that to continue to be a driver next year. In terms of the elasticity of the business as we have started to raise price, I’ll share a few things that we’ve observed thus far although keeping in mind, it’s still relatively early days since we implemented the price increase. Thus far, we’ve seen that new subscriber starts have basically been in line with our expectations. And we’re seeing some really encouraging data around engagement, including a double-digit increase in daily hours per sub since we launched the combined product that’s obviously consistent with our thesis for putting these services together. And we’re optimistic about the net churn impact, but it’s probably a little early to have enough data to really measure that. And all of those metrics are driven by very strong content lineup, which we’ve talked about. So we’re encouraged by what we see in terms of, call it, the consumer value proposition. And then with respect to your question on what it all means with respect to cash content spend, I’d say a few things. First, we’ve historically talked about cash content spend on a total company basis as growing, call it, low single digits. But as you heard in my remarks, we are laser-focused on improving the efficiency of our content spend going forward. And that’s true for both linear and for streaming. We’re accomplishing that goal by leveraging content across platforms more and more by leaning into franchises. And now that we’ve got more data, we’re increasingly able to use analytics to understand how to super serve these key audience segments. And so we can get away from, call it, a volume-focused game and be more focused on making sure that we have the right content for the right audience at the right time. Financially, that means that there is opportunity to further improve the long-term trajectory of cash content spend. Now keep in mind the strikes, obviously, will create some timing shifts between how cash gets deployed in ‘23 versus 2024, but it doesn’t change our commitment to improving that cash spend over a multiyear period of time.

Operator:

Thank you. The next question goes to Rich Greenfield of LightShed Partners. Rich, please go ahead. Your line is open.

Bob Bakish:

Yes. Sure, Rich. Let me take the sports part and Naveen will add on the Pluto side. So a couple of things on sports, really embedded in your question. One, on the announcements over the weekend. Look, we view that as a very additive development for the Big Ten and Paramount in particular, meaning our Big Ten deal looks even better today than when we did it. In terms of specific impact, there will be no change in the fees that we pay or the volume of the games that we get for CBS and Paramount+. But the expansion of the Big Ten clearly enhances the quality of games, the portfolio, if you will, that we have to pick from and that we carry. So essentially, it increases the quality of our deal. And I’d add that we very much look forward to beginning our partnership with Big Ten in the fall. And frankly, given everything else going on, timing couldn’t be better. So that’s part one. Part two is sports is, as you know, integral to our strategy. It’s really a component of both CBS and Paramount+ from a content offering. We like that. We find sports working very well for us, driving distribution, attracting viewers and subscribers, enabling strong monetization in the ad market, providing powerful promotion and schedule lead-ins, etcetera. And we are in a great place because that works. And our schedule is essentially stable. Our deals are all locked through the end of the decade. So, we are not in a place where we need to do anything. And if you look at what we have, we have broad and top-tier quality sports. We don’t need or frankly want to do anything incremental. Sports, intentionally, as I have said, are part of the equation. And we do view sports and entertainment as a synergistic mix, both in streaming and on linear. And we spend a lot of time thinking about how do we connect sports viewers with other types of content, including our original slate to maximize the ROI for both. So, for us, the marketplace is what it is, but the answer is not more sports. We are in a great place from a mix standpoint. Instead, it’s about continuing to focus on maximizing the impact of these highly valuable rights that we already have. And again, we have stability. We are locked through the end of the decade. Naveen, on Pluto?

Kristin Southey:

Operator?

Brett Feldman:

Hi. Thanks for taking my question. I am going to ask about churn. Naveen, you have shared some interesting anecdotes about different types of subscriber cohorts and how much lower their churn profile can be than the base. Sort, of a two-part question. One, what are the principal churn initiatives you have underway right now? In other words, if investors are going to be walking your KPIs, I would say, in the next year or so, where are we going to see it? Is it mostly going to be something that supports sustained net adds, or is this really about getting a lot more efficiency out of your marketing dollars, if there is a little bit of both. I am curious how you think about that. And then since you are talking about sports, how does sports consumption factor into churn? In other words, what’s the churn profile of your customer cohorts that you clearly know are coming to Paramount+ for sports versus people who are a little more general entertainment focused? Thanks.

Bob Bakish:

But Brett, just to jump in, I think it also goes to the fundamental premise behind our thesis, and that is broad. We talked about Paramount+ as new sports and amount of entertainment. And the fact of the matter is when we look at the data under the covers, we are seeing conjoint analysis, if you will, of sports viewers watching entertainment programming. And to Naveen’s point on efficiency, for example, we probably need to do less for that viewer who is an NFL viewer in the fall and do more for that viewer outside the fall because we can rely on the NFL. That’s an example of fine-tuning our strategy. And really, that also goes to why we are doing Paramount+ with Showtime. Again, that broad product, which we are seeing 40% more titles consumed when Showtime and Paramount+. It’s all about studying the data and leveraging this combination of sports and entertainment, not doing either naked. That is, I believe the path to success because, among other things, it helps you lower your churn, but it has broader benefits as well and ad monetization and subscriber acquisition, engagement, etcetera.

Operator:

Thank you. The next question goes to Robert Fishman of MoffettNathanson. Robert, please go ahead. Your line is open.

Bob Bakish:

Yes. Robert, so on the advertising side, you are right, we see a combined impact of cyclical and secular. On the cyclical side, look, rates are coming down a bit. Things are marginally improving. But what we have really been focusing on is the secular side. And you see that in terms of how we are participating and really driving the digital ad market. For us, direct digital is very strong, and it wouldn’t be had we not configured our product line to prosecute it basically. And we are going after that with EyeQ, which is a combination, of course of Pluto TV and Paramount+. We are seeing direct digital strong, and we are seeing improvement in programmatic, and we expect both of those things to continue. So, that’s all about secular. And as we roll forward through the year, in Q3, we expect to see a slight improvement overall on a year-to-year basis, but that will be driven by D2C, so back to the secular piece. And then as we get to Q4, there, sports are going to be a key driver, including the NFL, the Big Ten that – by the way, that timing has turned up to be great for us as well as our modified CBS slate, which is strong and has plenty of scripted programming. That should add meaning multiple benefit on the linear side. And yes, hopefully, we continue to see some cyclical improvement. But we are very much focused on this secular trend, and we think we are extremely well positioned given the impression scale we have in the marketplace with EyeQ, and the revenue growth trends we are seeing. So, we are very excited about the road ahead.

Kristin Southey:

Alright. Thank you. Operator, we will take our last question.

Bryan Kraft:

Thank you. Good afternoon. I wanted to ask you on the film side, I realize we don’t know at this point when the strikes will end, but if we were to assume it ends at the end of the third quarter, I was curious how you are thinking about your upcoming Paramount film releases for the remainder of the year and next year and maybe even into ‘25. Would you expect any disruption or delays? And on the Paramount+ side, assuming that same timing, would you expect any disruption to sub growth at some point from the strike, or do you think based on producing in advance and being able to kind of catch up, you can make up for that five months’ disruption in production? Thank you.

Naveen Chopra:

And then I will just jump in on the P+ impact specifically. It’s similar in the sense that we actually feel pretty good about our slate. Our back half plan does include a number of formats that are either unaffected by the strike or things that were already in the can that include shows like Special Ops

Operator:

Thank you. This now concludes today’s call. Thank you all for joining. You may now disconnect your lines.

Kristin Southey:

Good morning, everyone. Thank you for taking the time to join us for our first quarter 2023 earnings call. Joining me for today’s discussion are Bob Bakish, our President and CEO; and Naveen Chopra, our CFO. Please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our Web site. Before we start this morning, I want to remind you that certain statements made on this call are forward-looking statements that involve risks and uncertainties. These risks and uncertainties are discussed in more detail in our filings with the SEC. Some of today’s financial remarks will focus on adjusted results. Reconciliations of these non-GAAP financial measures can be found in our earnings release or in our trending schedules, which contain supplemental information, and in each case, can be found in the Investor Relations section of our Web site. Now, I will turn the call over to Bob.

Naveen Chopra:

Thank you, Bob. Good morning, everyone. Our Q1 results reflect a combination of strong momentum from Paramount content, investment in our DTC business and the continued impact of macro headwinds. Today I'm going to cover three things. First, I'll provide additional color on a few elements of our Q1 results. Second, I will talk about optimizing our capital allocation. And third, I'll discuss our expectations for earnings and free cash flow improvement in the back-half of this year and into 2024. In Q1, we delivered total company revenue of $7.3 billion and adjusted OIBDA of $548 million. Our press release includes a comprehensive review of key financial and operational results for the quarter. I'm going to focus my comments here on four specific areas, affiliate and subscription revenue, advertising, our filmed entertainment results, and cash flow. Affiliate and subscription revenue growth accelerated to 12% this quarter, continued evidence that the ecosystem shift from paid TV to streaming yields material growth for our business. Notably, we saw improving trends in both linear and streaming. On the linear side, TV media affiliate revenue declined 1% year-over-year, an improvement versus Q4. And in streaming, DTC subscription revenue was up 50% year-over-year, Paramount+ subscription revenue saw even stronger growth driven by subscriber additions, an increase in ARPU and improvements in domestic churn. Looking ahead, we expect healthy levels of year-over-year affiliate and subscription revenue growth to continue over the next several quarters, aided in part by the integration of Showtime and Paramount+. From a subscriber perspective, we expect net ads in Q2 will be seasonally soft ahead of the release of key content titles and marketing initiatives aligned with the rollout of the integrated service, which will occur throughout Q3 and Q4. Now let's turn to advertising. The global ad market continued to experience weakness in Q1, resulting in a 7% decline in total advertising revenue. This consisted of 15% growth in DTC advertising, and an 11% decline in TV media advertising. The decline in TV media was impacted by international markets and fewer NFL games than in the prior-year. However, we are seeing signs of market stabilization. Within the domestic ad market, sports remains an area of strength, we also saw improvement in key buying categories including pharmaceuticals, food and beverage, travel and auto. Though categories like insurance, web services and big tech remain relatively weak. With respect to Q2, we expect the year-over-year trends in TV media advertising to be slightly favorable to what we reported in Q1. And in DTC advertising, we expect continued acceleration. Related to digital advertising, Pluto TV hit a new milestone in Q1, reaching 80 million MAUs. We're proud of this milestone and we expect global MAU growth to continue. However, the key driver of Pluto's future revenue growth will be the strong engagement trends we're seeing. In fact, total viewing hours on Pluto increased 35% in Q1 after growing nearly 20% in 2022. Going forward, we'll provide updates on engagement rather than reporting quarterly MAUs as we believe this is more indicative of Pluto's revenue growth opportunity. Moving on to Film Entertainment, revenue and OIBDA were down versus the prior year, due in part to the timing and performance of the film slate. In terms of timing, Dungeons & Dragons

Michael Morris:

Thank you, guys. Good morning. Bob, firstly I’ll ask you on Direct-to-Consumer. You had strong subscriber and subscription revenue growth at Paramount+. As you look forward this year, can you expand a little bit more on the balance of subscriber growth and pricing power that you expect to drive that continued subscription revenue growth from here? And then, I apologize I have to ask you the second though on Naveen, I need to ask you why now was the time to reduce the dividend so significantly? So, based on your comments overall, it seems that the level of investment that you are going through is consistent with the plan had all along, and that dividend level is such an important outward signal of your sustained confidence. So, I am hoping you can dig in a little bit more and help us specifically with what drove that change now? Thank you, guys.

Naveen Chopra:

Yes. Thanks, Bob. And Mike, I’ll just add a few things on the DTC point and then address your question on the dividend. As Bob said, on DTC, this is a combination of subscriber growth as well as ARPU growth. Bob talked about a number of the drivers on those. I would just add, particularly with respect to ARPU, we continue to see growth there both from a favorable mix shift in terms of tiers, channels, geography. We’re also seeing some good trends from an ad ARPU growth perspective. So, that’s going to continue to contribute to growth going forward. And it benefits from nice growth that we are seeing in terms of engagement, hours per sub, and the like. And then, the pricing piece, which Bob mentioned, and I think is really worth reiterating, all the pieces are in place for us to, I think, successfully raise pricing without a significant impact on churn and growth. The value proposition for P+ both relative to other streaming services and traditional pay television remains incredibly strong. And as I said, engagement on the service is only getting deeper. So, we’re very encouraged by what we can do there. And we are going to be taking really just the first step this year. I think there also future opportunities to grow price down the road, both domestically and internationally. So, that’s DTC. And then, with respect to your question on the dividend, look, I think the capital allocation policy, the changes we made to our capital allocation policy are totally appropriate for a company that has both the compelling growth opportunity we see today, but operating in the current macro environment, there is no debate that our streaming momentum has obviously continued to build. But the reality is the macro environment has not gotten less complex. So, it’s prudent really for all companies to optimize their balance sheet for flexibility. And that’s exactly what we are doing by reducing the quarterly dividend to $0.05. That does translate to significant cash savings. Roughly, $500 million annually as mentioned while still returning some capital to shareholders. And two, one of the elements of your question, I would emphasize that the reduction in the dividend does not mean that we intend to spend more than previously planned on streaming. You should really think of this as the cash benefit of reducing the dividend, along with other initiatives like non-core asset sales and continued cost management, is intended to help delever our balance sheet, which is generally a smart thing to do in an uncertain macro environment. And is also a key ingredient in creating long-term shareholder value which is, of course, the primary goal that we have.

Operator:

Thank you. The next question goes to Brett Feldman of Goldman Sachs. Brett, please go ahead. Your line is open.

Naveen Chopra:

Yes, sure, Brett. Thanks for the question. And as you said that the top line dynamics are important here as well, because even though the traditional ecosystem is obviously evolving, the financial impact for us is somewhat mitigated, given the combination of rate increases in both linear advertising side and linear affiliate revenues, which offset some of that ecosystem shift. We saw that in Q1, where linear affiliate revenue declines were just 1%, which is much lower than what you see in terms of declines in the pay-TV sub base overall. But with respect to the cost base, which you specifically asked about, there are numerous levers that we continue to exercise. That includes variety of opportunities on programming, things like continuing to evolve the mix of genres, transitioning some of our programming to lower cost formats, moving more production offshore where factor costs are significantly lower, and we are even doing things like adopting AI for content localization, which by the way, produces some really high-quality results that's very, very compelling economics. So, lots to do on the programming side. Beyond programming, we are taking a highly disciplined approach to headcount and continuing to find efficiencies there. And also, evolving marketing budgets where it makes sense and where we can do so efficiently. Then we are also doing some things around licensing, which is little more revenue-related, but we do see opportunity to expand our licensing business in, call it, non-core international marketplace. So, the way I think about it, it's really the combination of our ability to mitigate some of the ecosystem declines on the top line, while also exercising a lot of these levers on the cost side, the combination of which means that TV media OIBDA will continue to be a source of significant earnings in cash flow going forward.

Operator:

Thank you. The next question goes to Ben Swinburne of Morgan Stanley. Ben, please go ahead. Your line is open.

Naveen Chopra:

Yes, look, I think I will go in the reverse order there, Ben. With respect to dividends, I just said it really is about providing as much financial flexibility as possible and finding ways to create the most value for our shareholders. And I think having a strong balance sheet is helpful to that. And the macro environment is something that we are cautious of as we think about what the balance sheet should look like. So, that is very much the motivation there. With respect to your question on content spend over time, I would say a few things, number one, really since we launched Paramount+ we have had a strategy which is very focused on being as efficient as possible in how we deploy cash related to content for building out streaming. If you remember, we embrace the concept of sharing content across platforms to reduce cost and maximize our ally. We lean very heavily into franchises, which are fundamentally more cost-efficient. We never abandoned third-party licensing, and we took a very capital efficient approach to international expansion. Now, we are always looking for ways to be even more efficient that content spend. That's one of the reasons that we decided to integrate Showtime and Paramount+, which as we said last quarter, means more than 700 million of future expense savings, not all of which is content. And I think I also noted that the time that does mean DTC content expansion 2024 should actually be less than what we originally indicated. And we are not stopping there. We are pushing even harder to unlock additional savings. That means even bigger focus on franchises, and some of the things I referenced earlier, genre mix, formats, order size, looking at the special effect budget, international development et cetera. And I think the combination of those things means we will likely find even more efficiencies in content spend across both linear and streaming than what we have assumed today.

Operator:

Thank you. The next question goes to Jessica Reif Ehrlich of Bank of America Securities. Jessica, please go ahead. Your line is open.

Bob Bakish:

Yes, sure, Jessica. I will take both of those. Let me do the writers strike first. It's a little bit shorter. Starting with, writers are an essential part of creating content that our audiences enjoy really across platform, and we hope we can come to a resolution that works for everyone fairly quickly, but it's also fair to say there is a pretty big gap today, and it's really a multifaceted ask. So, obviously we've been planning to this. We do have many levers to pull, and that will allow us to manage through the strike even if it's for an extended duration. In terms of those levers, we have a lot in the can, so to speak, content in the can. So, with the exceptional things like Late-Night, consumers really won't notice anything for a while. Add to that, a broad range of reality and unscripted where we are definitely a leader, as well as sports, and that's not affected. And so, look, we can do more in those areas if necessary, and again, we have a leadership position overall. Plus, we have offshore production, which we have been moving to leverage prehistoric anyway, as part of our broader strategy, and Naveen touched on that. Plus, finally one of the largest libraries in media features television series, multiple demographics, et cetera, which we can pull from to fill the schedules. So, we are well-positioned to navigate that, and by the way, in case, because I'm sure you're wondering in terms of financial impact, it really ultimately depends on duration of the strike, but at this point we think it's probably slightly dilutive to revenue, flat on OIBDA, and accretive to your question to cash. But again, ultimately really a function of how long it lasts. Over to the ad side, when you said we're doing something differently, you're referring to our upfront events, which I will come to, big picture retail grade about our proposition to advertisers in their agencies, I've been associated with it for a long time, and frankly I think it's strong as it's ever been, given our differentiated platform portfolio, industry-leading creative integration, advertising a lot on alternate measurement, and of course, a popular content, including sports, and by the way, we have the next Super Bowl, so that's August. We did realign our sales force in terms of doing something differently. Also we realigned it. So, now it's easier to do business with us, particularly if you are agency holding company, where you now have a dedicated team serving you that's knowledgeable about your business, and again, can give you turnkey access. With respect to the upfront, we did a couple of things differently this year. In fact, we just wrapped nine upfront events in a new format that really strong resonated with our clients in the room. They liked it. It's targeting specific buyer groups. It was more intimate. It was really quality two-way conversation, and that contracts kind of with the old model of one big presentation event and then a huge party after not really effective anymore for the day. By the way we did it earlier, that's clearly better. And for us, it's one of those rare move that's more effective based on the feedback we got, and more efficient because in aggregate it costs significantly less in the old model. So, we feel great about that. And again, we are in the very early stages of the upfront. I'm not going to comment on what's going on; price, volume, et cetera, because at the end of the day, it's an active negotiation, and it doesn't make sense to get into it live on the call. So, that's it. I will say, by the way, without getting into it, we definitely have a plan here, we are executing against that plan. And I do believe that when the dust settles, we will clearly demonstrate the power of Paramount in the ad space, so feeling good about it going in.

Operator:

Thank you. The next question goes to Rich Greenfield of LightShed Partners. Rich, please go ahead. Your line is open.

Bob Bakish:

Naveen, why don't you start with the ad placement DTC?

Bob Bakish:

Yes, and going to your question about the cost side, clearly start with it's something we are very focused on as an umbrella point, if you look and you could think Rich when we started this conversation seven years ago, at the time on the cable networks side, we had probably five fully built out groups organizationally programming each set of networks. Fast forward to today, through consolidation, call it economics, we now have one kind of master cable networks group here in the U.S. And I'm going to come back to the international side in a second. And they're running all the networks with a slight exception, and we're in the middle of effectuating the latest step on that which is the Showtime consolidation into effectively the U.S. cable group. And so, there's all kinds of economic savings there. And we continue to ask the question of how can we extract more from operating a set of networks as a portfolio managed in a single group and that goes to organization, that goes to how we use content, that goes to cross promo, et cetera. And again, we've seen significant benefit along the way. And we think there is further road to go. And right now we're just in the middle of integrating Showtime. And if you look at, for example, what we did with Your Honor, most recently, we launched that show on the back of this second season on the back of what we call the Yellowstone Launchpad on Paramount network. That probably would, that was much easier to do as we integrated the structure into one than it was previously. And those are the kinds of things we'll continue to model mine. As you look outside the U.S. and the International, there's two things you should know, again, going to the cost. One is we've now globalized management of those networks. So, Chris's team is ultimately thinking about how can we run that whole portfolio more efficiently and effectively. And related to that, we are going from a place where you have country specific feeds to in a way it's back to the future. It's shared feeds with local opt outs and multiple language tracks, which has all kinds of efficiencies. So, there is I'm not going to get into what the specific headcount could be. But rest assured, that is something we are very focused on and we will continue to extract benefits as we go forward.

Operator:

Thank you. The next question goes to Robert Fishman of MoffettNathanson. Robert, please go ahead. Your line is open.

Bob Bakish:

Yes, sure, Robert. So, look there's been fundamentally no change to our views on content licensing. In general, we believe in a balanced strategy with two key components, keeping our franchise content for our owned and operated platforms on a first window basis. We think that's a real strategic advantage, it certainly drives subscribers. And you've seen that to great effect with Paramount+, but at the same time, and we used to be an outlier here, other people are pivoting back to the rationality of the approach, we do believe in monetizing content, mostly library content on a co-exclusive or non-exclusive basis with third-parties because the fact is it generates incremental revenues, incremental margins, incremental franchise impressions, which are good for that, and doesn't really adversely affect subscriber acquisition on the O&O side. Yes, we do things from time to time, particularly in international markets with a franchise remember, Paramount+ isn't fully penetrated yet on a global basis. It's very much. We're nine in the top 10 streaming markets. But the world is a pretty big place, as you know. So, content licensing can be very important on a rest of world basis. But the main thing is we haven't changed our point of view on licensing. We believe in this dual model of core IP and franchises to drive O&O particularly streaming, combined with a broader licensing strategy. And we continue to evaluate opportunities against that, that framework including we believe there are some broader licensing opportunities that have financial upside, but that's licensing. Naveen?

Kristin Southey:

Operator, we can take another question.

Doug Mitchelson:

Thanks so much for taking the question. So, I'm curious, are there other assets that you're considering selling beyond Simon & Schuster, just sort of unclear from the preamble, if you are thinking more broadly there? And then, Naveen, on the positive free cash flow 2024, I was just hoping you could outline the bridge, and you kind of mentioned further on DTC, is it simple as flowing through EBITDA growth, or are there other drivers of free cash flow beyond operating growth? Thank you so much.

Naveen Chopra:

Yes. And Doug, with respect to your question on free cash flow, I think I just took it through some of the sort of operational levers, if you will, that will drive the business into '24. If you think about it through more of just a pure financial end, yes, OIBDA improvement is a big contributor to the improvements that we expect to see in free cash flow, but there are also benefits from a working capital perspective. We talked about this dynamic, where over the last few years as we have ramped up in streaming, you saw significant growth in sort of cash content spend. And then it takes a little while for the expense side of that to -- the P&L side of that to show up, because of the nature of amortization. What you will see going into '24 and beyond is actually that the cash content growth really starts to slow very significantly. And you start to get a place where the rate of growth in cash content and P&L expense will start to converge. But there is going to be real benefits from a working capital perspective over the next couple of years, because of those dynamics.

Operator:

Thank you. Our final question goes to Phil Cusick of JPMorgan. Phil, please go ahead. Your line is open.

Naveen Chopra:

Yes, thanks, Phil. So, first with respect to '24 goals, we talked about this a little bit on our last call, we've continued to be very bullish about DTC growth overall. There are some puts and takes in terms of what's going on in terms of the ad market, but we are, I would say, ahead of our plans with respect to Paramount+ growth subs revenue et cetera. I noted that with respect to content expense, the integration of Showtime and Paramount+, we think does puts in a position where we'll actually be spending less in 2024 than we originally indicated. So, I think in general, we continue to be very excited about the trajectory of the DTC business relative to our plan. Regarding the question on retail churn characteristics, I think the short answer is churn continues to improve. We saw that in Q1, and it's been pretty consistent theme as we see really nice improvements in engagement, the content portfolio continues to expand, we get more partnerships in place, all of those things are beneficial from a churn perspective, and that's definitely one of the key ingredients that's going to drive revenue growth going forward. So, we like what we are seeing there.

Operator:

Thank you. This now concludes today’s call. Thank you so much for joining. You may now disconnect your lines.

Anthony DiClemente:

Good morning, everyone. Thank you for taking the time to join us for our fourth quarter 2022 earnings call. Joining me for today’s discussion are Bob Bakish, our President and CEO; and Naveen Chopra, our CFO. Please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our website. Before we start this morning, I want to remind you that certain statements made on this call are forward-looking statements that involve risks and uncertainties. These risks and uncertainties are discussed in more detail in our filings with the SEC. Some of today’s financial remarks will focus on adjusted results. Reconciliations of these non-GAAP financial measures can be found in our earnings release or in our trending schedules, which contain supplemental information and in each case can be found in the Investor Relations section of our website. And now, I will turn the call over to Bob.

Naveen Chopra:

Thank you, Bob, and good morning, everyone. Q4 demonstrated earnings resiliency in our traditional business, along with robust revenue growth in our D2C business, the combination of which puts us on a path toward meaningful earnings and free cash flow growth in 2024 as we transition out of peak streaming investment in 2023. Today, I’m going to cover three things. First, I’ll provide additional color on a few elements of our Q4 results. Second, I’m going to address specifics of our Showtime-Paramount+ integration plan, including its contribution to future expense savings so you can better understand how it affects our financial model in 2023 and beyond. And third, I will explain how continued execution of our strategy delivers meaningful bottom line growth in 2024. In Q4, Paramount delivered total company revenue and adjusted OIBDA growth despite increased investment in streaming and a difficult macroeconomic backdrop. Today’s earnings press release includes a comprehensive review of key financial and operational results for the quarter. I’m going to focus my comments here on three items, which deserve specific attention

Bryan Kraft:

Hi, good morning. Some of your peers are revisiting elements of their streaming strategies, whether it’s the amount and types of content they’re making, backing off from exclusivity and doing more licensing or resetting their approach in international markets. Are there any adjustments that you’re looking to make to Paramount streaming strategy? Or is the current course the one that you plan to stay on from here? Thank you.

Anthony DiClemente:

Thanks, Bryan. Operator, we’ll take our next question please.

Michael Morris:

Hi, thank you guys. Good morning. I wanted to follow-up a little bit on the subscriber component on this path to profitability. You guys are at about 56 million Paramount+ subscribers as of year-end. You had a number of market launches in 2022. How many subscribers does the Paramount+ product need to get to scale? And how does the growth trajectory for Paramount+ compared to the prior outlook you had for 100 million-plus combined subscribers by the end of 2024? And if I could also just on free cash flow. As you think about 2023 in the investment year, can you give a little more color around how much cash investment you expect in 2023 before you inflect into 2024, and whether that has any impact on how you think about your dividend payout? Thanks guys.

Anthony DiClemente:

Great. Thanks, Mike. Operator, we’ll take our next question.

Ben Swinburne:

Thanks. Good morning. Maybe two. Bob, could you talk a little bit about the outlook on film with Paramount? You have a big slate for 2023. And obviously, you had a lot of success last year. Can you just talk a little bit about the film strategy at Paramount and how you see that feeding Paramount+ growth over time? And then, Naveen, maybe just to try to finish the sort of 2023 conversation. You guys gave us some helpful guidance for Q1 OIBDA. Any help for the year on overall OIBDA versus 2022 just so we can think about the right free cash flow comparison as well? Thank you, both.

Naveen Chopra:

Yes. So Ben, with respect to 2023 OIBDA, we’re not providing any sort of specific numerical guidance today, but I can give you a few additional notes to help you model the year. If you think first about the D2C segment, as we’ve made clear, this is the year of peak losses. So you should think about it as really reflecting the full year impact of investments that we made in 2022, most of those related to content and market expansion. On the TV Media side of the business, we are looking to ad recovery in the back half of the year. I think TV Media will also reflect the impact of a number of the cost savings initiatives that we started talking about on our last call as well as some of the benefits that we’ll unlock from Showtime and Paramount+ in the back part of the year. And then on the Filmed Entertainment segment, we do expect slightly lower OIBDA on a year-over-year basis there, just given the timing of our film slate, which is a little more back-end loaded in 2023 relative to 2022. And then, of course, we’re comping against 2022, which included Top Gun, which was obviously a very large contributor.

Anthony DiClemente:

Thanks, Ben. Operator, we’ll take our next.

Rich Greenfield:

Hey, thanks for taking the question. I got a couple of sort of big picture questions for Bob and then a quick financial one. So I’ve heard that there was credible multi-billion dollar offers for Showtime. Curious sort of how you thought about the value accretion of collapsing it into Paramount+ versus just selling it for cash? Disney then – I think Iger, if you listened to him on my earnings call and certainly on CNBC, he’s backing pretty far away from general entertainment content. Hulu’s clearly for sale. Wondering, one, do you have interest in buying Hulu? Could that be an interesting asset for Paramount? And related to that, how do you react to sort of the – what I guess he called undifferentiated general entertainment programming not being a great place to be? And then the financial housekeeping is just on the free cash flow, are you committing to positive free cash flow in 2024 or just an improvement in losses in 2024? I wasn’t sure how to take what you said. Thanks. I know that’s a lot.

Naveen Chopra:

And Rich, with respect to your financial question, thank you for giving us a chance to clarify that. Our plan is to deliver positive cash flow in 2024.

Operator:

Thank you. The next question goes to Jessica Reif Ehrlich of Bank of America. Jessica, please go ahead. Your line is open.

Bob Bakish:

Yes. Sure, Jessica. I’ll take the first piece of that. Look, we’re super excited about the Delta partnership we did. It was a competitive process and obviously we won, it provides Sky members access to Paramount+ in the air and for a limited period on the ground. So you can think of it as promotional in nature. Importantly, the subscriber numbers will not be in our sub count. So they will only – what they do is they put in their frequent flyer mile, and that gives them temporary access. But it’s only if they actually become a real subscriber that it will start to go to our sub count and drive revenue and all that. But we think it’s an awesome promotional platform. And I know the Delta folks are really excited about it today could – really showcases what they’ve done in broadband and their planes in the air. And we think it’s going to be a nice plus for Paramount+.

Anthony DiClemente:

Thanks a lot, Jessica. Operator, next question please.

Doug Mitchelson:

Thanks so much. Just a few cleanup questions. One, on the price increases, how does that function with the partnerships? I’m just trying to figure out kind of what percentage of subscribers I apply that price increase to or how I think about the magnitude of the benefit to ARPU. The second piece is on that impairment charge, could you share how that impacts 2023 EBITDA? Or how that kind of feathers in over time in terms of improving the content amortization? And I guess these are all for Naveen. Sorry, Bob. I think the last sort of big one is, can you help us understand when does the cash content spend and the content amortization equalize? So I understand it’s going to improve in 2024 in particular. But can we look out, pick a number of three years and say, okay, we don’t have a working capital burn related to content cash cost versus amortization? Thank you very much.

Bob Bakish:

Doug.

Anthony DiClemente:

Thanks, Doug. Operator, next question please.

Phil Cusick:

Hi, thank you for squeezing me in. Bob, first, can you expand on your comment about stabilization in advertising? How should we think about indications for the current quarter and how you think about deeper in the year comping versus the fourth quarter? And then second, can you expand on the contribution from international from – for Pluto? Thanks very much.

Naveen Chopra:

There was a question about Pluto international.

Naveen Chopra:

Yes, I can take that if you like. Pluto in the – excuse me, the international markets is certainly at an earlier stage of development and monetization than where we are in the United States. But it’s grown at a nice rate. So, we’re enthusiastic about that. We saw a decent chunk of the MAU growth in Q4 was international, including in Canada, where we launched an exciting partnership with Corus. And from a monetization perspective, as I said, it’s still relatively small scale internationally, but very compelling growth rate. So, we’re looking forward to it being a bigger contributor over time.

Operator:

Thank you. The final question goes to Kutgun Maral of RBC Capital Markets. Kutgun, please go ahead your line is open.

Bob Bakish:

Yes, sure. Kutgun, let me take that. And suffice to say, I was schooled in international, spent better – well, really spent a decade running our businesses. And so that’s certainly informed what we’re doing here. Start with the fact that streaming is definitely a global opportunity, and thus the international markets are an important piece of the equation. And just to level set, as we come out of 2022, we’re obviously active in all Latin America, Western Europe as well as Canada, South Korea and Australia. And then we got our Sky JV, which is in Eastern Europe and the Nordics and the Netherlands, but not consolidating our numbers. So we’re pretty well penetrated, and we’re going to really focus 2023 on deepening our participation in those markets. But to your point, I believe in a global strategy, but local market execution. And you have to look at the nuances of the market as you go forward. I also believe in the power of partnership. That led us early on and really first to this hard bundle concept where we use existing relationships with what you could think of as MVPDs [ph] to kind of turbocharge our market entry. We do that in the UK. We do that in Germany. We did that in Italy. We’ve done that a bit in Latin America. And that’s all about getting a large chunk of subscribers out of the gate at zero acquisition cost. And then now, as Naveen said, it really also was intended and in fact, has catalyzed demand for channel stores and the more direct business, D2C O&O, which we really like what we’re seeing in the trend lines there. And that will certainly continue to play out in 2023. So, we are very much looking at this market-by-market. And part of the peak operating losses, by the way, in 2023 is driven by the fact that we launched all of Western Europe in the back half of 2022. So that had some spillover effect to our financials. But as we get past that, that helps as well. So really excited about the international market opportunity. We are going at it differently. And yes, you’re right, I’ve talked to some folks who are thinking about scaling back their presence, but they basically launched a D2C O&O in all these independent markets around the world themselves and arguably are subscale, too. So, I’m not surprised they’re unwinding it, but we didn’t go into it like that. We were very thoughtful in how we went into it, again, leveraging existing relationships and assets to both accelerate the growth of the business and really ensure it’s an attractive longer-term business. And with that, I just want to wrap the call and leave you with a few key points to keep in mind. We believe in our differentiated strategy, our unique portfolio of assets and our ability to make popular content efficiently. And I think you saw that in 2022, and you will see it in 2023. We are focused on the turn towards streaming profitability. Our plan always contemplated that, and we are very much executing against that. We look at our approach as already creating value for shareholders given the strong Paramount+ revenue and subscriber growth. Yes, you’ve got to break it out separately and look at it as some of the parts, but there’s no question we’ve already created a very material asset, and it’s got a long attractive runway ahead of it. And as we continue to execute our 2023 plan, it really sets the stage, as Naveen said, for a return to significant earnings growth and a return to positive free cash flow, thanks Rich, in 2024. So thank you, everyone for your support, and be well.

Anthony DiClemente:

Good morning, everyone. Thank you for taking the time to join us for our third quarter 2022 earnings call. Joining me for today's discussion are Bob Bakish, our President and CEO; and Naveen Chopra, our CFO. Please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our website. I want to remind you that certain statements made on this call are forward-looking statements that involve risks and uncertainties. These risks and uncertainties are discussed in more detail in our filings with the SEC. Some of today’s financial remarks will focus on adjusted results. Reconciliations of these non-GAAP financial measures can be found on our earnings release or in our trending schedules which contain supplemental information and in each case can be found in the Investor Relations section of our website. And now, I will turn the call over to Bob.

Naveen Chopra:

Thank you, Bob. Good morning, everyone. Our third quarter results demonstrate continued execution of our long-term strategy to create broad content for diverse audiences across multiple platforms on a global basis. It's a strategy that offers significant incremental opportunity relative to our traditional business in three important dimensions. First, as we've noted previously, streaming offers a total addressable market, which is more than twice the size of linear, excluding China and India. And the incredible ease of consumption with a vast array of content available at home or on the go, in whatever format you want, ad-free or ad-supported means we can connect more consumers with Paramount content than ever before. Second, we expect streaming to be accretive to ARPU over time. In fact, streaming ARPU already exceeds linear ARPU in some international markets. For example, in the UK P+ ARPU in the current quarter is over 20% higher than our UK linear pay TV ARPU, and our total reach has grown relative to the linear-only world. In the United States, it's worth noting that there are streaming services in the market today with ARPU comparable to or higher than the monthly revenue we generate per linear household. And we believe Paramount+ will achieve these levels of ARPU over time with the implementation of price increases and continued growth and engagement and advertising monetization. Third, we believe long-term operating margins in streaming will approach TV media margins as the benefits of our multi-platform strategy play out. This strategy yields significant efficiencies in marketing expense where our linear networks provide a great promotional platform for Paramount+ and in content expense, where we monetize content like movies and sports across multiple platforms. Our streaming content expense also benefits from a wealth of fully owned library content and world-renowned franchises that are a highly efficient driver of acquisition and retention. These cost efficiencies do not exist in a pure-play streaming business model. Of course, our investment in streaming does impact near-term profitability. But given the combination of a bigger market opportunity, incremental ARPU and compelling margins, we believe there is significant long-term shareholder value to be created, and we remain committed to this strategy despite the impact of near-term cyclical advertising headwinds. Now, let's get into our third quarter results, which reflect strong D2C growth and box office success, but also macroeconomic conditions and FX impacts on advertising revenue growth. Total company revenue grew 5% in the quarter. Affiliate and subscription revenue rose 8%, continuing to demonstrate that the ecosystem shift from pay TV to streaming yields net growth for our business. Theatrical revenue was also a significant contributor to total company growth in Q3. Licensing revenue declined 1% and advertising revenue declined 2%. FX was a headwind to advertising revenue in the quarter, resulting in a 300 basis point impact on the advertising growth rate. On a constant currency basis, advertising revenue grew 1% in the quarter. In direct-to-consumer, we added 4.7 million global subscribers, which drove 59% subscription revenue growth. As of September 30, we had a base of 66.5 million global D2C subscribers, including 46 million Paramount+ subscribers. Paramount+ added 4.6 million global subs in the quarter. Note that our quarter end total subscriber count reflects the elimination of 1.9 million Paramount+ subs in the Nordics, following the launch of Sky Showtime in September, which replaced Paramount+ in that market. Ubiquitous distribution remained a key theme for Paramount+ this quarter. Domestically, we became the video service for Walmart+. And in Europe, we launched Paramount+ in Italy, including a hard bundle offer with Sky Italia. These bundled distribution partnerships were both important contributors to Q3 sub growth. And despite a lighter slate of new original series in Q3 compared to Q2, other content formats, including sports like NFL and UEFA, movies such as Orphan

Michael Morris:

Thank you. Good morning. Bob, I'm wondering if you can share any updated thoughts on the Showtime service as compared to the Paramount+ service, maybe specifically how you feel about continuing to run them as separate businesses with the potential for a bundle versus having a more integrated service between the two? Where -- what are you thinking about that going forward? And if I could, Naveen, both you and Bob talked about a number of puts and takes going forward, including the potential for some more aggressive cost savings. Can you opine at all on how you're feeling about free cash flow into 2023, whether you think there's opportunity for any growth there with these savings or whether you think the -- you talked about peak losses at the D2C side next year, whether you expect that to be heavier? Thank you.

Naveen Chopra:

Yeah. So to the questions on free cash flow in 2023 and what to expect there. I'd note a few things. I mean, first of all, in terms of the broad trends that are influencing free cash flow. It's really about the ramp in production and marketing investments related to streaming. And then, obviously, some of the macro impacts on the advertising marketplace, offset by improvements that we're making both with respect to the cost side of the equation, as well as improvements that we're seeing in working capital. And that's an important point because we are very focused on ultimately driving improvements in both earnings and free cash flow. And I think what you'll see in 2022 and both in 2023 is that the changes in OIBDA don't necessarily reflect the changes in free cash flow, which is to say the changes in free cash flow are better or lower than the changes in OIBDA because we have made improvements from a working capital perspective. So while it's premature to put any specific numbers on that for 2023, I would note that we are still focused on peak D2C losses next year and continuing to apply that formula of improved working capital and realizing the benefit of the cost reductions that we noted, all of which should put us in a position to ultimately improve cash flow and OIBDA trajectory.

Operator:

Sure. The next question comes from Bryan Kraft from Deutsche Bank. Bryan, your line is open. Please, go ahead.

Bob Bakish:

Yes, sure, Brian. So as I mentioned in my remarks, we really have a decades-long relationship with Walmart. It's a relationship that's rooted in consumer products and home video. And yes, we have an office in Bentonville, and so when they were looking to add a video offering, we were really thrilled that they saw Paramount+ as the right choice. And part of the reason there, as they really described to us was that, they see both brands, i.e., Walmart and Paramount, as representing all audiences. The coast, the center of the country, young, old, you name it. And yet again, I think that's confirmation of the power of our broad positioning built on popular content. So we launched our Walmart+-Paramount+ partnership in September, and just for the room, any Walmart+ customer can choose to opt into Paramount+, and that gives them access to the Paramount+ Essential’s product at no incremental cost. Once they opt in, they become a Paramount+ subscriber, and we get paid. Partnership is off to an excellent start. We really -- I have not seen a more collaborative relationship between two big companies than what we have here right now, and that's phenomenal. And we are exceeding our early objectives in terms of number of subscribers that have joined through Walmart+. I think the more important point is, the partnership has a long multi-year road ahead of it. To date, we've only done limited marketing, really leveraging some e-mail lists they have and some of our media the full in-store Paramount+ presence, for example, which will reach, I believe it's $140 million-ish customers visiting a Walmart store in the US every week has yet to kick off. And by the way, their 1.5 million employees also get access for the ability to opt into Paramount+. And so, we look for this partnership to be driving not only Paramount+ subscribers, but importantly, Walmart+ subscribers as well, as they get access to this great benefit for quite some time. I'd note that we also plan to execute on a multi-platform basis around our IP, and that's things like in-store activations around -- I don't know, PAW Patrol and Turtles next year and many other great franchises. So this is a super powerful example of our belief in partnership. And again, we're thrilled with the early results.

Anthony DiClemente:

Thanks Bryan. Operator, we’ll take our next question please.

Rich Greenfield:

Hi. Thanks for taking the question. When you look at the success of Top Gun and Smile, it clearly shows us that you made the right decision in pushing both or waiting for both of those titles, and putting them into the box office versus putting them directly on to the streaming service. I think when you talk about scale and reach of theaters, that was a clear benefit to both of those titles. But if you shift gears and you look at something like Halo or 1883. I guess, I wonder, would those titles have benefited from being on a platform with more scale than Paramount+, meaning something like Netflix, we just saw NBCU shipped Girls5eva from Peacock over to Netflix. And I'm just wondering, how do you think about the pluses and minuses tied to reach and scale when you're deciding whether to put a piece of content on to your own service versus sell it to a third-party? And how do you make that decision?

Anthony DiClemente:

Thank you, Rich. Next question, please.

Brett Feldman:

Yes. Thanks for taking the question. So first, Naveen, thanks for giving us some help and some of the thinking about the relationship next year between cash flow and EBITDA. For this year, you're essentially breakeven on cash flow through the first three quarters of the year. What are the key swing factors we need to be thinking about for the fourth quarter, because sometimes nailing down working capital for us can be a little bit difficult? And then you've had a lot of momentum and you expect to still have some momentum in the Paramount+ subscriber base, leveraging the new distribution in the new markets you're in. I'm wondering at what point you're going to -- you expect to be fairly fully distributed, whether it's through partnerships or geographic, such that the incremental driver of subscribers is going to increasingly be about driving greater penetration through your content delivery in those markets? Is that something we should be thinking about in 2023, or do you still think you've got a lot of distribution opportunities as we move into next year? Thank you.

Naveen Chopra:

Sure. So on expectations for Q4 cash flow, I'd mention a few things. Again, just going back a little bit to what's driving cash flow in Q3, which as I noted earlier, is really about the ramp in production spend and marketing and international launches. And I think of those as sort of negative working capital drivers. Q4 will obviously improve relative to that, because we'll get past some of those needs. Now some of that improvement, I expect will be offset by the macroeconomic factors affecting Q4 OIBDA as some of that obviously will flow to cash flow. And therefore, I think it's probably most helpful to think about free cash flow on a full year basis. And when you look at it through that lens, as I said earlier, you'll see that the year-over-year change in free cash flow will be significantly smaller than the year-over-year change in OIBDA, which again reflects the progress that we're making in improving working capital, which is very important to us. We're highly focused on the importance of generating free cash flow, while we continue to invest in growth. So hopefully, that gives you a little bit of sense of how to think about the full year.

Anthony DiClemente:

Thank you Brett. Next question please.

Douglas Mitchelson:

Thank you so much. Good morning everybody. So Bob -- so a multipart question on advertising. So Bob, any further context around advertising trends you're willing to offer? Are you seeing broad weakness or certain categories pulling back? Anything on how that softness is sequencing in 4Q. Some companies are saying they're seeing stabilization the declines, others are saying, continues to weaken. So anything there? And then Naveen, you talked about improving advertising monetization. One of the big debates for streaming and free TV recently, obviously is, what level CPMs can be achieved, especially as targeting has improved. And I think some of the premium, the CPM goals out there for some of the newer services are well above what you guys might be getting currently. So I'm just curious, what are the ad monetization efforts? When do they start to layer in? And specifically, what kind of upside do you see as your targeting efforts improve? Thank you.

Naveen Chopra:

And Doug, with respect to ad monetization, a few comments. First of all, I would say the main drivers of ad monetization from sort of an ARPU perspective, I mean, obviously, on the top line subscriber growth plays into it. But from an ARPU perspective, for us, it's really engagement driven. And I would say that we're really just getting started despite a lot of the great metrics that we're already pointing to in terms of consumption, both on P+ and Pluto and all of those trends moving up very positively. And churn continuing to come down. I think we have a lot of headroom to continue to drive engagement, which will ultimately result in higher levels of advertising monetization. Second thing I would note is that, with respect to CPMs and you asked about how realistic some of the expectations may be out there, I would note that we've been in this business for a long period of time. We're in it at scale. Our D2C businesses today are at $1.5 billion advertising run rate, and what that means is that we have been very focused on what is the largest part of that market. We're not necessarily going for the very premium CPMs. We don't think that's where the biggest pool of dollars exist. And that means that we are focused on two things; number one, continuing to drive scale and we price our advertising in order to achieve that; and number two, we're focused on packaging. And that's one of the big differentiators that we bring to the equation is the ability to package multiple types of D2C inventory, streaming inventory along with the full spectrum of both cable and broadcast inventory, which is ultimately, I think, the answer that advertisers are looking for.

Operator:

The next question comes from Ben Swinburne from Morgan Stanley. Ben, please go ahead. Your line is open.

Naveen Chopra:

Yeah. Hey Ben, it's Naveen. I'll start on the cost side and then turn it over to Bob to take the advertising side of that question. So I guess, first, just to the specifics, and then I'll talk a little bigger picture on what we're doing from a cost perspective. As I said, the benefit of the moves that we're making on the cost side will mostly manifest in 2023. I do think that there's a potential for a restructuring charge in Q4. We'll see depending on exactly the timing of finalizing some of these decisions. I'm not going to put any specific numbers on those cost savings, but I would say that -- these are meaningful and sizable. They are things that we think not only have an economic benefit to us, but frankly, help put us where we want to be strategically in terms of both how we want to operate and where we want to focus our resources. And we shared some of the examples of what that looks like. It includes both labor and non-labor expenses. It spans a lot of different parts of the business. And I'd point out that incremental to the ongoing work that we've spoken about previously that helps drive efficiencies on the linear side of the business. So it is meaningful, and I think it can be a helpful contributor to 2023, particularly in light of some of the macroeconomic challenges that exist right now.

Anthony DiClemente:

Thanks Ben. Operator, we have time for one last question.

John Hodulik:

Great. Thanks for the question. On the media side, yeah, we've hit the advertising piece. How about on the affiliate side, I guess for Naveen, can you quantify the impact that the reclassification of Sky had on the acceleration and the affiliate declines in the quarter, maybe what you're seeing in terms of cord cutting? And then just any outlook you could provide on that line item that would be great. Thanks.

Naveen Chopra:

Thanks all.

Anthony DiClemente:

Good morning, everyone. Thank you taking the time to join us for our second quarter 2022 earnings call. Joining me for today's discussion are Bob Bakish, our President and CEO; and Naveen Chopra, our CFO. Please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our website. I want to remind you that certain statements made on this call are forward-looking statements that involve risks and uncertainties. These risks and uncertainties are discussed in more detail in our filings with the SEC. Some of today's financial remarks will focus on adjusted results. Reconciliations of these non-GAAP financial measures can be found in our earnings release or in our trending schedules, which contains supplemental information and in each case, can be found in the Investor Relations section of our website. Now I will turn the call over to Bob.

Naveen Chopra:

Thank you, Bob, and good morning, everyone. Second quarter results demonstrate the value of our diversified media business and expansive monetization platforms. We delivered 19% total company revenue growth through continued strong D2C momentum and record performance at the box off. Affiliate and subscription revenue grew 12% in the quarter. Advertising was down 2% year-over-year or flat on a constant currency basis due to macroeconomic headwinds, and licensing revenue grew 27%. Today, I will highlight some of the key financial and operational drivers behind our second quarter results and share some insight on expectations for the second half of the year. Starting with direct-to-consumer. We added 5.2 million global D2C subscribers in Q2. Paramount+ added 4.9 million global subs, while our other streaming services grew modestly. As of June 30, we had a base of 63.7 million global D2C subscribers, including 43.3 million Paramount+ subscribers. Our quarter end totals reflect the removal of 3.9 million D2C subs in Russia, of which 1.2 million were from Paramount+, consistent with our plan to remove these subscribers from our reporting. Q2 subscriber growth benefited from the launch of Paramount+ in the U.K., Ireland and South Korea as well as continued domestic growth as we added new hit content to the service. Paramount+ saw continued engagement improvement as our content offering expanded even further. P Plus customers are watching a greater number of unique titles today than ever before. as evidenced by sequential and year-over-year growth in titles viewed per active domestic subs. We also saw sequential growth in hours per act. And most importantly, deeper engagement resulted in sizable improvement in domestic churn. The combination of subscriber growth and engagement drove Paramount+ revenue growth of 120%, including subscription revenue growth of 126% and advertising growth of 92%. Paramount+ ARPU improved on a sequential basis in Q2, with both domestic and international ARPU higher versus Q1. Pluto TV added 2.1 million global MAUs in Q2, bringing our global reach to 69.6 million MAUs. Revenue grew 10% year-on-year. Although Pluto TV revenue growth was impacted by the macro environment, the service continues to demonstrate strong engagement with the year-over-year growth rate in total viewing hours accelerating from Q1 to Q2. Continued improvements in engagement and our compelling advertiser proposition mean that Pluto is well positioned to both gain share and benefit from organic growth. Our dual revenue stream model delivered 56% year-over-year D2C revenue growth, with total D2C revenue now reaching $1.2 billion in the quarter. This growth consisted of a 74% increase in subscription revenue and a 25% increase in advertising revenue. D2C OIBDA was a loss of $445 million in the quarter, reflecting the investments we are making in content, marketing and international expansion in support of what we believe is a compelling growth opportunity for Paramount. The combination of continued investment and ad market softness means that D2C losses should remain roughly the same in the second half of 2022 as the first half of the year. As we said last quarter, except for the removal of subscribers to our services in Russia, our full year D2C subscriber growth expectations are unchanged. And longer term, we remain focused on our goal of reaching over 100 million global D2C subscribers and generating at least $9 billion in D2C revenue by 2024. And we continue to forecast D2C OIBDA losses will be greatest in 2023 and then improve in 2024. Turning to our TV Media segment. Revenue grew 1% in Q2 as strong growth in content licensing was mostly offset by declines in advertising and affiliate revenue. TV Media advertising declined 6% in the quarter as pricing growth only partially offset the impact of lower linear impressions and a 2% headwind from FX. TV Media affiliate revenue declined 3% in the quarter. Importantly, the vast majority of the year-over-year decline occurred in international markets where we proactively restructured key affiliate deals, resulting in a shift of revenue from our Pay TV to D2C services. Over the term of these deals, the reduction in TV Media affiliate revenue is expected to be more than offset by revenue generated from our Paramount+ hard bundle relationships, resulting in net growth to the company. Domestic affiliate revenue was flat in Q2, excluding a 50 basis point headwind from a year-over-year decrease in pay-per-view revenue. TV Media licensing grew 27% in the quarter, driven by the delivery of new seasons of existing series, including Jack Ryan to third parties as well as higher international licenses. TV Media OIBDA declined 8% in the quarter to $1.4 billion, reflecting the flow-through of lower advertising and affiliate revenue. And while macroeconomic conditions are likely to continue to affect advertising demand and impact TV Media financials, political advertising as well as price increases negotiated in this year's upfront, in combination with continued expense discipline, should help mitigate market-driven headwinds, particularly in Q4. As such, in the second half of the year, we expect TV Media OIBDA to return to modest growth on a year-over-year basis. In Filmed Entertainment, Q2 revenue was $1.4 billion, more than double the year ago period. Theatrical revenue increased $630 million, driven by the success of Top Gun

Michael Morris:

Bob, maybe you could share your thoughts on your expectation for changes to the competitive landscape for streaming advertising as we move into the back half of the year. I'm particularly interested in how you're thinking about the launches of some of these ad-supported services from Netflix and Disney+, how they could impact the CTV ad market and Paramount+ Pluto, in particular? And then if I could, Naveen, I apologize because I know it's early to discuss '23, but I'd be curious if you could provide any frame of reference for how much greater those peak D2C losses could be in '23 relative to the 2022 outlook? And any thoughts on growth or swing factors and investment drivers top line that would be incremental there.

Naveen Chopra:

And Mike, with respect to your question on the outlook for 2023, I'd really say 2 things. One, I mean, as you saw in Q2, we continue to see tremendous momentum in the direct-to-consumer business, whether you look at the growth on Paramount+ subs, what we're seeing in terms of churn, nice MAU growth and engagement growth at Pluto and most importantly, D2C revenue growth at very, very strong levels, 50% on a combined basis, well over 100% revenue growth at Paramount+. So what we're really navigating from an OIBDA perspective is the weakness in the macro advertising marketplace. And as you said, it's really too early to know exactly what the market will look like in 2023. But we are still focused on managing the business to peak losses in '23, and then starting to see improvements in earnings, both for the D2C segment and the consolidated business as a whole beyond that as we move toward our long-term D2C revenue and subscriber goals.

Bryan Kraft:

Just wondering if you could talk in some more detail about the impacts of the macroeconomic environment that you're seeing in the business and particularly what you're seeing in terms of advertising demand across your own platforms. And maybe, along with that, if you could talk about what you're seeing as far as specific advertiser category strength or weakness? And any additional color on the outlook for Pluto in the back half of the year, given what you saw in 2Q?

Naveen Chopra:

Yes. I mean in terms of our expectations for Pluto in the back part of the year, I'd take a couple of things. We don't obviously guide to Pluto specifically. It is part of our broader D2C business, as you well know. And we continue to see very healthy levels of growth there, 56% D2C revenue growth in the quarter. And I think we'll probably finish the year with very healthy revenue growth across the segment.

Steven Cahall:

I just wanted to pick up on some of the Pluto line of questioning. It seems like the MAU growth is strong. I assume the engagement is pretty strong as well. And so with some of the slowdown in revenue, is the right way to think about this business that it is just a price taker in the programmatic market, and that price pressure can kind of arrive unannounced? And if that's the case, I was just wondering if you could talk about some of the pricing changes that you saw late in Q2 and how those have trended as you've gotten into Q3, any improvement or degradation? And then at TV Media, I think investors have been a little bit skeptical about the stable guide in OIBDA. So thanks for that color on the second half growth. Could you maybe just think about what the drivers for stable guidance might be for next year, especially since you're comping political?

Naveen Chopra:

And in terms of the question around the stability of TV Media earnings, as we said, we do expect the -- in the near term, there'll be some impact because of the macro advertising environment. But longer term, we do still remain confident that once that advertising market recovers, we can deliver TV Media -- stable TV Media OIBDA, and that's enabled by a combination of a few things. Number one, rate increases in both the affiliate and advertising side of the business, and there's been evidence of that over the last few quarters. We've done -- we have a very successful track record of putting in place new affiliate deals that either have built-in rate escalators or fixed fee components on the station side of the business. And then obviously, on the advertising side, we're very happy with what we've seen in the upfront, both in terms of price increases and what we've been able to do from a volume perspective. So rate is an important part of the equation. We also expect to see continued meaningful contributions from the licensing side of that business, which is enabled by a combination of both an incredible catalog and unique production capabilities. And of course, we will continue to have a lot of innovation and discipline on the cost side of the equation, and that's true across programming, it's true across marketing, and it's true across our broader operations. So the combination of all those things will be key to delivering stable TV Media OIBDA.

Benjamin Swinburne:

I just had a couple of questions on one topic, which is sort of the international opportunity with Paramount+. Bob, could you talk a little bit about how the launch went in the U.K. and South Korea in the quarter, sort of the strategy to drive that business? And did you see the whole benefit of the initial launch in Q2? Or is some of that going to lead into Q3? And as part of that, could you talk a little bit your international programming strategy? I believe you guys have some local productions, 4 language productions in the works? Just could you give us a sense of your appetite to build that out as a part of the offering as you grow the business outside the U.S.?

Naveen Chopra:

I think you covered the -- I think you got it.

Richard Greenfield:

So when Netflix published its Q2, it showed this chart that had minutes viewed, and I think CBS was actually #2 behind Netflix. It didn't have Paramount+ or Pluto, but I would assume that would close the gap between Netflix and the broader Paramount company. But I think the question that sort of every investor on this call is thinking about is as the business shifts from linear to digital, meaning CBS sort of shrinks in share and Paramount+ and Pluto growing their share, can Paramount maintain sort of aggregate time spend? And what will the margin profile of that business looks like? Because I think if you think about everyone in streaming today, like you're talking about $1.8 billion of losses for the calendar year. Sort of everyone, but Netflix is losing billions a year on streaming. And maybe just the way to think about this is, on a revenue basis, your linear TV business this quarter had $2 billion of advertising plus and Paramount+ was sort of in the $90 million range and Pluto at $265 million or so. So I guess the point is just as this business shifts, can you capture enough time spend to have the similar profit look your business has in legacy as you move to streaming, if that makes sense?

Operator:

Our next question is from Kutgun Maral from RBC Capital Markets.

Naveen Chopra:

Yes. It's Naveen, I'll take both of those. First, on content spend. The most important thing to remember is that when we think about our content investment, we're always looking at it in the context of the growth and the return that it unlocks. And so of course, when you think about it through that lens, you have to focus on the fact that we added 5 million Paramount+ subs in the quarter. Paramount+ revenue growth was 120%, and we continue to be very bullish about growth going forward. So our content investment is definitely working. It's producing very real results in the momentum that you've seen. And at the same time, we're very committed to our long-term growth objectives around the D2C business, and we intend to continue to invest to support that growth opportunity. Continuing as we have to make those decisions prudently with a real eye towards the ROI of the investments, what we don't want to do is sacrifice a long-term opportunity by overreacting to some of the short-term headwinds that obviously exist, particularly in the advertising marketplace today. So we're continuing to move forward. We're continuing to fund the growth. We think it's an incredible opportunity. And as you pointed out, our content dollars are used differently than many of our peers. We leverage those assets across many platforms, and it's one of the reasons that we can grow faster, while spending less than others. In terms of your question on the Filmed Entertainment business, obviously, we have not provided any specific long-term guidance there. But I would encourage you to think about that business more broadly, which is to say, increasingly, the value of our movies is not just about what they generated in the box office. Those windows are now expanding in terms of -- it's not just about box office and home entertainment and then going to third parties, we can generate a lot of value out of those assets on our streaming services. We continue to monetize them from a catalog perspective. So it's -- for us, it's really about continuing to build the asset value, and we do that by having a great slate that will continue to be heavy on franchises. And we're looking forward to what that does both for the box office business and also our other channels.

Jessica Reif Ehrlich:

I was wondering if you could give us color on IPL? What the dollar commitment -- your commitment is and what your goals are there? And then just to go back to the content spend, could you at least talk about like step function in increasing content spend '23 versus '22 and '24 as well?

Naveen Chopra:

And Jessica, with respect to the question on content spend in future years, I'd point you back to what we shared during our Investor Day back in February. As you know, we're -- our goal is to drive the growth on the D2C business to over $9 billion of revenue by the end of 2024. We said at that time that, that would involve D2C content expense of around $6 billion. And we're still operating with that in mind. We haven't provided any kind of specific cadence of exactly what that looks like from year to year, but we're continuing to invest and manage the business with those goals.

Brett Feldman:

And just sort of two related questions. The first is, to what extent are you seeing any inflationary cost pressures in the business? I'm particularly interested in whether that's creeping into content production costs. And then more broadly, one of the questions we get from investors as they think through the impact of inflation is pricing power. We've seen some price increases at different streaming services. I was wondering if you can give us your latest thoughts on when or whether you believe you'll be in a position to potentially start raising price on your streaming services, most notably Paramount+?

Naveen Chopra:

And in terms of pricing on streaming services, specifically Paramount+, I think you really have to look at that in the context of ARPU more broadly because remember, we have a dual revenue stream model, which means that we're not entirely dependent on price increases for growth. And we are -- despite some of the short-term headwinds, we continue to be very bullish about the potential for continued ad ARPU growth on our streaming services. In fact, we've seen healthy double-digit growth in ad ARPU on the Essentials tier of Paramount+, despite some of the macro headwinds. That's, of course, driven by meaningful growth in engagement and continued innovation around the ad products that we make available. Pricing will be a part of the equation. And though we don't have any imminent price changes, they will happen in the future, and we'll do it while also taking into account the evolution of our content offering, looking at what sort of bundles and other promotional opportunities are available to our customers. and of course, thinking about our value proposition relative to competing services, where I point out, I think we offer a very strong value position today. So we're continuing to look at pricing. We continue to look at how we optimize the tiering along with that, but it's part of a broader overall ARPU story.

Philip Cusick:

I'll try not to abuse it. A couple of clarifications and a question, if I can. It sounds like you're no longer targeting 60%-plus growth in D2C revenue this year. Is that right? And is there a better level we should look at? And how is the composition of ad-supported versus premium Paramount+ subs and gross add trends sort of changed since the release in June? What does that ad load look like in revenue from here? And does that grow over time in terms of ad load?

Robert Bakish:

Yes, let me just jump in here. I really want to thank everyone for their time today. In closing, I hope you heard how we're deploying a very unique asset portfolio with a differentiated strategy to not only successfully compete in this challenging macroeconomic environment, but importantly, take share and continue to have real momentum, particularly in the streaming space. So we're very excited about the future. We're going to continue to manage through it, and we look forward to keeping you updated as we do. In the interim, thanks again for your time, and be well, everyone. Bye-bye.

Anthony DiClemente:

Good morning, everyone. Thank you for taking the time to join us for our first quarter 2022 earnings call. Joining me for today’s discussion are Bob Bakish, our President and CEO and Naveen Chopra, our CFO. Please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our website. I want to remind you that certain statements made on this call are forward-looking statements that involve risks and uncertainties. These risks and uncertainties are discussed in more detail in our filings with the SEC. Some of today’s financial remarks will focus on adjusted results. Reconciliations of these non-GAAP financial measures can be found in our earnings release or in our trending schedules, which contains supplemental information, and in each case can be found in the Investor Relations section of our website. And now, I will turn the call over to Bob.

Naveen Chopra:

Thank you, Bob and good morning, everyone. Our first quarter results reflect how our four strategic differentiators can drive performance Paramount. Our balance portfolio of media assets yields not only strategic benefits but financial ones as well. The strong OIBDA generation of our traditional businesses together with our fast-growing D2C business make for a powerful combination. Today, I’d like to highlight some of the key financial and operational results in each of our new reporting segments. Starting with direct-to-consumer, our dual revenue stream model delivered strong year-over-year growth of 82%, with total D2C revenue reaching nearly $1.1 billion. This growth consisted of an increase in subscription revenue of 95%, aided by the addition of 6.3 million global subscribers in the quarter, and 59% advertising revenue growth. Total global streaming subscribers were 62.4 million at quarter-end, resulting in $742 million of D2C subscription revenue. Q1 D2C advertising revenue was $347 million, reflecting user growth, increased engagement and monetization across our ad platforms. Paramount+ added 6.8 million global streaming subscribers in Q1, bringing our worldwide base to nearly 40 million. The net additions reflect a balance of domestic and international growth, with international benefiting from both, direct subscribers and hard bundled offerings, another example of how our differentiated playbook is driving growth. Paramount+ saw continued improvement in engagement in Q1 as the breadth of our content portfolio expanded. This is evident in our domestic monthly active rate, which improved quarter-over-quarter and year-over-year. Additionally, we saw double-digit sequential growth rates in hours per active and unique titles streamed per active. Our multi-platform programming expertise helps our customers spend more time with Paramount+, and explore more of our broad content offerings. And importantly, this behavior helped drive improvements in average domestic monthly churn in Q1, which declined quarter-over-quarter and year-over-year to reach its lowest level in two years. Strong engagement also helped drive robust advertising growth, which contributed to total Paramount+ revenue growth of nearly 150% to 585 million, with domestic and international ARPU, both higher quarter-over-quarter and year-over-year. Net subscribers on our other streaming services declined in Q1, primarily due to the timing of new programming. Pluto TV added 3.1 million users in Q1, bringing our global footprint to 67.5 million MAUs. Revenue grew 51% to $253 million, which translated to strong year-on-year ARPU growth of more than 20% domestically and 7% on a global basis. In line with our previously shared expectations, D2C OIBDA was a loss of $456 million in the quarter, reflecting the investments we are making in content, marketing and our international expansion plans. Turning to our TV Media segment, Q1 revenue declined 6% year-over-year, including an 8-percentage-point impact from CBS’ broadcast of Super Bowl 55 in the prior year period. TV Media advertising declined 13% versus the year ago quarter, which included a 17 percentage point impact from the Super Bowl. Adjusting for the Super Bowl, total TV Media revenue grew 2% and TV Media advertising revenue grew 4%. TV Media affiliate revenue grew 1% in the quarter, driven by incremental distribution and contractual rate increases, which were somewhat offset by ecosystem declines, and TV Media licensing revenue was roughly flat in the quarter. TV Media OIBDA declined 13% in the quarter to $1.5 billion. The year-over-year decline is largely driven by the comparison to the Super Bowl in the prior year and a return to a more normalized programming schedule in 2022, relative to 2021. In Filmed Entertainment, we generated revenue of $624 million, which includes a resurgence in theatrical revenue generated from the release of three number one movies in Q1, compared to no theatrical releases in the year-ago period. These films are great examples of our broad platforms in action. For instance, Scream, which was released in January, outperformed our original box office expectations, and then moved to Paramount+ after 45 days, where it became a top 5 starts driver, and where its contribution to subscription -- subscriber acquisition and retention is enhancing overall ROI. Licensing revenue at Filmed Entertainment declined in the quarter due to the comparison against sizable transactions in Q1 of 2021, including Coming to America and Without Remorse. Filmed Entertainment had an OIBDA loss of $37 million, which reflects marketing expense associated with in-quarter and future theatrical releases. Total company Q1 revenue finished, down 1%, including a 6 percentage-point impact from the Super Bowl. Excluding the impact of the Super Bowl, total company revenue grew 5%. Total company adjusted OIBDA of $913 million is down year-over-year, which reflects increased investment in D2C, the return to theatrical releases and the comparison to the Super Bowl in the prior year period. Regarding the year-on-year trend, Q1 results are consistent with our prior commentary, in which we noted that we expect the first half of this year to show a year-over-year decline in consolidated OEBITDA, which will then flip to growth in the back half of the year. Turning to the balance sheet. We finished the quarter with $5.3 billion of cash on hand and total debt of $16.8 billion. This reflects the early repayment of nearly $2 billion of debt, as well as the issuance $1 billion in junior subordinated debt, which took place during the quarter. In April, we used proceeds from the junior subordinated debt offering to redeem approximately $1 billion of additional senior notes. We continue to maintain significant financial flexibility, which will increase with the addition of proceeds from the sale of Simon & Schuster and we also maintain a committed $3.5 billion credit facility that remains undrawn. Turning to our outlook. We continue to expect healthy D2C subscriber and revenue growth. And our full year OIBDA expectations remain largely unchanged with the exception of the impact from Russia’s invasion of Ukraine. As previously announced, we have taken steps to suspend our operations in Russia. This decision will negatively affect full year OIBDA by $70 million to $80 million, the largest component of which will fall to the TV Media segment. We’re also in the process of reviewing existing hard bundle relationships in Russia. And starting in Q2, we expect these subscribers will be removed from reported D2C subscribers. This change will reduce Q2 D2C subscriber growth by approximately 3 million subs, roughly two-thirds of which are subscribers to a non- Paramount+ service specific to the Russian market. Except for the removal of subscribers to our services in Russia, our full year D2C sub growth expectations are unchanged. Given the nature of the affected services, the financial contribution is immaterial and is included in the OIBDA impact I just mentioned. And importantly, we remain highly-focused on using our differentiated playbook to build our streaming business in a way that can deliver sustainable long-term economics. As we’ve said previously, our model targets long-term D2C margins that approach TV Media. We are bullish about our long-term goal of reaching over 100 million global D2C subscribers, and generating at least 9 billion in D2C revenue by 2024. We continue to forecast D2C OIBDA losses will be greatest in 2023 and then improve in 2024. We have significant growth ahead. Our broad content offering has proven appeal. Our dual revenue stream model is enhancing ARPU and attracting subscribers. Our content investments are capturing returns across both, traditional and streaming platforms. And our global footprint is delivering strategic and financial benefits. With that, operator, can you please open the line for questions?

Brett Feldman:

Yes. Thanks for taking the question. I’ll just sort of jump into the big debate. Investors are increasingly concerned that the streaming market is becoming saturated. And as you think about your own business and as you’re looking to sustain the momentum we’ve seen in Paramount+ over the last couple of quarters, what are the key things you need to execute against this year to meet the subscriber targets that you’ve outlined? And I’m curious whether you’ve been making any adjustments behind the scenes to your go-to-market strategy or your content strategy, based on any shifts you’ve seen unfold in the market or maybe just the macro backdrop? Thank you.

Operator:

Our next question comes from Michael Morris of Guggenheim.

Bob Bakish:

Yes, sure. Why don’t we do it in reverse order? I’ll take India and then I’ll flip the margin question to Naveen. So, on India, look, that’s a fundamentally attractive market. It’s a market that’s already at scale and has a tremendous future ahead of it in the context of media. As I think you know, since its inception, Viacom18 has been a significant player in the market. And the recent agreement with Bodhi Tree, we look at that as a compelling way to really drive the next level of growth. And obviously, they’re going to make a significant capital infusion into the business. When we look at India and we think about our current situation, I would really just highlight three things. The first thing is, we really like Viacom18. It’s the model we like. It has broad reach television networks, including the market leading Colors brand, combined with a film business, Hindi film business, it’s both national and regional, and of course has streaming assets as well, all underpinned by a strong local content engine. So, that’s the model we like in general. Second thing is, our core partner there is Reliance. That’s arguably the strongest and most powerful company in India. And they also own the telecom market leader, Jio. So, we think that’s great. And as I said, now, Viacom18 is set up to be even bigger player in the market, including in streaming. So, we look at that as a great opportunity for Paramount+. As we said -- as I said in my remarks, we’re going to enter in 2023 in -- and we’re going to do so in a very capital efficient, hard bundle way. And so, we think that’s a great route into that market. And I would also note that India will be incremental to our 100 million sub guidance. It’s early days. So, we’re still at the point of deciding what we want to put out there. But it’s definitely incremental to our guide. Naveen, on the margins?

Operator:

Next question comes from Bryan Kraft of Deutsche Bank. Bryan, your line is now open.

Naveen Chopra:

Yes. Thanks, Bryan. Yes, there is a gap between cash content spend and content expense or amort, [ph] but we do expect that to improve and therefore overall free cash flow. I should say, we expect it to narrow and therefore overall free cash flow conversion to improve. The gap you’re seeing today between cash and amort is primarily related to two dynamics

Rich Greenfield:

Hi. Thanks. I’m going to ask a couple of questions. I don’t get to ask many questions on conference calls. So, Bob, I think you made a pretty active decision last year to move Halo from Showtime over to Paramount+, which I think has done pretty well, the way you’ve talked about Halo. It does seem though, when you look at sort of Showtime losing subscribers this quarter, I presume. It sort of just raises the question of like, why is it important for Paramount to own Showtime. It seems like it’s a pretty obvious asset, either to be incorporated into Paramount+, but it also has real strategic value, like you could spin it off, you could probably merge it with someone like Stars. Like, it just seems like there is a -- it’s confusing in terms of you have to figure out where to put content internally. So, if you could just help us think through the strategic logic of keeping Showtime as a separate brand inside of Paramount, that would be great. And then, two, more of just a housekeeping point. The ARPU of Paramount+ globally is like 539, that includes ads and subscription. When you look at sort of the strength of the connected TV ad market overall over the last year, just curious, like, where are you in terms of ad ARPUs or anything you can sort of highlight? And what is dragging down that overall ARPU, which looks like it’s down a few percent year-over-year? What’s weighing on that? Is that international, is that distribution deals, like team is -- like, just help us understand why the ARPU isn’t a lot higher than 539 would be great?

Naveen Chopra:

Yes. So, a couple of things on ARPU. In terms of the year-on-year trends that you are asking about, Rich, that really is a function of the mix between international and domestic. We’ve obviously grown -- or I should say, we’ve launched in number of international markets and grown our subscriber base there over the course of the last year. And so, that mix is skewing a little more international than it was a year ago. And given that it’s the mix that is driving that number, I think it’s more helpful to look at the individual components, which is to say, look at what happened with domestic ARPU and international ARPU separately, and when you look at it that way, both of those numbers, domestic and international ARPU improves both, quarter-over-quarter and year-over-year in Q1. Drivers of each are a little bit different. On the domestic side, that ARPU benefited from the fact we had a lot of folks in free trial state in Q4. And as we said, back then, we expected they would convert and become paid subscribers in Q1, which did happen. And on the international side, ARPU continues to benefit from the fact that the subs we’re adding are coming from markets where ARPU tends to be higher than sort of our installed base where we started in some smaller Latin American markets. So, that’s sort of the trend for Q1. In terms of where we see that going in the future and how big could it get relative to other industry peers, we do think there is upside potential. It’s a combination of both, growth in ad ARPU as well as continued strength on the subscription piece of it. I would remind you that as we said last quarter, domestic paid ARPU is around $9. And that actually grew in Q1 relative to Q4 as well. So, that gives you some sense of sort of the long-term potential when you look at it separately between domestic and international.

Benjamin Swinburne:

Two questions, one on the ad market and then one on D2C through the rest of this year. Obviously, a lot of concern around the macro backdrop. Could you guys talk a little bit about what you’re seeing in advertising, both as you head into the upfront, and also curious on the FAST Pluto front, if there’s been any slowdown or anything you are picking up on the advertising side and how we might want to think about that for Q2? And then, you have a lot going on this year in D2C. You got a lot of new market launches, some hard bundle launches, particularly with Sky. Could you just help us think about the rest of the year in terms of cadence, which quarters you think might be you bigger than others, based on what you know today around your partnerships and anything on the content slate we should be thinking about? Thank you.

Naveen Chopra:

Yes, sure. Look, in terms of Pluto, there was a little bit of softness in Q1. But similar to Bob’s comments, I think that was driven entirely by market dynamics and categories that are impacted by supply chain or in some cases comping against categories that had a real COVID bump in the prior year period. And I wouldn’t lose sight of the fact that Pluto revenue still grew more than 50% off $1 billion base, which by the way is despite some changes that we made to reduce ad load in order to continue to improve and evolve our user experience, which I think will benefit long-term engagement and monetization. That all translated to compelling ARPU trends in the quarter. I mentioned domestic ARPU being up more than 20%, international ARPU growing at an even faster clip than that. And so, looking forward, we think the strong user growth and engagement trends probably will continue to drive monetization. There will be some impact from the overall ad market based on some of the dynamics that Bob described there. But big picture, Pluto was a business where the combination of structural growth and our significant leadership position allow us to offset some of those cyclical headwinds by a very, very significant margin.

Operator:

Our next question comes from Phil Cusick of JP Morgan.

Bob Bakish:

Yes, sure. I guess, in reverse order, because the first one is quicker. So, box office, we feel very good about it. We just got some research that on the domestic side consumer comfort is at 87%. That is the highest level since the pandemic began. And we’ve released a number of films, all of which are number one to date. The third one, Lost City was a real canary in the coal mine in a good way, because that was an older female audience that came to the theater. The first two were younger male audiences, which we were less worried about showing up. And of course, Sonic, our fourth one did very well. That’s a broader family audience. So, we like what we’re seeing. Our sense now is box office for 2022 will probably be down, about 20% versus 2019, which we think is pretty good. So, we feel good about it. And we’re super excited going into Memorial Day weekend with Top Gun

Jessica Reif Ehrlich:

I have two questions. First, going back to India, which was news today. There’s been tons of press coverage on Reliance bidding for IPL. I think that comes up next month. Would that be part of Paramount+? It’s critical content, but obviously, it would be super expensive? And then, the second question is, you talked about the multiplatform advantage, which clearly benefits advertising. But I’m wondering if you could just talk a little bit about how that impacts your conversations with distributors as you move content between platforms. And given the kind of -- I don’t know, step up in sub losses this past quarter. So, if you could just talk about that impact that would be great. Thank you.

Operator:

Our final question comes from Robert Fishman of MoffettNathanson. Robert, your line is now open.

Bob Bakish:

Sure. Look, we like sports as a component of our programming strategy across platforms. CBS Sports is a clear market leader in it. Great portfolio of sports assets, including NFL, including NCAA, including golf, including by extension on -- mostly on Paramount+ plus but also been on CBS UEFA, that’s all obviously U.S. And we have been select adding sports properties outside the U.S. We do all this in a very disciplined way looking at ROI to ensure there’s some stuff that’s traded that we haven’t done because we didn’t think it was worth the price point. But we very much like it as a component of our strategy. It’s performing very well in the broadcast market, both on a viewership and an advertiser perspective. And it’s clearly, as I said in my remarks, driving streaming as well. The first quarter benefited once again from sports on Paramount+. So, we like it. In terms of negotiations, all negotiations have their challenges, but we were just with an international league last week, talking to them about the power of Paramount in the context of our platforms, our production expertise, our monetization capabilities and really showcasing the value of sports to us. And, I think it’s a compelling package we offer. And I’m very happy playing that plan. So, it’s part of our strategy. It’s clearly not our whole strategy, but it’s additive. With that, I just want to close by thanking everyone for joining for our Q1 call, and thank you for your continued support. As I hope you’ve seen, Paramount’s high-growth streaming business, underpinned by real strength in film, broadcast and cable is a powerful combination and it has clear momentum. So, our differentiated strategy, as we said, is creating advantage. We are excited about the road ahead. Until the next time we speak, everyone stay well.

Unidentified Company Representative:

Good afternoon from Kauffman studios, the original New York home of Paramount Studios. Thank you for joining us and welcome to our investor event. I’ve never been more excited about the future of this company than I am today. And during today’s program, you will see exactly why, because we are on the ascent and we are reaching for new heights. Today, we will show you that with the power of our people, the power of our content and the power of our platforms, we are built to grow, to drive shareholder value and to lead our industry forward. Two years after we brought together Viacom and CBS, and one year since we last convened, we are keeping our promises. We are consistently outperforming our goals ahead of schedule from growth in our subscriber base, to growth in brand recognition and growth in operating revenue. We are doing it all faster than anyone expected and we are delivering win after win after win. This does not happen by accident. We are winning with one team loaded with talent, creativity and expertise, and one integrated company that is greater than the sum of its parts. We are winning with hips that connect with audiences across all demographics in the markets around the world. And we are winning with our unique differentiated streaming services in free, pay and premium. And of course, I have to give a call out to Paramount+, which in less than a year has established itself as a leading brand in the industry. Our strategy has always been to harness the strength of our traditional business to build something new, with our world class content fueling our growth. This is what sets us apart as a company and positions us to succeed. We are making the right investments, in the right content, in the right places. And we are confident based on our track record of successes over the past two years that we can deliver the return on investment that you expect and deserve. We have set in motion a virtuous cycle. Our legacy business power is our transformation and our transformation enhances and expands our legacy. We have so much to be proud of, so much to be optimistic about and we are just getting started. The opportunity we see ahead across our brands is my dad’s vision come to life. One powerful company that creates content that keeps audiences wanting more. And Paramount was always at the core of this vision. For more than 100 years, Paramount Studios has been known for cinematic excellence. But Paramount is also an idea, a promise to be the best. It is the idea that inspired us to bring together the best in entertainment across CBS, BET, MTV, Nickelodeon, Showtime and more. And it is the idea that inspired our businesses and our brands to define and redefine entertainment, again and again, for generation after generation. Indeed, Paramount has always represented brilliant storytelling for audiences around the globe, on the big screen, the small screen and every device in between. It is what we are, it is who we are and it is who we are destined to be. And that is why today, we are thrilled to announce that ViacomCBS has become Paramount Global or simply Paramount. This afternoon, we invite you to take a closer look at how far we have come, where we are going, and most importantly, how we plan to get there. We want you to take note of the extraordinary progress we have made over the past two years and all the momentum we have gathered, and know that there is no higher priority for us, and no higher priority for me than unlocking a maximizing value for all of our shareholders. As I said, I have never had more reasons to be excited about the future of this company, Paramount. And now, I am proud to introduce our President and CEO, Bob Bakish.

Tom Ryan:

I’m Tom Ryan, President and CEO of Streaming. I’ll leave the acrobatics to Tom Cruise. But I do want to talk about strategy for the expansion and evolution of Paramount+. Let’s start with our expansion, where we’re leveraging our global footprint to bring Paramount+ to new markets with enormous potential. In just one year, we launched the service in 25 markets across Latin America, Canada and Australia. And in 2022, we’re building on that momentum, expanding to some of the biggest markets in the world. We will launch in the U.K., South Korea and the Caribbean by this summer, and will continue with a focus on Europe, Italy, Germany, France, Switzerland and Austria in the second half of the year. To scale most effectively, we’re creating customized go-to-market plans for each region, with tailor partnerships, marketing and distribution strategies, and even product offerings. We’re deploying hard bundles, where we work with a local provider to give their customers immediate access to Paramount+, as well as direct-to-consumer and à la carte distribution or sometimes a hybrid of all three. We’re taking the annual plan we rolled out in the U.S. and expanding it internationally. At the same time, we’re creating brand new offerings, like mobile-only plans for markets where value is key and mobile devices dominate streaming consumption. To do all this, we’re leaning on our longtime global presence and a vast network of relationships with partners all over the world. Last year, we double down on strategic partnerships, closing deals with T-Mobile in the United States and Sky in Europe to name just two examples. Today, we’re proud to announce a new partnership, this one in France with Canal+, one of the largest providers in the market. Through this hard bundle partnership, Canal+ subscribers will get access to Paramount+ immediately at launch, allowing us to gain a big foothold and a strong launch pad. These kinds of partnerships and hyper tailored strategies will help us continue to scale quickly and economically. Reinforcing our competitive position across our streaming services and SkyShowtime, our innovative joint venture with Comcast that serves territories encompassing 90 million homes, primarily in Eastern Europe will be in more than 60 markets by the end of the year, with more than 60 partners. Beginning in 2023, we’ll turn our sights to Asia, Africa and the Middle East, building on our momentum to bring Paramount+ to every region of the world. Our global expansion underscores an important lesson in streaming, the stories we create are only as powerful as the audience they reach. So in addition to expanding the service to more people, we’re also enhancing the service itself. We’re constantly asking ourselves, how do we make this experience better, smoother, more personalized, not just how do we serve users? How do we delight them? Just a year in we’ve made tremendous strides. We continue to serve a broad diversity of tastes through programming that’s tailored to the individual and personalized with a distinct editorial voice. Increasingly, viewers are spending more time streaming outside of our top titles and watching a greater variety of series and movies each month. And we’re continuing to innovate. We’ve revamped our brand hubs and introduced collection pages. We’ve used innovations from across our platforms to create an even richer experience on Paramount+. With Pluto TV, for example, we pioneered lean back linear channels that allow users to simply fall into a show. It’s easy entertainment that demands nothing of the viewer, because our programming team does the work, and it drives effortless discovery and engagement bringing the best of our deep catalogue to the fore. Now, we’ve launched 20 linear franchises and genre channels in the U.S. on Paramount+, so if you love animation or TV classics, you can jump straight in and discover something new. Just a few weeks in, the adoption of linear channels has grown quickly and the people who use this feature are spending 40% more time on the service than they were before. Simply put, viewers are more easily finding content to love. Our goal with these product enhancements is to give people every reason to explore and enjoy the full breadth of our content on Paramount+, to make the experience so engaging, it becomes part of your daily routine. So let’s talk about how we’re helping subscribers access even more of our amazing streaming services right there in the Paramount+ app. Our existing bundle of Paramount+ and Showtime has performed very well out of the gate. That’s because users can access two premium content offerings with streamlined signup, but viewed in distinct apps. Starting this summer, we’re making Showtime even easier to access in one app experience. The Showtime service will still be available separately if that’s your preference. But within Paramount+, it will be seamless to sign up for Showtime and easier than ever to discover great shows. You’ll be able to simply upgrade your Paramount+ subscription to a bundle that includes the Showtime service and then view all that content in a single user experience. And then when you’re done watching Mayor of Kingstown, you’ll be able to move immediately to the next season of Billions without ever leaving the Paramount+ app. Less than a year after launch, we’re expanding into new markets and making our product easier to explore and more seamless to operate, and it’s all for one reason, to build a home worthy of our content. To tell you more about our global content strategy. Please welcome our Chief Programming Officer, Tanya Giles.

Pablo Schreiber:

Thanks, Tanya. My name is Pablo Schreiber, and I play the iconic supersoldier Master Chief John-117. It has been literally a dream come true, to put on Chiefs helmet and roll in their armor and take the fight to the covenant. Bringing this series to life has been a labor of love for so many of us for so long and I’m so excited to show you the results in just a few weeks. Whether you’re a sci-fi geek or a die-hard fan of the Halo franchise or if you just love great television. Boy, we have something for you. Well, actually, we do have something for you. Please enjoy a sneak peek of the Halo universe like you’ve never seen it before. Let’s finish this fight. [Video Presentation]

Miranda Cosgrove:

Coming in. Hey, Brian.

Miranda Cosgrove:

Totally unrehearsed. I am actually close by though shooting Season 2 of iCarly. So I just thought I’d pop over to make sure we get a good plug in here for our show and to remind everyone how big it was last summer.

Miranda Cosgrove:

Yeah. It’s been such a great homecoming for all of us and we’re just so grateful to all the fans of the show. And I’ve even sort of enjoyed being a meme again. Anyway, thanks for the plug. I’ve got to get back to set. We’re doing this whole unresolved issues thing between Carly and Freddie. So thanks for indulging me and thanks again to everyone. Thanks, Brian.

Miranda Cosgrove:

Bye.

George Cheeks:

I’m George Cheeks, Chief Content Officer for News and Sports on Paramount+. And this is the legendary San Siro, the home of Inter Milan and AC Milan, and the setting for many thrilling UEFA Champions League in Syria matches. You can watch them all on Paramount+. We have many of the biggest franchises in live sports. It’s a true differentiator for the service. Now to talk about that, let’s hear from two voices of the most popular sport on Paramount+ from our inside the NFL studio in New York, an all time NFL great Julian Edelman, and from our Champions League studio, the incredible hosts of the UEFA Champions League on CBS Sports, Kate Abdo. Now who better to talk about the success of football on Paramount+ than one of the faces of our critically acclaimed coverage. Take it away. [Video Presentation] Like Kate and Julian said, whether we’re talking about football or football, Paramount+ is winning because we have something nobody else does, a sports ecosystem where Paramount+ and CBS Sports work together to drive subscriptions and engagement. We have televisions most valuable property the NFL and it’s performing better than ever for us. Take our Thanksgiving Day game. More than 40 million fans tuned in making it the most watched regular season game in 31 years and the most streamed regular season game ever on Paramount+. This record breaking momentum continued into the playoffs with our most streamed non-Superbowl weekends ever. Now in the span of just one football season, the NFL on Paramount+ has increased by 88% in active subscribers and by 67% in minutes streamed and there’s so much more to come. Thanks to our historic multi-platform deal that extends our relationship with the NFL through 2033. We’re also America’s home to the world’s most popular sports and look at the sheer tonnage of our exclusive rights in soccer. The 2021-2022 UEFA Champions League season alone continues to deliver record breaking audiences for Paramount+. And we’re expanding our coverage internationally. Paramount+ recently landed English Premier League rights for Mexico and Central America. In Chile, Paramount+ will stream the Chilean National Football Team Qualifying matches for the 2026 FIFA World Cup and Paramount+ and Network 10 will present the top Australian leagues and the Australian National team matches in territory. Paramount+ also is the home of the full CBS News portfolio. This includes our recently rebranded 24x7 streaming news service that will feature new original programs from CBS’ top on air news talent, a slate of upcoming Docu series from leading journalists and filmmakers, as well as on-demand access to the network’s iconic news franchises. Now, as Bob said, one of our key differentiators is our broad collection of businesses from television to theatrical, working together to drive global streaming. Our company has the world’s biggest broadcast footprint, with powerhouse networks around the world, including the top rated broadcaster in Argentina, Telefe, the top network in Chile, Chilevisión, Channel 5 in the U.K., and Australia’s Network 10. Each network offers up a powerful owned marketing platform with massive reach to fuel the growth of Paramount+. On CBS, for example, we promote Paramount+ in every hour of network programming. Last year, it added up to 4 billion on air impressions and 1,500 spots across CBS. Our networks continue to produce hit after hit, hits in find new audiences on Paramount+ all over the world. One of Network 10’s most successful Australian drama series Five Bedrooms moved to Paramount+. Five Bedrooms is now one of the biggest shows on the service, helping to drive early subscription growth in Australia, where we vastly exceeded our subscriber estimates. Latin America, our teams also are turning local broadcast hits into Paramount+ originals. Like the mega hit MasterChef on Telefe, spinning off into hands off chef on Paramount+. Two CBS series, Evil and SEAL Team became Paramount+ originals last year and quickly became two of the most watched original series on the service in the U.S. They both have been renewed for another season and today we’re excited to announce plans for a SEAL Team movie event exclusively for Paramount+. Now we continue to add CBS hits on Paramount+, from dramas like FBI, which has vaulted into one of the services top shows, to comedies like Ghosts, which is the number one new comedy on broadcast and the number one comedy series on Paramount+, from primetime entertainment, to news, to NFL on CBS. Bottomline, different audiences watch premium content in different ways. We can draw the biggest broadcast audiences, and engage a unique and additive audience on streaming, as we continue to grow Paramount+ and build more franchises. And CBS will take our globally popular franchises and turn them into local Paramount+ originals. Today we’re announcing NCIS Sydney, a uniquely Australian spin on the hit U.S. show coming next year to Paramount+ in Australia. The new series will be filmed in one of the world’s most scenic harbor cities. It will feature local stories and local creative talent, including Shane Brennan, creator of NCIS LA, who’s an Australian himself. It all adds up to the very best in live sports, breaking news, key entertainment franchises and broadcast networks driving Paramount+ with audiences all around the world. Now I’d like to pass it over to my colleague and friend, Chris McCarthy.

David Nevins:

I’m David Nevins, Chief Content Officer of Scripted Originals for Paramount+. Behind me is a London soundstage where we make the kind of global scripted originals that are helping to power Paramount+. We make shows that resonate across the country and around the world. And we make them in every market for every market. It’s a two-way street, with U.S. made shows that we’re rolling out around the world and internationally produce shows that we’re bringing to the U.S. and markets everywhere. We are creating groundbreaking new IP even as we lean into the franchises that fans love and we bring the highest level of acting, writing and cinematography, the best of Hollywood everything we do. The result is entertainment that’s addictive. It’s what entices subscribers and keeps them coming back for more. The kind of shows you can relax with on a Saturday afternoon or just before bedtime and the kind of shows that can fill the call for suspenseful Friday night at home. Take the offer, one of Hollywood’s wildest stories how the iconic film The Godfather almost didn’t happen. It’s a riveting limited series starring Miles Teller, Juno Temple, Matthew Goode and Giovanni Ribisi. Here’s a peek. [Video Presentation] Next comes Grease

Monica Barbaro:

Thanks, Maria. After playing a fighter pilot by the name of Phoenix in Paramount’s highly anticipated Top Gun Maverick with the legendary Tom Cruise, I am thrilled to stay with the family. At this very moment, I’m in Mexico shooting a beautiful new film with Diego Boneta called At Midnight, which tells the story of Sophie and Alejandro to ambitious people who meet at the right place, but the wrong time. I play a career driven movie star with a seemingly glamorous life and my world collides with Alejandro, who until now has lived his life according to thought out predictable plan. It’s been an incredible shoot so far and we can’t wait to share with you the magic we’ve gotten to experience on set every day.

David Nevins:

Thank you, Maria. As Maria said, the beating heart of what we do is tell great captivating stories. Stories that move us, provoke us and make us think. Stories that you can’t stop talking about and with hits like Your Honor and Yellowjackets not to mention the huge worldwide success of the Dexter revival. Showtime has been a great producer of Fear of Missing Out series that become worldwide sensations, series to dominate the cultural conversation and serve as a cornerstone for our Paramount+ service and markets around the world. And as Tom said earlier, this includes U.S. subscribers who will soon be able to easily access Showtime within Paramount+. Looking ahead, we couldn’t be more excited about these global hits in the making. The First Lady, an intimate view inside the lives of Michelle Obama, Betty Ford and Eleanor Roosevelt, starring Viola Davis, Michelle Pfeiffer, and Gillian Anderson. Take a look. [Video Presentation] From the creators of Billions comes another show from their universe exploring the contours of capitalism. It’s Super Pumped

Naveen Chopra:

Thanks, Bob, and hello, everyone. This afternoon, my colleagues have explained how we plan to take our flagship streaming service to new heights. Now, I’d like to explain how that strategy is driving our financial results today and into the future. I’ll start by sharing a few highlights from our Q4 results and recapping the remarkable year we had in streaming. Then I’ll talk about the future, starting with changes in our disclosures, which are important to understanding our future financial goals. I’ll explain how our differentiated streaming playbook translates to a financially attractive business with healthy long-term margins. And then we’ll put some specifics around all of that, with updates on our long-term goals and expectations for 2022. So let’s start with our Q4 results, which are covered in greater detail in the press release we issued earlier today. We added 9.4 million streaming subscribers in Q4, reaching a total of 56.1 million global subscribers across our services. Paramount+ continued to drive the vast majority of new subscribers in the quarter. But Showtime OTT also had a record quarter of additions. In ad supported streaming, Pluto TV continued to thrive, delivering its biggest quarter of MAU growth by adding 10 million MAUs to reach 64.4 million MAUs globally. In combination, these services powered another quarter of exceptionally strong revenue growth. Global streaming revenue was up almost 50% year-over-year to 1.3 billion, benefiting from strong subscription revenue growth, which accelerated yet again to an impressive 84%. At the same time, we saw continued strength in our traditional businesses, with growth in both advertising and affiliate revenue. Our balance sheet also strengthened in Q4, where we sold non-core real estate assets and ended the year with $6.3 billion of cash on hand. Our net debt balance now reflects a $7 billion reduction since the merger of Viacom and CBS, and provides ample firepower to seize the tremendous streaming opportunity before us. And speaking of streaming, as you’ve heard throughout today’s event, 2021 was indeed remarkable. Less than a year since the launch of Paramount+, our content, marketing and distribution engines drove explosive growth, adding more than 26 million global streaming subscribers across our platforms in 2021. In turn, streaming subscription revenue grew nearly 80%. We know that kind of growth relies on great content to attract and retain a broad base of subscribers and we’re seeing the formula working. In fact if we look at our domestic Paramount+ business, as content selection expanded, the average monthly active rate moved higher in each of the past three quarters since launch. And as audiences spend more time with the service, churn also improved each quarter during the year. There is engagement and retention increase, so does the lifetime value of Paramount+ subscribers. And to underscore what Bob and Tom shared, 2021 was also an out of this world year for Pluto TV. In addition to crossing the $1 billion revenue threshold, Pluto TV experienced tremendous growth in users and watch time. Total global viewing hours increased over 50% to 4.8 billion. While viewing hours per domestic MAU grew a healthy 12%. In a moment, I’m going to explain how our performance in 2021 guides our expectations for future streaming growth. But before doing so, let me explain changes we’re making to our financial disclosures, which will improve the visibility of this direct-to-consumer growth, while highlighting the profitability of our traditional business. Today, we publish recasted trending schedules on our website, presenting historical results through the lens of our three new segments as shown here. First, a highly profitable and resilient TV Media business, which includes our global broadcast and cable network businesses, and their associated studios that were reported separately in our Legacy TV Entertainment and Cable Network segments. It also includes Paramount TV studios, which was previously part of the Film Entertainment segment. Second, Filmed Entertainment, which is comprised of the Paramount Pictures and Nickelodeon studios. And finally, a high growth direct-to-consumer business, which includes the global operations of our D2C streaming services, consisting of Paramount+, Pluto TV, Showtime OTT, BET+ and Noggin, all in one segment. Taking a closer look at our segments under the new reporting structure, you’ll notice the profitability of our TV Media segment, which generated nearly $23 billion in revenue and close to $6 billion in adjusted OIBDA last year. TV Media OIBDA was up 1% year-over-year and delivered a 26% OIBDA margin. In our D2C segment, revenue grew an impressive 83%, and as you know, we continue to invest behind this growth to capture a highly strategic market opportunity. And as a result of this investment, D2C operated at a loss of approximately $1 billion in 2021. In addition to changes in our segment reporting, we’re also evolving our revenue disclosures. Our new reporting segments feature four revenue types, advertising, affiliate and subscription, theatrical, and licensing and other. Our streaming revenues are now captured as advertising or affiliate and subscription revenue in either the D2C segment or the TV Media segment, if not directly related to our D2C services. And to offer a closer look at direct-to-consumer, we will also be publishing revenue and subscribers or monthly active users for Paramount+ and Pluto TV, respectively. As shown on this chart by year end 2021, Paramount+ had 32.8 million global streaming subscribers. As Bob mentioned, Paramount+ has been the key driver of subscriber growth, representing over 80% of the 26.2 million global streaming additions we gained last year. Paramount+ generated $1.3 billion in revenue in 2021, up 115% year-over-year. Domestic paid ARPU approach $9 in Q4, reflecting a mix of essential, premium and promotional subscribers. In 2022, we expect both domestic ARPU and international ARPU to move higher. Domestic ARPU will benefit from improved ad monetization and the conversion of trial of promotional subs to full paying subs. And international ARPU will improve too, as we launch in large international markets with significantly higher average ARPUs than our current international sub base. And on Pluto TV, you now know we added over 21 million global MAUs in 2021, delivering almost 90% topline growth. That’s $1.1 billion in revenue. In the U.S., Pluto’s efficient business model and impressive ARPU growth demonstrate increasingly strong margin potential. In fact, Pluto TV’s global ARPU increased 17% year-over-year to $1.64, with domestic ARPU significantly higher at $2.54, up 44% year-over-year. We’re also simplifying the way we record direct-to-consumer content expense to more clearly present the actual cost to the company of our streaming investments. We are no longer recording intercompany licensing between segments. Instead, we’re allocating content costs to each segment based on the relative value of the distribution windows exploited by each reporting segment. What does this change mean for D2C investment? Well, under our new reporting structure, D2C content expense would have been about $1 billion in 2020 and $2.2 billion in 2021. We think this combination of changes makes it easier to understand and value the future Paramount. It’s a future we are very excited about, because it leverages the assets from our traditional media enterprise to build a large scale global direct-to-consumer business with attractive long-term margins. As Bob laid out, streaming unlocks a tremendous incremental market opportunity for Paramount compared to Pay TV. In fact, relative to our existing Pay TV footprint, which reaches 300 million households, our streaming strategy, which is more than double that amount, so well over 600 million broadband homes, excluding China and India, and this number will continue to grow, especially when adding mobile broadband users, a previously inaccessible segment will soon be targeting with a mobile-only plan for Paramount+ in certain geographies. Our broad approach to streaming positions us to capture an even greater portion of this growing addressable market with better long-term economics. Let me use three examples from our playbook to explain how our approach yields financial benefits and creates long-term value. First, within Paramount+ and across our ecosystem, we benefit from a combination of subscription and advertising revenue. This gives us multiple ways to grow beyond just subs in price. Our dual revenue stream model allows us to grow ARPU through enhanced engagement and monetization. And we can reach an even larger audience by appealing to the hundreds of millions of consumers who prefer to pay a low or no subscription fee for their content. Advertising is powered the Media business model for decades, powered broadcast television has been essential to cable television. Today, as we look ahead to the future, it adds incredible value to our streaming playbook, as part of a hybrid subscription ad supported model like Paramount+ and as a pure ad supported service with Pluto TV. Second, when it comes to distribution, we’re also running with a differentiated playbook, combining the top notch consumer experience and massive addressable market of streaming with the attractive economics of the traditional cable model. At a time where our partners are focused on using streaming services to further leverage their broadband presence and expand customer offerings. Take our hard bundle deal with Sky or the deal we announced today with Canal+, where Paramount+ is instantly distributed to millions of Sky cinema or Canal+ customers. While ARPU is lower than in our direct-to-consumer channel, it’s higher than linear TV, subscribers scale very quickly, we incur no customer acquisition, billing or support costs and we eliminate the risk of churn when series reach end of season. This play is enabled by our longstanding relationships with global MVPDs and the data differentiated value proposition of Paramount+. And of course, these hard bundle relationships let us maximize reach by complementing our higher ARPU direct channels and customers we acquire through streaming platforms like Amazon, Roku and Apple. Third, we have a unique opportunity to leverage our content investments across our broad platforms. It’s the perfect illustration of how our so called legacy businesses enhance streaming economics and it’s not just a hunch. We measure return on investment on a show-by-show basis. Unlike a pure play streamer, our ROI equation benefits from broad platforms like box office revenue, Pluto TV, third-party licensing, download-to-own and consumer products, among others. Coupled with the lifetime value of each Paramount+ customer directly attributed to the title, this diversified model consistently demonstrates compelling ROI across many popular Paramount+ releases. It brings us back to our differentiated streaming playbook. These monetization opportunities improve the return on streaming content and are not available to a pure-play streamer. In our model, these traditional businesses are powerful sources of economic and promotional value. While high-end, high impact Paramount+ exclusives, like Mayor of Kingstown and 1883 are important to our growth, they are only part of our success equation. Paramount+ is also powered by a deep portfolio of both shared and library content. With strong momentum in our direct-to-consumer business and a differentiated streaming playbook, we’re confident that the opportunity ahead is, as Bob said, matched only by the scale of our ambition to season. Just one year ago, we set a goal to reach 65 million to 75 million global streaming subscribers by year end 2024. We now expect to surpass that goal by the end of 2022, two years ahead of schedule. Today, we are raising that goal to over 100 million global D2C subscribers by year end 2024. These exclude subscribers we expect to serve with SkyShowtime, which will be reported separately by the JV. At Pluto TV engagement and ARPU have accelerated meaningfully in the past year, increasing our ability to monetize the 100 million to 120 million global MAUs we expect to reach by 2014. And this combination, higher subscribers and ARPU, as well as accelerated monetization improvements at Pluto TV means our goal for 2024 D2C revenue has increased substantially. Last year, our goal for global streaming revenue was to exceed $7 billion in 2024. As you can see on the right side of this chart, that included $6 billion of revenue now captured in our D2C segment, with the remainder being digital video advertising now captured in our TV Media segment. As a result of our momentum and incremental investments, we are raising our 2024 direct-to-consumer revenue goal to over $9 billion. That’s $3 billion higher than the $6 billion, which was embedded in our 2024 revenue goal just one year ago. The incremental D2C revenue consists of both more aggressive subscriber assumptions and ARPU improvement, driven by the combination of subscription price increases and growth in advertising monetization. Now, of course, our growth depends on delivering killer content. Last year, we told you we expected streaming content expense to exceed $5 billion in 2024. This included $4 billion of expense associated with our direct-to-consumer services. We now expect D2C content expense to grow from $2.2 billion last year to over $6 billion in 2024. Given these investments, we forecast D2C OIBDA losses will be greatest in 2023, but will improve in 2024, when our global D2C businesses will start to see the benefits of our full content slate, including Paramount Pay One movies, by then will be launched in significantly more markets, advertising and subscription monetization will be higher, and the layering of content amortization expense will begin to stabilize. And longer term, our model suggests that the D2C segment will approach margins similar to our current TV Media business. I also want to provide some color on near-term expectations for each of our segments in 2022. At TV Media, we expect adjusted OIBDA to be similar to 2021, when adjusting for the benefit of Super Bowl 55 in Q1 of last year. Similarly, we expect adjusted OIBDA at Filmed Entertainment to remain stable year-over-year absent changes to our current film slate. And in D2C we anticipate a another year of very healthy subscriber growth led by Paramount+ and continued expansion at Pluto TV, all of which will translate to D2C revenue growth in excess of 60% for the full year. In fact, we expect D2C revenue growth in Q1 to accelerate beyond 2021’s full year D2C revenue growth rate. As we grow, direct-to-consumer will see additional investments in content and international launches. As such, we anticipate an increase in OIBDA losses of approximately $500 million for the D2C segments in 2022. On a total company basis, consolidated OIBDA will show sequential increases in each quarter of 2022 including Q1. Regarding the year-over-year trends, the first half of 2021 incorporated several non-comparable items, which benefited OIBDA in the period, including the Super Bowl, the impact of COVID on linear production and film releases, and the launch of Paramount+, which did not occur until March 4th. Therefore, the first half of this year will show a material year-over-year decline in OIBDA, which will then flip to a significant year-over-year growth in the back half of the year, resulting in the full year trends I just described. We’ve covered a lot of ground today and I know everyone is looking forward to the Q&A session. So on behalf of my colleagues, let me recap four key takeaways. First, in just one year, Paramount+ has outperformed all expectations. We have serious momentum and the credibility to establish ourselves as a scaled streaming player. Second, we are enhancing transparency. We want you to see and understand the evolution of both our D2C and traditional businesses. Third, we are taking our ambitions to new heights. We’re investing in growth, with significantly higher goals for streaming subscribers and streaming revenue. Fourth, and most importantly, we are executing a differentiated streaming playbook that leverages our traditional businesses to yield faster growth and attractive long-term D2C margins. With that, let me introduce Anthony DiClemente, Executive Vice President, Investor Relations to lead us through Q&A.

Mike Morris:

Thank you, Anthony, and thank you for all of the information you guys just shared. I guess with one question, I’d like to ask you about the path to the subscriber guidance that you have out there the $100 million by 2024. Can you share any more details with us about what that path looks like over the next couple of years, whether there are different milestones that would accelerate or cause choppiness in that path? And can you give us any more details about how you see the geographic mix of that subscriber base evolving? Thanks.

Bob Bakish:

Mike, the only thing I want to add is that $100 million number does not include subscribers we expect from SkyShowtime, that’s an unconsolidated joint venture and we obviously expect that to be in the many millions of subs.

Bryan Kraft:

Hey. Thanks, Anthony. Hey, Naveen. Hey, Bob. Naveen, can you just size the free cash flow investment into streaming investments over the next couple of years or maybe talk about the delta between EBITDA and free cash flow and when that might peak, just so we can help the model -- help us model that. And Bob, you and Chris McCarthy have talked recently and Chris talked today about emphasizing the company’s shift to leveraging franchises in a bigger way. Can you talk about how that’s going to really be different going forward than it’s been historically and what that means for the business and what you’ve seen so far, and what gives you the conviction that that’s going to really carry the subscriber growth that you’re forecasting over the next few years? Thanks.

Bob Bakish:

Yeah. With respect to your question on franchises, we are absolutely increasing our focuses on franchises with respect to our content investments. I think if you look at the company, historically, probably, most of that franchise work was done at Nickelodeon and you saw us look to move quickly and benefit from that in the launch of Paramount+ with the SpongeBob movie and the first SpongeBob spinoff series Kamp Koral. Since that time, what you see is a broad -- including today, what you see is a broader commitment to franchises, including strategies, which span theatrical to series. You heard that today with respect to Sonic, you see that with respect to Yellowstone spawning 1883 and, we have a whole range of these in place. So it’s really a philosophical change that connects with a one company mentality that crosses platforms and feeds streaming, that is the step function change and are embracing franchises.

Brett Feldman:

Great. Can you hear me, okay?

Anthony DiClemente:

Yeah. We can hear you fine.

Naveen Chopra:

Yeah. Hey, Brett, let me try to give you some additional color on that. And I think, the essence of the question you’re asking is really what happens to total company content spend in combination with the incremental investment we’re obviously making in D2C and the answer to that is the following. While we’re investing aggressively in the D2C growth, we are also carefully managing spend in the traditional side of the business and that applies to both content investments, as well as looking at other opportunities to unlock operational efficiency. You’ve actually seen us do that quite extensively over the last couple of years, whether that’s doing things like combining networks or looking for ways to find other efficiencies in operating expense. We think we’ve been quite innovative in being able to do that. And you’ll see us continue to pull those levers going forward. You’ll also see us lean even more aggressively into leveraging global production, which has significant benefits in terms of helping us create cost, excuse me, create content much more efficiently. Take as an example, some of the things that Chris McCarthy mentioned that he’s dealing with shows like the challenge by leveraging global production capabilities. So that formula is going to be a critical part of what allows us to run the business with total company content spend that is growing at a much, much lower rate than what you’ll see on the D2C side and it’s also a critical part of the equation to returning the company to earnings growth in 2024 and beyond.

Naveen Chopra:

Yeah. So with respect to local content, global content, we are strong believers in the importance of local content. I’d point out this is not a new concept for us, we’ve been operating in geographies around the world for most of our history, as Bob pointed out, and we see tremendous opportunities to leverage a lot of the local content that already exists, as well as combining that with global content from the U.S. that travels well. We’ve had many examples of that, whether it’s a Yellowstone or a Dexter. We also utilize global formats. You heard about that in Chris’ presentation as well. And we’re also now increasingly taking content that’s produced in international markets and bringing it back to the United States. So, there’s many opportunities to take advantage of our global footprint and that is all part of how we have thought about our content expense over time. So when we talk about the $6 billion of D2C content investment in 2024, that assumes a mix of both global content and locally produced content.

Ben Swinburne:

Thank you. Good afternoon. Bob, since you came to Viacom, you have taken a new approach to distribution partnerships, which are obviously critical to driving direct-to-consumer. I’m wondering if you could talk about your strategy, based on what we heard this afternoon to leverage distribution partnerships internationally, and in the U.S., and maybe you can, in your answer, address some of the concerns investors may have about your ability to maintain your strip -- your pricing power and carriage position in the U.S., given how profitable that business is? Thank you.

Anthony DiClemente:

Do you want to address MVPDs in the U.S.?

Anthony DiClemente:

Great. Thanks so much, Ben. We’ll take our next question from Rich Greenfield at LightShed. Rich?

Bob Bakish:

Yeah. Sure, Rich. Let me kick it off. So we absolutely have a differentiated strategy in streaming, that differentiation occurs on a couple dimensions, which I outlined, it starts with content. As I said, we take the Plus and Paramount+ very seriously, we have the broadest selection account of content out there, including a full genre mix on the entertainment side, news, and of course, sports, NFL, European Football, Golf, NCAA, et cetera. So we think that’s a real differentiator and we’ve seen all of those lanes work together to drive our growth, including in the fourth quarter where we’re very pleased with the results. In addition to that, we believe the combination of free and pay, Pluto riding alongside, Paramount+ is powerful and that we’re differentiated in that regard. Remember, we have the number one fast product in the United States and based on the statistics I’ve seen, our lead in the United States increased in the fourth quarter, even though we were already the number one player. Third point, you’ve seen us how we’re using our broader range of platforms to drive that we’re doing that better than anyone else. Look at what we did with Yellowstone into 1883, look at the integration with Halo in the NFL Playoffs. We’re really leveraging these platforms. And lastly, the global side of this thing, we’ve been operating on the ground internationally for decades. I believe with respect to the distribution strategy we have, including hard bundles, we are an innovator. It is highly beneficial strategy. You’ll see the benefit in 2022. And by the way, you’re going to see other people following us, because we’re already seeing that begin to happen. But just like we benefited by being the market leader fast and being there earlier, we’re here early and you get a first mover advantage. So we got a lot of differentiation in place, it’s working really well and it’s going to pay real dividends going forward. Naveen?

Anthony DiClemente:

Great, thanks for the multiple questions, Rich. We’ll take our next question from John Hodulik at UBS, John?

Bob Bakish:

Yeah. Sure, John. So look on the content licensing side. As you know, we’ve made a strategic pivot at ViacomCBS now Paramount to pointing our content engines at our streaming platform, notably Paramount+. We’ve already seen early benefit from that in terms of the fourth quarter and we believe that is fundamentally the right thing to do as we look to create asset value and there’s clear examples of asset value creation in the streaming space where you’re successful, and again, we intend to be successful. So we’re doing that. In parallel to that, we are continuing to fulfill deals we put in place, pre-Paramount+, so those are like season N+1 of a particular show, maybe Jack Ryan as an example. We have contracts in place and we’re going to continue to do that. We also continue to do some selective non-exclusive licensing, which we found to be an effective franchise development tool, as we continue to build new versions of product again for Paramount+. So you should expect us to do that over time. Again, we think it’s strategically right and we think we also have some incremental financial benefit from that. In terms of your question on international sports rights. Look, it’s early days, but we’ve seen real benefit of sports as part of Paramount+ in the United States. The NFL, as you saw in one of the charts, was the number one source of subscriber additions for the product in 2021 and we have found that we can cross consumer, bring them in on sports and get them to consume entertainment product, sports fans, as an example, in the fourth quarter were also big consumers of shows like SEAL Team and Mayor of Kingstown and 1883, and that’s key to our overall plan and economics and ROI. So we’re looking at selectively at adding sports product internationally, we’ve done some of that in Latin America, we’ve done some of that in Australia. The IPL thing in India is really Viacom18, which is our joint venture over there. So, again, we think sports is additive and certainly a differentiator for us. You need to be disciplined in terms of how much you pay and we need to be effective in terms of extracting the value, including through co-usage of other product. But sports is definitely part of our streaming playbook. And by the way, we have a lot of benefit from our CBS Sports heritage as we pursue that opportunity.

Jason Bazinet:

Thanks so much. Maybe a little bit of a complicated question. But in -- under the old accounting standards, for film or television, you would amortize based on matching revenues, right, as a percent of your ultimate revenues. So the margins are sort of consistent all the way through. In the streaming world, I think, the amortization is a function of the streams and it sort of ignores the fact that the consumer gets more utility out of new content versus old. So how do you -- how can anyone have confidence that the streaming business is going to be a good fit for business as your new TV Media segment, as an example?

Bob Bakish:

I also just want to add one other point, because something you said is not reflective of what we see in streaming. You said that only new content matters in terms of streaming consumption. That’s actually categorically not true. It is true that new originals are key to subscriber acquisition. But what is tremendously valuable in streaming is library and specifically series that are deep in number of seasons. So you look at the NCIS, the FBIs, the SEAL Teams, the SpongeBob, et cetera. Those are tremendously valuable for in some cases bringing people in, but for the most part in terms of engagement, and engagement, is what you use to manage churn. So with respect to the value of content, it’s not all about exclusive originals. These libraries are highly valuable and when you look at Paramount, which is what we call the company now, we have very deep, very high quality libraries at from the original Paramount Studio, from CBS, from Showtime, from the cable networks, and those are tremendously valuable for streaming, both for Paramount+ and for Pluto TV. So don’t lose sight of that value, because it is very material and it’s key to our long-term streaming economics as well.

Steve Cahall:

Hi. Thanks. Just one kind of long domestic question, so I was wondering if you could talk about where you think you are in the domestic journey in terms of subs for Paramount+ and where that can go. And similarly, you talked about the $9 ARPU, as we think about both subscription and advertising revenue, how do you think about the upside to domestic ARPU? And just while we’re on domestic Paramount+, I think, if you could go back in time, you might look at a slightly different arrangement for some of the early seasons of Yellowstone, which are on a competitor service. Do you have any levers you can pull in the next couple of years to consolidate the Yellowstone library entirely onto Paramount+? Thank you.

Naveen Chopra:

Yeah. Let me jump in on ARPU. We continue to be very encouraged by what we’ve seen from an ARPU perspective, particularly in the domestic market. You saw on the prepared remarks, the $9 paid ARPU that we experienced in Q4. We see continued upside in domestic ARPU, both short-term and long-term. Short term, there are really two key factors, we expect that there’ll be a benefit from the continued conversion of promotional and trial subscribers to fully paid subs. We continue to see very healthy trial-to-pay conversion rates. So we actually see that as a compelling opportunity for the service both from an ARPU and an overall revenue perspective. We also expect to see continued improvement in the monetization of advertising on the essential tier of Paramount+. The essential tier is a significant portion of our subscriber base, both actually essential and premium, sort of balanced composition. But we have seen improvements in the ad ARPU, that’s generated on the essentials tier as engagement continues to grow with the service and we expect that will continue as we add more and more content to Paramount+. And then longer term, we also see ARPU upside coming out of the ability to adjust price, as the content selection on the service continues to grow and as use of Paramount+ becomes even more habitual. And I think we’ll probably get some tailwind in that regard from the category in general, where you’re seeing pricing continue to move upward. So there will likely be opportunities for us to adjust price and still maintain our value proposition relative to others. So we’re very bullish about where ARPU can grow and it is, as I pointed out, definitely one of the key ingredients to how we grow the business from a little over $3 billion of D2C revenue today to $9 billion plus in 2024. It’s not just about adding subscribers. It’s about adding subscribers and growing ARPU. So we really like that equation and the growth that it can create.

Anthony DiClemente:

Good morning, everyone. Thank you for taking the time to join us for our third quarter 2021 earnings call. Joining us for today’s discussion are Bob Bakish, our President and CEO and Naveen Chopra, our CFO. Please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our website. We want to remind you that certain statements made on this call are forward-looking statements that involve risks and uncertainties. These risks and uncertainties are discussed in more detail in our filings with the SEC. Some of today’s financial remarks will focus on adjusted results. Reconciliations of these non-GAAP financial measures can be found in our earnings release or in our trending schedules, which contain supplemental information and in each case, can be found in the Investor Relations section of our website. Now, I will turn the call over to Bob.

Naveen Chopra:

Thank you, Bob and good morning everyone. Our third quarter results were highlighted by continued growth in streaming, where we had another solid quarter of subscriber additions. Streaming revenue grew 62% year-over-year with solid growth in both the subscription and advertising components of our streaming business. Q3 also benefited from growth in traditional advertising, affiliate revenue and content licensing. Let me start by providing some additional granularity on our streaming results, beginning with our subscription business and then moving to our ad-supported services. We added 4.3 million global streaming subscribers in the quarter, reaching nearly 47 million at quarter end. Paramount+ continues to drive the significant majority of new subscribers with a mix of both domestic and international customers. We also saw continued improvement in Paramount+ engagement. The average monthly share of domestic pay subscribers active on the service also known as our monthly active rate, grew in the quarter both sequentially and year-over-year. At the same time, average monthly hours per active domestic subscriber also improved quarter-over-quarter and year-over-year. And in terms of monetization, global streaming subscription ARPU increased 8% year-over-year. The combination of strong subscriber growth and increased engagement led to streaming subscription revenue growth of 79% to $548 million. Moving to our ad-supported streaming businesses, Pluto TV ended Q3 with 54.4 billion global MAUs and revenue grew 99% year-over-year. Pluto’s success continues to be driven by growth in users, engagement and sell-through, which translated to a 60% increase in Pluto TV domestic ARPU in the quarter. While Pluto accounts for the majority of our streaming advertising revenue growth, we also saw strong growth at Paramount+, where domestic advertising revenue more than doubled in the quarter. All-in, streaming advertising revenue grew 48% year-over-year to $531 million. Advertising revenue, which excludes streaming, grew 1% in Q3 to $1.9 billion as strong demand was somewhat offset by ratings pressure, political spend that benefited the prior year quarter, as well as the sale of CNET. Taken together, the impact of political and the sale of CNET resulted in nearly 500 basis points of headwind to advertising growth in Q3. Looking to Q4, advertising revenue will benefit from the start of new fall programming and improved upfront pricing with the new broadcast season. While supply chain issues do somewhat limit visibility, we expect to see year-over-year advertising growth in Q4. Affiliate revenue, which also excludes streaming, grew 2% year-over-year to $2.1 billion as incremental distribution, contractual rate increases and growth in reverse comp more than offset the decline in pay TV subscribers. We expect these drivers to continue into Q4, resulting in another quarter of low single-digit affiliate revenue growth. Licensing and other revenue, which includes fees from the licensing of internally produced television and film programming to third-party platforms as well as fees generated from home entertainment, consumer products and live events, increased 18% to $1.5 billion. Q3 2021 reflects a higher volume of licensing deliveries in the year ago period, which was impacted by COVID-19 production shutdowns. Total company revenue grew 13% year-over-year to $6.6 billion. Adjusted OIBDA fell 3% to $1 billion as we continue to ramp up programming and production spend coming out of COVID and increase our investment in streaming. Adjusted diluted EPS was $0.76. Adjusted free cash flow was a use of $187 million in the quarter, reflecting a ramp in programming spend, including our investment in streaming. Adjusted free cash flow in Q4 should reflect a continuation of this trend. And turning to the balance sheet, we finished the quarter with $4.8 billion of cash on hand and total debt of $17.7 billion. This translates to a 2.5x net leverage ratio as of September 30. We continue to have significant financial flexibility, which will increase further with proceeds from asset sales, including BlackRock, which closed in October. Looking ahead, we expect total pay subscriber additions in Q4 to be higher than Q3, driven by the content we have coming to Paramount+, including the premier of some of our biggest new originals, as Bob just described. We are excited about the launch of our T-Mobile partnership, which will have a modest benefit in Q4, which should be a more significant contributor in 2022. We also expect Q4 Pluto TV MAU additions to be greater than Q3, which, in combination with Paramount+ growth, will result in continued strong total streaming revenue growth rates in Q4. In fact, we expect streaming revenue to surpass a $5 billion annual run-rate in the quarter. This places us ahead of the trajectory implied by the long-term streaming subscriber and revenue goals we provided earlier this year. We are encouraged by this momentum and are continuing to execute against our previously described growth and investment plans. As we have said before, this translates to streaming content expense more than doubling for the full year 2021 versus 2020. And given the cadence of content hitting Paramount+, Q4 streaming expense, including content and marketing to support the new programming, is expected to increase on the order of $350 million relative to streaming costs incurred in the third quarter of 2021. As Bob said, ViacomCBS is well-positioned to be successful in streaming, given the breadth and depth of content we have on the service, our robust distribution and marketing capabilities, and our strong and flexible financial engine. As we scale, improving unit economics and continued TAM expansion will make streaming accretive to ViacomCBS earnings and cash flow over the long-term. And as we invest against the streaming growth opportunity, we will evolve the way we manage and allocate resources in our business. With this in mind, we plan to change our segment reporting beginning with our first quarter ‘22 results, which will help investors better understand ViacomCBS as the combination of three parts

Brett Feldman:

Yes. Thanks for taking the question. It’s actually a three-part question about the new T-Mobile deal, which looks pretty exciting. T-Mobile, they just reported earlier in the week, they had just under 27 million postpaid accounts, I just want to confirm that, that’s sort of the addressable opportunity for you with T-Mobile. And then I’m curious why you’re expecting the impact to be more early next year, even though it’s going to start being offered in this quarter? The second part of the question is, typically, these are wholesale deals, where all of these customers would be paid and in your paid subscriber count, but maybe at a lower ARPU. And I’m just curious if that’s the arrangement here. And then the last one is a bigger one. This is now sort of your second big distribution deal following what you’ve done with Sky in Europe. I was hoping you can maybe give us some insights into what you think the opportunity is to continue adding more distribution partners, both domestically and in your international markets? Thanks.

Naveen Chopra:

Sure. Bob, happy to do that. We’re definitely looking forward to showcasing all the new content we’ve got coming to Paramount+ in 2022 for all T-Mobile customers. So to your question about scope, yes, it – we’re excited to make this available to all the postpaid T-Mobile customers. We do think that the deal should accelerate sub growth for Paramount+, but it will build over time. Some of the reason behind that is that the really big broad awareness marketing campaign will mostly kick in, in 2022. And between now and then, we’re going to be doing some things to evolve and optimize the consumer sign-up experience. We like the economics of these deals. You asked about the impact on ARPU as is typically the case for these kinds of third-party bundles, they do come with slightly lower ARPU than what we would see on a direct basis. But we really like the LTVs of the subs that we can acquire through these types of deals. Those subs have lower churn and we get full access to all the relevant user data, which helps us further maximize lifetime value. And at the same time, SAC is very low. So that ratio between lifetime value and acquisition cost is really compelling. And given what we’re seeing with our trial-to-pay conversion rates, I think, we can really make some hay out of giving T-Mobile customers 12 months to experience all the great content that we are producing for Paramount+ and then having them roll to paid customers after that point in time.

Operator:

Thank you. Our next question comes from the line of Michael Morris with Guggenheim Partners. Please proceed with your question.

Bob Bakish:

Yes, sure, Mike. So let me start and then I’ll throw it to Naveen. On the Sky question, there is really two different kinds of partnerships with Sky that we’ve announced. The first one, you could think of as a bundle, and that’s with Sky in the UK, in Germany and Italy. It’s a commercial deal where Sky will distribute Paramount+ to all their Sky Cinema subscribers. And we look at that as a compelling way to accelerate penetration, but it’s a commercial deal. So we preserve a 100% ownership of the business. Like Naveen talked about with T-Mo, we believe that has really attractive SAC and churn characteristics. And importantly, in that deal, we’ve preserved our right to go direct in those markets as well to pursue additional opportunity because obviously, O&O direct is an important part of the streaming business. The second deal we announced with Sky is the Sky Showtime joint venture, that’s really a deal with Comcast, obviously, as well. That’s 50-50 JV on an equity basis. That’s targeting 20 smaller, mostly Eastern European countries, which is additive to the 45 markets we’ve talked about for ‘22 historically. We see that – and that will be a single app combining ViacomCBS and Comcast product. And we look at that as a way for us to participate in these smaller markets while preserving investment capacity for the larger ones, which are more important strategically. Now in terms of timing of both of those, the Sky bundle will launch in the UK in the first half of ‘22, and that will be followed by Germany, Austria and Italy also in ‘22. Sky Showtime, we’ve yet to announce dates on that, but it will be in ‘22. So that’s the story big picture. Naveen?

Anthony DiClemente:

Thanks a lot. Operator, we will take our next question.

Alexia Quadrani:

Hi, thank you. It sounds like movies are some of the biggest drivers to new subscribers based on your opening comments, Bob. I’m wondering if that changes the way that you think about windowing are you less inclined to stay with a 45-day window. And my second question is just back to the investment in local language content you’ve made several acquisitions to bolster that content. Going forward, I think you see outsized investment in content outside the U.S. versus domestic or is it kind of – how should we think about it should be kind of even? Which markets do you see as sort of more competitive and maybe need more spending?

Anthony DiClemente:

Thanks, Alexia. Operator, next question.

Rich Greenfield:

Hi, thanks for taking the question. Over the last several months, WarnerMedia moved away from Amazon channel. So you’ve seen essentially the biggest players in streaming

Anthony DiClemente:

Thanks, Rich. Next question, please.

John Hodulik:

Great. Thanks, guys. Two things. First on the DTC content, Naveen, thanks for the color there, ramping to sounds like over $2 billion in ‘21. Is the $5 billion in ‘24 still the target? Any color on sort of how that ramps in ‘22? And how much of that is incremental to the whole company? And then secondly, the licensing revenues look strong again this quarter, and I know you guys benefited from easier comps. But Bob, you’re talking about the business continuing to be a multi-revenue stream business. Just your view on sort of the future of that licensing business you have and how that fits into the broader D2C strategy? Thanks.

Bob Bakish:

Yes. Look, I will take the licensing side. We have obviously been in the licensing business for a long time. As a reminder, content licensing revenue for ViacomCBS has a bunch of different components in it. As Naveen mentioned in his remarks, it includes home entertainment, includes TV syndication, it includes consumer products, and of course, it includes licensing of content more broadly. When you look at – so I would say two things. One is we are in the licensing business, but two is that business is, for sure, evolving. So, when you look at the Q3 results, and yes, there was a whole bunch of growth there. The growth was heavily COVID related. We had many deliveries that were delayed due to production shutdowns. So, there is definitely some catch-up in Q3. And then the other thing that’s going on is, if you looked at the prior year quarter, particularly internationally, particularly in the ad-supported network space, you had many people that had hunkered – many buyers that had hunkered down and we are preserving cash given the uncertainty of the revenue situation. As the ad market has rebounded, those companies have moved to refresh their content lineups so that they can satisfy their consumers with new product versus kind of running these brackets off what they had at the time. And that’s certainly a driver of the growth. The third thing is there are a bunch of original series deliveries in there. What you need to understand about that is those are fulfillment of deals that were really predating the launch of Paramount+. So, that might be a third season of a show we are doing for someone. It might be a first season of a show we are doing for someone that took 2-plus years to create. So, while our strategy has shifted to become much more focused on owned and operated streaming with our franchises, etcetera. There is a tail to the, call it, legacy deals we have done, and you do see that showing up in the third quarter.

Operator:

Our next question comes from the line of Jessica Reif Ehrlich with Bank of America Securities. Please proceed with your question.

Bob Bakish:

Yes. So, a bunch of stuff in there, Jessica, let me start. On content and Paramount, presumably Paramount Pictures, we obviously made a management change there. I m very excited to have Brian in the chair, Jim obviously got us to a better place financially and really stabilized the studio. But as we look at the next chapter, we need to lean in more into franchises. We need to lean more into a multifaceted model, including, of course, streaming. And I think Brian, as both a content creator and a collaborator is ideally suited to that and is already moving quickly to prove that value. In terms of the evolution of the slate, Brian is working on that. I think the good news is we have a very well stock slate as we enter 2022, for sure, great pictures in the can, which hopefully the theatrical market will continue to improve. It has been improving, particularly at the younger end. And that slate will provide tremendous benefit theatrically. And we remain committed to theatrical, but also in downstream windows, including the fast follow strategy we are using for Paramount+ Pay1. You did see us announce a PAW Patrol sequel which speaks to franchises. But I am very excited about where Paramount Pictures is going to go. It clearly is an important part of the company as a content engine. And it’s clearly in early days, but clearly benefiting Paramount+ as well. Let me take the last part of your question, too, which is the Simon & Schuster one, and then I will throw it to Naveen. On Simon & Schuster, really, I just want to reiterate the statements that we and Penguin Random House made earlier in the week. We do believe the transaction will be beneficial for consumers, booksellers and authors. We think the DOJ’s claims are without merit. I am not going to get into any legal arguments here. But I will say, as we have disclosed, under our sale agreement, Penguin Random House has agreed to take all necessary steps to attain the required regulatory approval, including defending through – defending any litigation. And so they and we will vigorously defend this lawsuit. Naveen?

Anthony DiClemente:

Great. Thanks Jessica. Operator, next question.

Ben Swinburne:

Good morning. Bob, you talked a lot about different content verticals for streaming. I wanted to ask you about sports. How is the NFL and sort of your sports line outperforming? Are you looking to add sports rights? And are there international strategies around adding sports to your streaming portfolio over time? And then I will just ask my follow-up now to Naveen. On the new segments next year. I realize it’s a ways out. But I am assuming that includes EBITDA, so we are going to be getting the direct-to-consumer segment EBITDA number. And to your point earlier about content traveling I guess you will be using some sort of allocation between segments on programming that lives in both places. Just was wondering if you could give us some more color there. So, it’s obviously an interesting addition to the sort of disclosures. Thank you.

Naveen Chopra:

Yes. Ben, to your question on what to expect in terms of the new segment reporting, let me share a couple of thoughts. We are obviously making those changes because we are really evolving the way that we are managing the business, and we are increasingly thinking about it as the three parts that we outlined, that traditional media business that combines broadcast and cable networks, which is sort of a lower growth, but a very healthy margin business. The movie studio, which as you know is a core source of content for both our theatrical and streaming platforms. And then that D2C segment, which is the portfolio of a bunch of high-growth businesses where we are still in investment mode, but very bullish about the future growth potential. So yes, we will have those as fully independent segments, meaning the presentation will allow you to see the earnings power of our traditional businesses independent from the investment and contribution from streaming. And I think that will reveal a couple of important things. Number one, it will give you a holistic view of the direct-to-consumer business all the way through the P&L, to your question. And I think it will also demonstrate that earnings in our core business are relatively stable and materially higher than our consolidated OIBDA. So, I think it will be helpful to investors to look at the business in that way and get a much more accurate picture of how the different parts are evolving.

Operator:

Thank you. Our next question comes from the line of Doug Mitchelson with Credit Suisse. Please proceed with your question.

Bob Bakish:

Yes, Doug. So look, we have a differentiated strategy and one we believe is right for our company and right for the times. And that strategy spans both free and pay, which gives us access to the largest total addressable market opportunity. As you know, there is many types of consumers out there. Some people don’t want to pay on one extreme. And on the other extreme, there are heavy users that are fine with paying very significant, call it, monthly bills for entertainment content. Both of those segments or all the segments are a very material size. And the products we have in the space, in this case, Paramount+ on one hand and Pluto on the other, and I will come to Showtime, are differentiated in their space because they are both broad products. We definitely believe there are synergies across this. As you noted, Pluto as a free top-of-the-funnel service using our Paramount+ PIC channel, as an example, which showcases Paramount+ shows, likewise, exhibiting Showtime originals, first episodes, etcetera, both are good for subscriber acquisition. And then in the context of Paramount+ and Showtime in the U.S., those are two services with very, very low overlap in sub base. And so we believe a bundled strategy to the consumer could create some value. And as you know, we launched that product. There are other synergies in this business, too, particularly on the ad side. When you look across Pluto and Paramount+, and you heard Naveen talk about the growth rates of both of those ad businesses, obviously, those ad businesses need to be fueled by impression growth, and both of those businesses are growing impression. So, we like that combination. We believe there is early evidence of synergy across that combination, and we will continue to push that. In terms of Showtime and Paramount+ combined, as you know, we are doing that outside the United States. We think that will be really interesting to get some kind of real data on. But at the same time, they have very distinct brand positionings in the United States. Both are doing well, including Showtime OTT, that’s really offsetting pressures in the linear business. And again, it has a very distinct positioning has a great content slate whether it’s shows like Billions or the L Word or The Chi, new hits like Your Honor. Dexter, I was at the Red Carpet premiere earlier in the week and the return of that. So, Showtime continues to do very well, and we like this multifaceted configuration.

Anthony DiClemente:

Thanks so much Doug. Operator, we have time for one final question.

Robert Fishman:

Thank you and good morning. Yes, just one on the supply chain. So, any impact that you can help share on auto or any other verticals on your portfolio, broadcast, cable networks, the local stations and even Pluto? And then more broadly, if you can discuss how the fourth quarter ad market is looking and any early cancellations you have seen for next quarter? Thank you.

Anthony DiClemente:

Thanks, operator. That concludes our Q3 earnings call.

Anthony DiClemente:

Good morning, everyone, and thank you for taking the time to join us for our second quarter 2021 earnings call. Joining me for today's discussion are Bob Bakish, our President and CEO; and Naveen Chopra, our CFO. Please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our website. I want to remind you that certain statements made on this call are forward-looking statements that involve risks and uncertainties. These risks and uncertainties are discussed in more detail in our filings with the SEC. Some of today's financial remarks will focus on adjusted results. Reconciliations of these non-GAAP financial measures can be found in our earnings release or in our trending schedules, which contain supplemental information and in each case, can be found in the Investor Relations section of our website. Now I will turn the call over to Bob.

Naveen Chopra:

Thank you, Bob. And good morning, everyone. As Bob mentioned, our second quarter results were highlighted by robust growth in streaming, where we had another quarter of record subscriber additions. Growth rates for both streaming subscription and streaming advertising revenue accelerated from their already strong Q1 levels, taking overall streaming revenue to 92% year-on-year growth. Q2 also benefited from strong performance in advertising and affiliate revenue. I’ll unpack our streaming results by sharing additional color on audience growth, engagement and monetization. Starting with our subscription businesses, and then moving to our ad supported services. We added $6.5 million global streaming subscribers in the quarter, taking us to more than $42 million global streaming subscribers. SHOWTIMEOTT enjoyed one of its best quarters ever in terms of new signups. But like last quarter, the significant majority of our new subscribers are from Paramount Plus, including a mix of both domestic and international subscribers. In fact, we were increasingly bullish about the international market opportunity for Paramount Plus, as evidenced by our Q2 results, and our newly announced partnership with Sky. Financially speaking, this type of deal provides a capital efficient way for us to quickly build scale and awareness in new markets. Bundles with international partners bring low churn and highly efficient acquisition costs. Moreover, as Bob pointed out, ARPUs are meaningfully accretive to the linear affiliate revenue we are replacing. In addition to strong subscriber growth, we also saw continued improvement in customer engagement and retention, as the breadth of our content portfolio continues to expand. For example, for Paramount Plus domestic trial that pay conversion, monthly hours per active and monthly churn all improve measurably in Q2 on both a sequential basis and year-over-year. In terms of monetization, we saw healthy streaming subscription ARPU growth of 4% in Q2, versus the Q1 level. The combination of strong subscriber growth and increased engagement powered year-over-year streaming subscription revenue growth of 82% to $481 million. Moving on to streaming advertising. Here, our growth was led by Pluto TV. As at quarter-end, Pluto TV reached more than 52 million global MAUs across 25 countries. Pluto's revenue grew 169% in the quarter. This tremendous expansion of the business has been driven by growth in users’ engagement and sell through. Domestic watch time per MAU increased 45% year-over-year in Q2, and Pluto TV domestic ARPU more than doubled year-over-year, benefiting from a double-digit percentage increase in effective CPMs and significant improvement in sell through. This enhanced monetization reflect both strong demand for Pluto TVs high quality connected TV inventory, and efficiency benefits from the Q2 launch of open header bidding. While Pluto remains the largest component of our IQ digital advertising platform, we are optimistic about the growth potential for advertising on Paramount Plus, an early results are encouraging. In fact, in Q2, Paramount Plus domestic advertising revenue more than doubled versus a year ago. Benefiting from user growth along with a high teens percentage increase in streaming advertising ARPU per active sub. We believe we're just scratching the surface of the Paramount Plus advertising opportunity as user and engagement growth alongside product enhancements should add supply for this highly valuable digital video inventory. When you put it all together this quarter, the combination of Pluto TV, Paramount Plus, and other IQ platforms, drove streaming advertising revenue to $502 million representing 102% year-over-year growth. Advertising revenue, which excludes streaming grew 24% in Q2 to $2.1 billion, benefiting from both the return of the NCAA Men's Basketball Tournament, as well as timing shifts of this year's professional golf tournaments. This quarter strong growth rate was also a function of improvement in demand, and record scatter pricing compared with the COVID impacted quarter a year ago. Affiliate revenue, which excludes streaming grew 9% to $2.1 billion, where we benefited from distribution deals and renewals that provide incremental carriage and improved economics, which more than offset changes in the number of pay television subscribers. Even excluding the impact of incremental distribution deals, we saw modest improvements in subscriber trends in Q2, as we did in Q1. Licensing and other revenue fell 36% to $1.2 billion, as the year ago period included a significant licensing deal for South Park. Adjusting for the 21 percentage point impact of the South Park deal. Licensing and other revenue would have been down about 15%, which reflects COVID impacted content availability and our ongoing efforts to limit licensing to third-party streaming services. Total company revenue grew 8% year-over-year to 6.6 billion. Adjusted OIBDA fell 25% to $1.2 billion in the quarter. Again, year-over-year, growth rates for revenue and adjusted OIBDA were impacted by the comparison to the year ago period, which included a significant contribution from the licensing of South Park. Excluding the 9 and 30 percentage points South Park impact respectively, Q2 revenue growth would have been 17% year-over-year and adjusted OIBDA growth would have been 5% year-over-year as revenue growth and ongoing cost management more than offset increased investment in streaming. Adjusted diluted EPS was $0.97 in the quarter, and Q2 adjusted free cash flow was $75 million. Moving to the balance sheet, we finished the quarter with $5.4 billion of cash on hand and total long-term debt of $17.7 billion, this translates to a 2.4 times net leverage ratio as of June 30. We have significant financial flexibility, which will increase with net proceeds of $2 billion from the sale of Simon & Schuster, which is on track to close in 2021, subject to regulatory approval. We continue to believe investing in our streaming growth opportunity is our best use of capital. And we are starting to execute across the streaming growth vectors we previously described. As Bob highlighted, we are investing even more in original content for Paramount Plus. Our long-term multi format deals with Alex Kurtzman, Taylor Sheridan, and the creators of South Park exemplify compelling opportunities to bring heavyweight franchise IP with global appeal exclusively to Paramount Plus. We are accelerating international expansion, as evidenced by our plan to launch Paramount Plus in 45 markets by the end of 2022. And aided by strategic partnerships, like the one we announced with Sky today, which will accelerate our growth plans in the U.K., Italy and Germany. And we continue to reduce the amount of original content we make for and licensed to third-party streamers, instead focusing more of our creative assets on in-house streaming services. Beyond investing in streaming, we use excess cash to pay our dividend, manage leverage and fund opportunistic M&A, which bolsters our streaming growth ambitions, similar to our 2020 investment in MIRAMAX and our pending acquisition of Chilevisión, which we anticipate closing in Q3. Looking ahead to the third quarter, we expect to see continued strong year-over-year streaming growth in both the subscription and advertising parts of the business. In Q3, Paramount Plus will benefit from the strong content lineup Bob described as well as the rollout of our SHOWTIME Paramount Plus bundle. International growth will be aided by our launch at Paramount Plus in Australia and the launch of additional distribution partnerships. And we expect Pluto TV to see continued growth in engagement and further improvement in monetization, in addition to MAU growth from international market launches, as it continues till March to over a $1 billion in revenue for full year 2021. Average advertising in the back half of the year will continue to benefit from a robust market. So year-on-year trends will be compared to the return of demand in Q3, 2020 as we ramped out of COVID and benefited from record political spent. Advertising growth will improve when new upfront pricing kicks-in for Q4. We expect affiliate revenue growth in the back half of ‘21 to slow as we lapped the benefit of new distribution from YouTube TV, and the timing of other affiliate renewals, which started in Q2 of 2020. We expect to return to growth in content licensing revenue, largely driven by increased licensing of TV content for linear distribution. Looking further out, our enthusiasm for streaming continues to grow. Streaming revenue and subscriber growth are pacing ahead of our expectations and streaming will represent close to 15% of total company revenue in 2021, and will become an even bigger share of revenue next year. This momentum tells us that our investment thesis is solid and can unlock significant incremental growth. In pursuit of this growth, we continue to expect streaming content expense will more than double in 2021. relative to our 2020 spend, as we deliberately transition linear content expense to streaming content expense. We are confident the streaming investments we are making will yield compelling ROI. You can see some of the early proof points in this quarter's results. And we are bullish about where we can go from here. Moreover, we are excited about the long-term shareholder value we can create. With that, let's open the call for questions.

A - Naveen Chopra:

We can’t hear the question?

Naveen Chopra:

We're not getting?

Operator:

Gentlemen, thank you for standing-by. Mr. Feldman, Mr. Feldman. Your line is open, sir. Please give us your question.

Naveen Chopra:

Yes.

Brett Feldman:

Outstanding. All right. Two questions. If you don't mind. The first one is for Bob. Obviously seeing continued M&A. And your company has been cited as a potential merger partner in a lot of these media reports. So my first question for you is, do you need more scale? And how do you think about the metrics gaining it via M&A or partnerships? And then the second question is for Naveen, I was hoping you can give us a little bit of insight on the uptake that you've seen in the new ad light tier ParamountPlus, was it meaningful to the net ads you had in the quarter, and any insight you can give them where the ARPU is trending there would be appreciated? Thank you.

Naveen Chopra:

Yes, and regarding the essential plan, we're very excited about being able to launch that this quarter, we think it expands the Paramount Plus proposition to an even greater set of different customers. And from our perspective, we're actually very happy for people to sign up for either our premium or essential tier, we want them in the plan, that's going to be the stickiest for them. Because in the long run, we know that we maximize lifetime value based on the expected life of our customers. It's also important to recognize that the ARPUs between each of those tiers are actually not as different as you might think, because of the advertising contribution from the essential tier. And those ARPUs actually, both the subscription and the combined advertising and subscription in the essential tier are growing both domestically and internationally. And we think that they have material future upside potential, both through evolution of pricing, and also significant upside in the ad monetization. So we'd like how essentials is progressing. And we think it's going to be very additive to our strategy.

Operator:

As the next analyst is Michael Morris with Guggenheim. Please go ahead sir.

Bob Bakish:

Yes, sure, Michael. So just to frame it, our streaming strategy overall is to access the largest total addressable market, and do so by leveraging the full power of ViacomCBS. That obviously means global so international is a key component including critical scale markets like the U.K., Germany and Italy. The good news is we have a long mutually productive value creating history with Sky. And to that end, we saw a compelling opportunity to use renewables in the U.K., Italy and Germany, to both elongate and continue to transform our business, and specifically accelerate our streaming strategy. On streaming, you’ll see us launch Paramount Plus in 2022, to the subscriber base on the Sky cinema tier, and that'll be albacore on top of that, in all of those markets, which will be a very meaningful sub catalyst in 2022. And as I said, in my prepared remarks, part of this deal was unlocking some previous exclusive to Sky content. So, in addition to the distribution boost, it really makes our product even more compelling. All that said, and I'm not going to comment on real contract specifics, I will tell you, we're happy with the economics. We see this deal as a meaningful, predictable Paramount Plus subscriber accelerant in all those markets, and one with a compelling churn reduction dynamic. And importantly, the deal does not prevent us from pursuing the broader DTC opportunity in these markets. So this is an awesome deal for us. And it's an example of leveraging the full power of ViacomCBS, including existing relationships, to accelerate our streaming business. And that's something we're going to look to continue to do. Naveen?

Bob Bakish:

Great. Thanks, Mike. Operator, next question, please.

Alexia Quadrani:

Hi, thank you. My question is really on your film strategy. Your thoughts on the health of the box office as a profit driver for Paramount long return? Do you still see it as the big driver of growth longer term? And then sort of staying on your film business? I think you've recently made some changes. I think he pulled Clifford from the film play because the Delta variant I assume and putting Paw Patrol daily. I guess I'm curious if you see the 45-day close to window eventually for all your major films or will be decided basis. I guess I'm trying to get a sense that this is so COVID related changes or you'll kind of go back and forth longer term depending on what your thoughts on the outlook?

Operator:

Next question comes from Ben Swinburne with Morgan Stanley.

Naveen Chopra:

Yes. Hey, Ben. So I'll start with your question on ARPU, and then touch on free cash flow. So as you pointed out, subscription, ARPU in Q2 saw some very nice sequential improvement. And I point out that that improvement happened both with respect to domestic ARPU and international ARPU. And I think going forward, it's important to think about those two things somewhat independently. Because the drivers are a little different. Domestic ARPU will benefit from continued conversion of trial subs into pay subs. And it will also be influenced by the mix of subs between our essential and premium tiers. But as I said earlier, it's important to remember that the real ARPU coming out of our essential tier includes both subscription and advertising revenue. So in the long-term, we think that the essential tier can actually be accretive to overall ARPUs on Paramount Plus. On the international side. The next wave of countries that we're going to be launching which are primarily in Europe and Australia are higher ARPU markets then where we've been today, which has been primarily Latin America. So that should be accretive to ARPU. And in fact, the deal we announced with Sky today is a great example of that. Would that deal we will quickly add millions of subscribers in the U.K. when it launches. And those subs would be accretive to both our current international streaming ARPU and the ARPU that we generate on the linear affiliate side today. In terms of free cash flow, I'd say a couple things. Number one, as we said before, we are increasing streaming investment for content. You've heard me mentioned before that we expect that investment to more than double this year relative to 2020. Again, not all of it is incremental on a total company basis, because there's a lot of remixing between linear and streaming. And we've got content that does double duty. But we're also doing well in terms of being ahead of our plan on revenue and subs and continuing to find ways to drive operating leverage out of the business. So the result of all that, I think in terms of free cash flow, obviously, that will mean that there's some working capital needs going forward, both to scale that production on the streaming side. And also just generally, as we transition out of COVID. Some of the tailwinds that we've had from a cash flow perspective, in 2020, in the first half of this year, probably start to dissipate.

Rich Greenfield:

Hi, thanks for taking the questions. I just want to follow up on Alexia’s question, just as you think about sort of things like Snake Eyes, which, obviously, you're struggling at the box office, just given the health of U.S. box office. I mean, even the two biggest films to-date, I think have only done domestically $170 million or $175 million sort of looks like the peak and so it just doesn't seem like box office dollars are there the way they used to? And I guess, Bob you sort of alluded to other strategies, but I'm just wondering, you've got two other companies, one in Disney doing sort of a $30 day-in-date, premium access, and you've got Warner Brothers sort of throwing them in at no extra cost Netflix Style and HBO Max. We just sort of love your view, given that it looks like things are getting worse again, rather than better from an attendance standpoint, is there one of those that you prefer, or one of those that you think makes more sense for Paramount? And then just, I guess for Bob, specifically, to me, Nick seems like one of the most important assets, when I think about creation of franchises, and what it's doing for your streaming service, I was wondering, sort of how you think about the IP creation -- new IP and creation at Nickelodeon over the past year, and what you see coming over the course of the next year that we should keep our eye on?

Operator:

The next question is from Jessica Reif Ehrlich with Bank of America.

Bob Bakish:

Yes, sure, Jessica, let's do it in reverse order. Let me talk about advertising, big picture, and then and then have Naveen, add some color around your question of ARPU, etcetera. So, to your point, and our remarks, we're very happy with what we're seeing in the ad market. We're clearly benefiting from our leadership position, they're in. The upfront, as expected was particularly strong this year. Part of that, of course, was a function of supply and demand at the market level supply, particularly on linear being tight, and demand strong, given the ongoing ramp out of COVID. That obviously set the stage for very strong and arguably historic linear prices increases. And those increases were what we delivered, and those will largely kick in Q4. But it's not just market, there are also real ViacomCBS elements in play here. We obviously benefit from a portfolio which includes premium content, both in the mass market and targeted spaces, including with young and diverse audiences. We have leadership both on the linear side, and with IQ on the digital video side. IQ in particular, on a long-term basis, and in this upfront is really important because it provides a large volume of high quality impressions, which more than offset the linear supply dynamics and drive overall advertising revenue. And critical to all of that is our executing as a single sales organization that allows clients and their agencies really turnkey access to the portfolio through a single point of contact. So very pleased with what we're seeing in the ad market. Very pleased with the upfront really a case study of the strength of ViacomCBS, and our ability to differentiate ourselves and grow on an ongoing basis. Naveen?

Operator:

Next question is from Vijay Jayant with Evercore.

Bob Bakish:

Yes, sure, Vijay. So let me start by saying we're extremely pleased with where we are from an affiliate perspective. And see this multi quarter track record that we've put on the boards of affiliate renewal after affiliate renewal as overwhelming evidence of the strength of ViacomCBS. ViacomCBS really is a cornerstone provider to the distribution community. And yes, that started way back when, with the provision of linear feeds, probably five or six years ago that expanded to include advanced advertising partnerships, which were mutually beneficial. And now it's incorporating streaming as a fundamental element. And so we are working with MVPDs to advance our streaming benefit for both of ours benefit. And we're doing that across free and pay. We're doing that across set-top box and broadband only. And the reason examples of that are Charter and Cox, were streaming with certainly additive and mutually beneficial. And then today's announcement Sky, same thing. So it really is a modernization of broadening and making these partnerships even stronger as we together transform the benefit and provide the business and for ViacomCBS really accelerate the growth of our streaming portfolio. So we're feeling great about it Vijay.

John Janedis:

Thank you, Bob, maybe one for you with your comments on Paramount Plus and coming out of the upfront. Can you give us more of an update on your digital advertising strategy? I don't know if you separate the dollars between Paramount Plus PTV and Pluto, but maybe even directionally, what are you targeting for digital as a percent of the total? And do the CPM increases and TBS provides some form of a tailwind or upside for price increases? Or do you go for volume in the short-term? And then maybe a quickie on Pluto? With the growth they're still really strong? Have you seen any changes in either the economics of the business or content availability?

Operator:

Yes, that question is from one and Robert Fishman with Moffett Nathanson.

Bob Bakish:

Yes, so in that order, so sports are fundamental, the Paramount Plus. Again, we think the Paramount Plus as live sports, breaking news and a mountain of entertainment. If you look at our experience in Q1 and Q2 it clearly points to the value of sports, there's no question the NFL makes a difference. And part of our long-term renewal with the NFL, some months ago was of course, insuring rights for Paramount Plus, by the way, both a 999 and the 499 product 499 product doesn't have the linear feet. So, we had to do some work with the NFL and we did. Soccer is making a difference. And you see us growing our collection there, I'm really looking forward to see what Syria does. Very shortly, that'll be our first season with that as the Italian league. Golf to makes a difference. They all contribute to ParamountPlus, they all broaden its appeal to specific market sectors. But I think also importantly, they work in what we would call a conjoint way with entertainment. There are sports fans out there and they also love entertainment. And so as we ensure that the product is sticky as we optimize monetization having a strong entertaining offering to go with the sports offering is very important. And again, while early days, we're seeing really clear value there. And it's obviously a critical extension of CBS Sports and a modernization of that into the streaming world. So we like that a lot. The Pluto question what -- sorry, can you just restate your Pluto question, Rob?

Bob Bakish:

Right, thank you. Look, we are privileged to be in a leadership position with Pluto. That's partially because we saw the opportunity early and then added first Viacom and now ViacomCBS assets and capabilities to it in the form of content, in the form of distribution, in the form of advertising sales. I don't think it's a winner take to all market. But clearly, having a leadership position is exceptionally valuable. And we are certainly focused on continuing to press the gas pedal there and building a leadership position worldwide. And I would point out that as you have this scale, it really is a flywheel of Talking Tom, Ryan, he'll talk about the Pluto flywheel. And what he means by that is, the scale is self reinforcing. Because as the platform gets bigger, as you have more MAUs, your monetization increases to the example of $70 million to a billion this year. That means that the people who have content on the platform make more money, which in turn means your platform is more attractive, which in turn means you get better content. So the good news is that the trajectory Pluto's on and again, we couldn't be happier.

Operator:

This concludes today's conference. You may disconnect your lines. Thank you for your participation.

Anthony DiClemente:

Good morning everyone and thank you for taking the time to join us for our first quarter 2021 earnings call. Joining me for today’s discussion are Bob Bakish, our President and CEO and Naveen Chopra, our CFO. Please note that in vision to our earnings release we have trending schedules containing supplemental information available on our website. We also have a slide a presentation for your to follow along with our remarks. Want to refer you to the second slide in that presentation and remind you that certain statements made on this call are forward-looking statements that involve risks and uncertainties. These risks and uncertainties are discussed in more detail in our filings with the SEC. Some of today's financial remarks will focus on adjusted results. Reconciliations of these non-GAAP financial measures can be found in our earnings release or in our trending schedules, which contain supplemental information, and in each case, can be found in the Investor Relations section of our website. Now I will turn the call over to Bob.

Naveen Chopra:

Thank you, Bob. Good morning, everyone. As Bob mentioned, we had very strong financial results in the first quarter of 2021 across revenue, adjusted OIBDA, adjusted EPS, and adjusted free cash flow. Our results reflect robust growth in streaming where we saw record subscriber additions and revenue growth of 65%, as well as solid performance in our linear business. Our first quarter streaming results are evidence of the early positive response we have seen from the launch of Paramount+ and continued momentum in Pluto TV and Showtime OTT. We added 6 million global streaming subscribers in Q1, marking a record quarter of subscriber growth and taking us to 36 million global streaming subscribers as of quarter end. The significant majority of new subscribers were from Paramount+ and of those the significant majority were domestic customers. The combination of subscriber growth and increased engagement helped streaming subscription revenue grow 69% to 388 million. These results include the impact of subscribers whose free trials extended beyond quarter-end and international subscriber growth, where ARPUs are generally lower relative to domestic subscriptions. Turning to streaming and advertising, the largest driver of growth came from Pluto TV, where we added 6.4 million global Pluto TV MAUs in Q1, and now reached nearly 50 million MAUs globally. Pluto TV engagement also continues to improve. Average monthly watch time for domestic user increased 28% year-on-year in the first quarter. The increased engagement combined with domestic sell through rates that were up 600 basis points drove significant improvements in Pluto's domestic ARPU. The evolution of Pluto's domestic business also gives us confidence that a similar pattern of international monetization growth can be unlocked as we scale globally. Overall Pluto TV revenue more than doubled in Q1 on a year-over-year basis for the third consecutive quarter. The strong advertising performance from Pluto TV and our other brand specific streaming sites and apps, all of which are critical drivers of our IQ Digital Ad platform drove a 62% increase in streaming advertising revenue to 428 million. Advertising revenue which excludes streaming grew 21% in the quarter to 2.7 billion, driven by the success of Super Bowl 55 and the return of the NCAA Men's Basketball Tournament, neither of which aired on CBS in the prior year period. Advertising demand continues to improve with strong scatter pricing relative to the upfront and last year scatter market. Affiliate revenue, which also excludes streaming grew 5% in Q1 to 2.1 billion. We continue to benefit from distribution renewal signed in 2020 that included incremental carriage and improved economics as well as contractual rate increases, which more than offset the decline in the number of paid TV subscribers. Licensing and other revenue grew 11% to 1.8 billion. Keep in mind that licensing revenue is reported on a consolidated basis after the elimination of significant intercompany licensing transactions related to content on Paramount+. Theatrical revenue was insignificant in Q1 as we had no releases in the quarter. We are looking forward to our first theatrical release in over a year with A Quiet Place 2 which debuts in theaters on May 28th. Total revenue was 7.4 billion, up 14% year-over-year leading to adjusted OIBDA of 1.6 billion up 31% year-over-year and diluted EPS was $1.52, up 36% year-over-year. The growth in adjusted OIBDA benefited from our strong revenue growth partially offset by costs associated with our investment in Paramount+. Q1 adjusted free cash flow was 1.7 billion benefiting from OIBDA growth and the timing of cash production spend and favorable collections among other factors. Moving to the balance sheet, during Q1 we redeemed 2 billion of debt and raised 2.7 billion of cash from the sale of equity and mandatory convertible preferred securities. In combination with our strong free cash flow generation, these transactions resulted in 5.5 billion of cash on hand and total debt of 17.8 billion at quarter-end. This translates to a 2.2 times net leverage ratio as of March 31st. I'd now like to share some insights regarding the second quarter. We expect continued robust growth in streaming revenue with the Q2 growth rates for total streaming revenue, streaming advertising revenue, and streaming subscription revenue, all accelerating versus the Q1 growth rates. Streaming subscription revenue in particular will benefit from Paramount+ subscribers who began free trials in Q1, but only start generating revenue in Q2. We expect another quarter of strong double-digit advertising growth as demand continues to improve and scatter pricing remains at all-time highs. We will also benefit from the NCAA final four and championship games which didn't occur in the prior year period. Turning to affiliate revenue, we expect to see modest acceleration in the year-over-year growth in Q2 relative to Q1 as we continue to benefit from several new distribution deals signed in 2020 and early 2021, which include increased pricing and expanded distribution. For content licensing, we expect revenue to decline year-on-year because Q2 2020 included significant revenue and OIBDA from the licensing of South Park. In regard to Q2 adjusted free cash flow, we expect some reversal of the working capital tailwinds which benefited Q1, largely driven by the timing of production spend and continued investment in Paramount+. Looking further out, our enthusiasm for the potential of streaming continues to grow. The streaming market is global, it is growing fast, and we are well positioned to take share. Streaming presents a compelling market opportunity for two key reasons; one, unit upside where streaming allows for a greater addressable base of viewers go linear and two, ARPU upside because streaming ARPU's have a more compelling long-term trajectory than linear. The unit upside is especially true internationally where streaming allows us to reach beyond the Pay TV universe, which has limited penetration in many international markets. And when it comes to ARPU upside, we think that over time the per subscriber economics of streaming can be accretive to linear when considering the combination of advertising and subscription revenue captured by our ecosystem of free, pay, and premium streaming services. We see opportunity to drive Paramount+ subscription ARPU higher as distribution channels and subscriber mix evolve and as we expand our content offering to deliver greater and greater value to customers. And we see even more growth potential in advertising ARPU where both Paramount+ and Pluto TV will benefit from increased engagement, improved targeting, dynamic ad loads, and sell through optimization. I would also note that in most instances outside the United States streaming economics are already accretive as international linear ARPU is materially lower than streaming ARPU today. This attractive market opportunity is one of the primary reasons we decided to raise capital in March. We intend to use the additional investment firepower to take our streaming efforts to the next level building on the consistent momentum we have demonstrated over the past few quarters and leaning even more aggressively into streaming. You will see us deploy new capital in four major areas. First, we intend to fund development of more original series and movies exclusively for streaming. Second, we will pursue incremental streaming sports rights. Third, we will look to accelerate international launches and market expansion. And fourth, we plan to further reduce the amount of content we licensed to third party streamers instead preserving more of these assets for our in-house streaming services. We're moving quickly to start deploying this capital. In fact, Bob shared some of our early investment initiatives including the addition of Serie A Football, a Paramount+ exclusive release of the movie Infinite, and the acceleration of our international deployment plan. Nonetheless, the bulk of our investments will occur in 2022 and beyond. In the months ahead, we'll have more to share on these additional investment plans as we aim to capture an even greater share of a growing long-term market opportunity. With that, we can now open the line for questions.

Michael Morris:

Thank you guys. Good morning, a couple of questions on the streaming business. First one on Paramount+, appreciate all the detail on signups and engagement. There's a lot in there, hoping to dig a little bit more on trend. I know we're only a couple of months into Paramount+, but we do have some good historic data on -- with all access. So I'm curious if you can talk about how engagement churn has sort of trended with the new product availability, the expanded product and if anything, on the content side in particular has maybe surprised you compared to what you were anticipating and how that might inform some of those investment decisions going forward? And then also on Pluto, I think ad revenue growth is outpacing that sort of combination of usage and per engagement growth -- engagement per user growth. Is that accurate, there's a couple of moving parts in there, and can you kind of provide any context for what the upside is for Pluto maybe compared to how you monetize your linear audiences? Thank you.

Anthony DiClemente:

Thanks a lot Mike. Operator, let's take our next question.

Brett Feldman:

Thanks and two if you don't mind. So just following-up a little bit, as you had noted the quarter-end global subscriber number would include anyone that was still in a free trial period and with Paramount+ having launched in early March, anyone who signed up after the launch would have been in their free trial at the end of the quarter. So, you're now two months past the launch, many of those customers have gone through the free month, some of them have gone through a paid month, can you give us any insight into what the free to paid conversion is looking like and maybe how that has compared to what you historically saw with CBS all access? And then Naveen thank you for the color around sort of the four areas you're looking to sort of lean in with your investment on streaming. Can you give us any context, are certain of those a little more front burner than others, you said we might start to see that in the financials next year, what does that mean? And then really the more important question is if you're investing more, how should we think about seeing that payoff, do you think you can meet your long-term targets sooner, do you think there's upside, any further insight there would be greatly appreciated?

Naveen Chopra:

Yeah. So let me try to add a little color in terms of how we see the deployment of that capital playing out. You heard Bob talk today about some of the ways in which we're already starting to deploy that capital, which as reminder it's things like the addition of Serie A Football on Paramount+, the Infinite movie being released on Paramount+, a significant acceleration of our international expansion plans, and starting to ramp up to getting an original movie each week on Paramount+. So those things will allow us to start deploying some of the incremental cash. As I said in the second half of 2021, that being said we're obviously not going to spend $2.7 billion overnight. So the bulk of the investment will happen over a multi-year period of time. And we are continuing to be diligent in evaluating a variety of different investment options against one another and we're very focused on the ROI of those across all of the different buckets that we articulated. So I would expect that as we commit to some of those specific plans we'll look to share more about the expense magnitude, the timing of the cash versus the expense which could be different by the way, and I think perhaps most importantly, how those investment plans affect our goals for subscriber and revenue growth, which is obviously the intent, the motivation behind any of those investments is to try to exceed some of the goals that we've already set for ourselves. One other point that I think is important just to be aware of from a timing perspective, as I said, we are starting to fund some of those -- these early initiatives this year. Though I'd note that our expectations for full year OIBDA and free cash flow really haven't changed materially because of the over performance in Q1. So that is hopefully helpful to you in terms of thinking about some of the timing elements of this.

Operator:

Thank you. Our next question comes from the line of Ben Swinburne with Morgan Stanley. Please proceed with your question.

Robert M. Bakish:

Yeah. So we'll take this sequentially Ben. So on the 499 product, we're really excited about it. It obviously brings live sports, breaking news, and amount of entertainment including this expanded original slate to the market at a lower price point. That's great from a consumer perspective. For us, it also has cost advantages, which improve margins versus the legacy 599 product, which we will be discontinuing from a new subscriber standpoint. If you step back from it, we believe two tiers of Paramount+ really maximizes its ability to drive the total addressable market. Obviously this lower price point at 499 is good for the more cost sensitive consumer and thus helps maximize total subscribers for Paramount+. It also adds another important asset for us in terms of advertising inventory. It will become part of IQ and because there's so much opportunity in high-quality premium streaming, digital advertising, we see the product actually generating higher ARPUs over time than the 999 product. So, it really is quite exciting there. I'd also point out that adding this to our quiver broadened the portfolio we have to work with distributors to meet their objectives, really strengthens our position as a supplier of choice. We add that to our existing offerings, both in free with Pluto TV and the Paramount and Showtime OTT and BET+ paid products. Obviously it's at the lower end of the price point, so it could work for a subset of their consumer base. It also related to the cost structure gives us more flexibility on promotions and so that's something we're excited to deploy. And lastly, I'd note, it will launch in early June with broad distribution. So very excited about the 499 product and how it will continue to drive Paramount+. Naveen.

Anthony DiClemente:

Great, thanks Ben. Operator, next question, please.

Alexia Quadrani:

Thank you. Just staying on Paramount+, we've seen some of your competitors experience a pull forward and growth in subs on their streaming platforms during the pandemic, and then Q1 you had the benefit of substantial marketing push and the rebranding which accelerated subscriber growth. I'm curious how you're thinking -- how we should think about growth in subs at Paramount+ over the next couple quarters? And then my follow-up question is just sort of circling back to your comments on international expansion also on Paramount+, you highlight a bunch of markets, you gave us some great color which I really appreciate. I'm curious, where you see the biggest opportunity, what markets, and outside of Spanish language are you ramping up in local language like your peers as well?

Anthony DiClemente:

Thanks Alexia. Operator, next question.

Rich Greenfield:

Hey, thanks for taking the questions. A couple of them; first, I want to just dig in a little bit deeper into the comments about what people are actually doing on Paramount+. It seems like Nickelodeon just looking at like sort of the top shows every day, seeing things like SpongeBob and Paw Patrol, it seems like they are driving a very substantial part of viewership and wondering, like, when you look at sort of the promotion you talked about sports and some of the stuff that you have and certainly it had some originals, but it looks like the kids' stuff is really driving viewership. I guess a big picture question is like, you said double-digits, like is it half the kids, like how substantial is kids' programming and how do you get more viewership of some of the adults skewing fair, I'd be curious how you're thinking about the marketing message because it seems like kids has been a very powerful force for you? And then I just want to follow up on two things; one, you said you haven't commented are Paramount+ subs higher today than 36 million, could you give us any clarity on that? And then I think you mentioned one movie -- one original movie a week in 2022, does that include the 45 day after movies that are coming out in theaters or is that a dedicated original movie every single week, I just wasn't clear of what you meant by that?

Anthony DiClemente:

Yeah, I think he was asking about subs post the end of the quarter. We're not providing any numbers, but just remember that 36 is total global streaming subscribers rich, not just paramount+.

Operator:

Thank you. Our next question comes from the line of John Janedis with Wolfe Research. Please proceed with your question.

Robert M. Bakish:

Yeah, sure John. So on your first question, I'd start with the fact that ViacomCBS is a critically important content supplier to the MVPD ecosystem. Why do I say that? We do have a number one linear portfolio on share and we do lead on a range of key demographics. Within that we have must have content including sports, including the NFL. Beyond that, we have a really broad opportunity to work with them to create value. And you see that, for example, as we deploy our assets in the advanced ad space and we have advanced ad partnerships with most of the large MVPDS at this point. And more recently, we've become a supplier to the app space, with both free and paid streaming products, and we supply those to both their set top box and their broadband only infrastructure, things like Flex. So that gives us even more to work with. And you look at 2020 and you look at through the first quarter of 2021 and you see that we're using that asset base to consistently close deals, deals with companies that are formidable, the likes of Comcast, Verizon, YouTube, Hulu. And when you take the contractual -- when you take that, and then you combine the contractual rate inclusive increases for deals that are in flight, you've seen that drive affiliate growth in incremental distribution in linear. So it's a powerful combination. As we look forward, including to a world as you described with did you see [ph] Paramount+ growing etc. We like our position, we are among the most important content suppliers in the industry, we know how to get deals done. The addition of streaming, including Paramount+ gives us even more to work with. And remember, that helps us drive value for those customers and simultaneously helps them evolve their business, as consumers increasingly embrace broadband versus say Set Top Box. And our ability to do that, in turn drives real revenue and asset value for ViacomCBS. So yeah, negotiations might be a little more complicated than they have been in the past but I feel very good about our asset base. We have the best affiliate team in the business. And I feel great about the outlook of our partnerships with MVPDs. To your second question, Showtime. Showtime, is on a really nice roll. It produces great content and as we look at the segmentation of the consumer in the United States, there's no question that there's a significant market for a more upscale, more coastal, more R rated offering. That's what premium is. And as you saw, Showtime really continued it's great run in the first quarter. It had the top two scripted premium series with Your Honor and Shameless. It had record OTT sub growth and growth in total subscribers and it's had record engagement. So it's working. The fundamental driver here is content, originals in particular. Again, Shameless and Your Honor in the first quarter. Movies are important too, as they always have been in the premium category. As we look forward with Showtime, because it is part of your question, we like our slate. We currently have about 10 or 12 ten poll series per year and we support that or package that with three to five kind of lower cost original series. You look what's coming, it's the Return of Dexter, it’s the Return of Billions, a new series called American Rust with Jeff Daniels, a new series called Yellow Jackets with Juliette Lewis and Christina Ricci, that's pretty hairy kind of series. It's about a plane crash in Latin America and a girl soccer team and kind of what happens in that. We're doing a great project on First Ladies. You could think quasi crown of the U.S. and then starting with the Viola Davis playing Michelle Obama. Really excited about that. We're going to do a Ray Donovan movie. So the list goes on and that product by the way is not only good for Showtime in the U.S. where it'll continue to drive engagement and performance in the category but it's also going to increasingly benefit Paramount+ outside the U.S. where Showtime product is an integral component of the offering. By the way, the movie outlook is good for Showtime too and we have optionality in house. So we're feeling great about Showtime, both standalone and as an integral part of ViacomCBS, including in streaming. So with that, in closing, I just want to say a couple things. Clearly, very exciting times at ViacomCBS. We have strong operating momentum, we have amazing content, and we have a streaming strategy that is really delivering. You see all of that in our first quarter and it really positions us well moving forward. As management, we have a focus on value creation and delivering for our shareholders. That's true overall and certainly with respect to streaming, as we build on these strong early results and momentum, particularly with respect to Paramount+. It's a differentiated product, it's a product with real competitive advantages, and we're investing to deliver on its promise. So thank you for your time today. Thank you for your support. We look forward to continuing the dialogue as we execute and deliver on the ViacomCBS growth opportunity. And finally, I'd like to thank all the ViacomCBS employees for all they do every day to drive our company forward. Stay well, everyone.

Operator:

Thank you ladies and gentlemen. That concludes today's conference. You may now disconnect your lines and have a wonderful day.

Anthony DiClemente:

Good afternoon. My name is Anthony DiClemente, and I am the Head of Investor Relations at ViacomCBS. It is my pleasure to welcome you to our Streaming Investor Event and Fourth Quarter and Full Year 2020 Earnings Presentation. Before we begin, I would like to remind you that certain statements made in today's presentation are forward-looking statements that involve risks and uncertainties. Information about these risks and uncertainties are discussed in more detail in our filings with the SEC. Some of today's financial remarks will focus on adjusted results. Reconciliations of these non-GAAP financial measures can be found in our earnings release or in our trending schedules, which contain supplemental information, and in each case, can be found in the Investor Relations section of our website. With that being said, on behalf of everyone at ViacomCBS, I would like to thank you for taking the time to join us this afternoon. And now, sit back, relax, and enjoy the show. [Video Presentation]

Bob Bakish:

[Video Presentation] Thank you, Shari. And hello, everyone. On behalf of the ViacomCBS senior leadership team, thank you for joining us on this exciting day. Paramount was the first studio to make a full-length feature film back in 1912. In the century since, Paramount has been home to some of the biggest stars and the biggest movies and television series in Hollywood history. Paramount has also had a front-row seat on every innovation to propel the entertainment industry forward, from the advent of sound and color, to the rise of broadcast television, to the birth and rapid expansion of the Internet. Today, that landscape is being reshaped again, as the industry transitions from linear-based platforms to streaming video. So this lot is the perfect backdrop to launch an exciting new chapter for the Paramount brand and for ViacomCBS. Paramount has thrived through the years for a simple reason, because Paramount tells stories that people love. This is a brand that hasn't just produced iconic movies like The Godfather and Top Gun, but also legendary television series like, The Brady Bunch, Star Trek and Cheers. Paramount has proven that no matter how technology changes the industry, great content will always win in the end. And that same commitment to telling great stories, also sits at the heart of the flagship brands of ViacomCBS. Whether on demand, on broadcast or on the big screen, there's one truth we pride ourselves on that connects all of our brand experiences. We know how to make hits. ViacomCBS has been and remains a consistent hit maker across genres, across demographics, across formats and across platforms. Across our studios, we're one of the biggest suppliers of premium original content in the industry today, with nearly 900 shows in production this year. In addition to hits on our own networks around the world, every major streaming service has had a monster hit from one of our studios. We have made or licensed for third parties some of the most watched shows and movies of the streaming era, including 13 Reasons Why, Emily in Paris, Dead to Me, Jack Ryan, Avatar, The Haunting of Bly Manor and many others. The original shows we've made for others, is proof of the power of our content in the streaming era. And we also know that if we direct that same great content engine back to our own streaming service and unleash that same knack for producing original hits to attract our own subscribers, we can be successful. And that's exactly, what we're setting out to do. A year ago, I said we were going to super size CBS All Access, but we've done much more than that. We've transformed CBS All Access into Paramount+. Paramount+ will be one of the only streaming services to combine live sports, breaking news and a mountain of entertainment, a mountain of entertainment built on a portfolio of world-renowned brands. It's all your favorites, all in one place. Going forward, the combined creative firepower, franchises and IP of Paramount, CBS, MTV, Nickelodeon, Comedy Central, BET and the Smithsonian Channel will be focused on creating original hits for Paramount+. And Paramount+ will also be home to their massive libraries. As you'll hear over the next couple of hours, Paramount+ comes to the streaming space with real advantages that our competitors do not have. And with a strategy that's unique to the marketplace. As the streaming segment continues to evolve and mature, we believe consumers will increasingly be looking for the combination of genres that have long made linear television popular. And ours will be the first service that can do it at scale in each of them, all in one place. It starts with live sports. CBS was a pioneer of live sports on television more than seven decades ago, with coverage of college football, PGA golf and the NFL. College basketball found a home on CBS four decades ago. Today, Paramount+ is helping to bring those sports and more into the streaming era, with over 1,000 live sporting events a year. It will have exclusive matches and tournaments that fans love most, from the NFL to the National Women's Soccer League, from March Madness to the Masters. And we'll have Messi, Ronaldo and Neymar competing for some of soccer's biggest cups. Few other streaming services will offer live sports at this scale. The same is true of breaking news. There are a few brands more storied or celebrated in journalism than CBS News. Back when giants like Edward R. Murrow walked its halls, CBS invented Broadcast News. Eight decades later, our award-winning news programs and franchises, like the renowned 60 Minutes, are among the most watched and trusted in the world. And now that commitment to excellence is carrying over to the streaming era. Paramount+ is the only streaming service where well-informed citizens will get both a 24-hour news network and local news and weather from 200 local affiliates across America. Now we know that fans of sports and news also have this in common. When the game or the news is done, they like to find other content to watch. And as you've seen from our marketing campaign, we have a mountain of entertainment for them to enjoy. How big is that mountain? As you'll see today, it's a lot bigger than you think. It starts with more than 30,000 episodes of iconic television from some of the most popular franchises of all time, and we're building on that library immediately, with a broad slate of original content that we're thrilled to tell you about. This year alone, Paramount+ will debut 36 original series across key genre lines. And it will also have some unforgettable original movies, content that subscribers won't get anywhere else. Now if you like reality TV, Paramount+ is the place for you. Remember, ViacomCBS invented the genre with MTV's The Real World back in 1992, and we've dominated it globally ever since. Paramount+ will have more than 5,000 episodes of the biggest reality hits, including the most-watched reality series on all of television and four of the most popular reality franchises on cable. And we will debut a new reality series every single month in 2021. If you're a parent looking for outstanding kids programming, we have beloved characters and global franchises that have ranked in first place with kids and families for 25 years straight, a library of nearly 7,000 episodes of the most popular series ever and some extraordinary new original series and movies for kids on the way this year, including new versions of a certain sponge that lives under the sea. If scripted dramas are what you love, Paramount+ will, of course, benefit from our top rated broadcast network and studios that produce original programming on a huge scale. And we don't just develop shows. We develop powerful, beloved series and franchises that are as popular on streaming, as they are on broadcast, cable and the big screen. On Paramount+, you'll see powerful new versions of well-established television IP, amazing spin-offs based on franchise movies and of course, some of the best new ideas from creators responsible for a number of the most acclaimed series streaming today. The good news is that you help make our scripted dramas big hits on other services, there's a good chance that the next chapters or spin-off of your favorite franchises will be coming soon, only to Paramount+. In addition to reality, kids and scripted dramas, we also have more than 6,000 episodes of the world's funniest comedy programming and dozens of documentaries coming from award-winning film makers, including sports and news docks. We're thrilled about all of that. And let me tell you what we're most excited about. If you love movies, our service will do justice to the Paramount name. We will provide an unforgettable range of some of the most exciting movies ever made for the Paramount+ consumer. As you will hear in more detail from Jim Gianopulos, movies will come to Paramount+ in a variety of ways. First, some of the biggest, most anticipated new Paramount films will go exclusively to Paramount+ 30 to 45 days after their theatrical release. Second, all other new Paramount movies will appear on Paramount+ after their theatrical run, some as early as 90 days. In addition, new movies from MGM will also appear on Paramount+ during the pay one window. Third, the powerful hit-making studios across all of ViacomCBS are ramping up production to provide a continuous flow of new original movies made exclusively for Paramount+. And fourth, all of these new offerings will be underpinned by a library with over 2,500 titles from Paramount, Miramax and a number of other leading Hollywood studios, which includes some of the most popular films and franchises of all time. In short, if you love movies, Paramount+ is a streaming service that you can't live without. So we have incredible breadth and depth of content coming, truly. That's what we mean by a mountain of entertainment. Today, we're thrilled to show you the original storytelling that's coming in Paramount+. And here to tell us more about that mountain of entertainment, is a man who started more genres in his own right than you can count, our very own, James Corden.

Bob Bakish:

Thanks, James. Lastly, let me say that Paramount+ is not the only part of our streaming strategy that makes us unique. We're also the only media company to fully embrace an ecosystem of free, pay and premium streaming services. That starts with free. We acquired Pluto TV two years ago because it is a compelling, free, ad-based complement to linear and streaming video. Today, Pluto is the number one free ad-supported streaming television service in the United States and is quickly becoming a leading fast service around the world. Pluto may not be a planet, but it sure looks like a rocket ship. And it's well on its way to being a $1 billion business, and it's not going to stop there. On the premium side of the spectrum, we have Showtime OTT and BET+. We believe strongly in the premium space, because it attracts a different kind of consumer, one who values provocative, cutting-edge content and storytelling that takes risks. All told, no matter where you are on your streaming journey, we have fantastic content for you. This is a differentiated winning strategy. One of the reasons I'm so excited about our streaming future is that we have Tom Ryan, the visionary who built Pluto TV and a master at seeing and acting upon white spaces, driving our streaming execution across free, pay and premium. As Tom will tell you, you don't want to miss the chance to be part of it. It's my pleasure to introduce the President and CEO of Streaming at ViacomCBS, Tom Ryan.

George Cheeks:

Wow! Thanks, Ru. That's a serious view you've got up there. Now as Bob said earlier, Paramount+ stands out because it provides the full breadth of programming that consumers love. In addition to all the entertainment content CBS will bring to Paramount+, we're also contributing two of the service's biggest differentiators, live sports and breaking news. So let's talk about live sports. It's a huge passion point in our lives and the number one acquisition driver for our current streaming service. Fans come to us because we have college football and basketball. We've got the PGA Tour. We've got marquee events like the Super Bowl, NCAA March Madness, the Masters and the PGA championship. And of course, we have the NFL. It's television's most valuable property by far, attracting massive audiences and major advertisers. And it will be fundamental to the growth of Paramount+. It drives more subscriptions than any other program and significant engagement, too. Time spent streaming NFL games grew 88% this season alone. Any NFL game you can watch on CBS, you can stream on Paramount+. Bottom line, everything sports fans love on CBS, everything that brings them to us and everything that keeps them with us, our marquee properties, regular season games, playoffs, championships, all of this will be available on Paramount+. We're also doubling down on soccer for Paramount+. It's the world's most popular sport with billions of fans globally. And it's rapidly growing here in the US among young, diverse, enthusiastic digital natives, exactly the type of audience that's drawn to streaming. Plus it's year round, which means no seasonal churn. So as we look to the future, we are making soccer a core pillar of sports exclusively available on Paramount+. We will be the home of UEFA, including the popular Champions League, Europa League and Europa Conference League and the only place in the US where you can find every match, every season. That's hundreds of exclusive matches with renowned clubs like Man City, Barcelona and Bayern Munich. UEFA currently drives more new subscriptions than any sports partner except the NFL. Now for fans of Megan Rapinoe, Julie Ertz or Carli Lloyd, Paramount+ also will be the home of the national women's soccer league, with full regular season coverage and now the challenge cup. In addition to this, we've added exclusive US English language rights to three more soccer properties and hundreds of additional matches. We'll have more than 200 matches from Concacaf, covering 41 national teams across North and Central America and the Caribbean, including high profile matches for the US men's and women's national teams, as well as the women's World Cup qualifiers. We'll have more than 300 matches a year from Argentina's top soccer division with more than a century of history and some of the most famous rivalries in the world. We'll have 350 matches a year from Brazil's premier soccer league, known for holding the most club world champion titles and for producing exceptional young superstars. With the breadth of our sports programming available on Paramount+ as well as the depth of new exclusive matches and tournaments, few other streaming services will offer live sports at this scale. So let's hear what this means for fans from the people who know them best. [Video Presentation] Thanks, guys. Now as Jim and Tony know, fans don't stop watching when players stop playing. So while Paramount+ will be the leader in live sports, we'll also have original programming that will take fans even deeper into the sports they love. Here's just one example. Inside the NFL, it's a go-to program for NFL fans with the most respected experts in the industry offering an inside look at America's most popular sport. And it's coming exclusively to Paramount+. This is exactly the kind of programming that turns new subscribers into lifelong fans, and it's just the beginning. Now beyond sports, Paramount+ will give you deeper insight into our world with breaking news and impactful journalism from the award-winning CBS News team, Truth Matters. And today, more than ever, we need best-in-class unbiased journalism that brings us the news as soon as it happens and unpacks the most pressing questions of the day with context and with perspective. This is what CBS News stands for. Time-honored broadcast with steadfast followers, trusted journalists who help people understand not just what's happening, but why? And who better to speak to the power of CBS News than Norah O'Donnell and Gayle King.

Norah O'Donnell:

Hey, Gayle, and hey, George. Hi, everybody, so good to be here.

Norah O'Donnell:

It's so true. CBS News and all of the reporters here have a mission, to break news, to tell stories that may never see the light of day if it weren't for our relentless efforts to listen, report and bring important issues to the public. That's what all of our shows really do.

Norah O'Donnell:

The very best shows and also we tell the new stories that are compelling, and we do interviews that have impact. I'm proud to be part of CBS News and excited that we will be bringing the best news content in the business to Paramount+ alongside live sports and a mountain of entertainment, yes, all in one place.

George Cheeks:

Thanks so much, Gayle and Norah. So, in addition to the news programs our viewers already love, Paramount+ will be home to brand-new series based on our award-winning franchises. First 60 Minutes Plus, a compelling new version of the world-renowned News Magazine and the number one news program in America. The program will feature the famous ticking stopwatch, as well as the hallmark storytelling that has made it a Sunday night favorite for generations, investigations that expose injustice, correspondents who travel the globe to interview world leaders and cultural icons who open up and reveal their true selves, respected award-winning journalists, Enrique Acevedo, Wes Lowery, Laurie Segall and Seth Doane will speak directly to the next-generation of viewers on a news magazine built for them. That's 60 Minutes Plus exclusively on Paramount+. Next up, the new 48 Hours, true crime docu series, exclusive for Paramount+, it's called a Lie-Detector. A Texas Rangers who has spent 25 years getting into the minds of killers in high-profile, twisted murder cases. He will take viewers behind the scenes into some of the most infamous cases he has handled. You'll find the same style and quality of true crime reporting you've come to expect from the producers of the Emmy and Peabody Award-Winning 48 Hours. But this time, in a new and compelling original format. And then there's CBSN. CBS News is global, 24/7 digital new service. It's a live, anchored stream with breaking news and round-the-clock coverage. Now it's been embedded within CBS All Access since 2017, which means we've had a big head start with a streaming news service on a premium service. We've got years of data on what news stories people consume, as well as how and when they consume it. We know our CBSN audience is 20 years younger than our broadcast audience. Also viewers who streamed CBSN daily last year spend an average of 55 minutes on the service. And CBSN broke records in 2020 with more than 1 billion streams across platforms and connected devices. That's a year-over-year increase of 200%. All of these showcase our strength and storytelling. And increasingly, we see audiences hungry for shows that document history from the distant past to history that's being made today. So I'm excited to tell you about just a few of the amazing documentaries from all across ViacomCBS that we're bringing to Paramount+. For sports, we'll bring fans up close to the greatest sports figures and the moments that define them. NEVER GIVE IN tells a story of Alice Ferguson the legendary manager of Manchester United and one of the most memorable figures in European football. And building on our strength in soccer, we’re producing an original series of documentaries called the Stories from the Beautiful Game from Pete Radovich, the award winning producer of our UEFA Champions League coverage We’ll release four to five soccer documentaries every year, beginning later this year. We'll also produce exclusive documentaries in the immediate aftermath of momentous events like the siege on the Capitol last month. These instant documentaries, or inst docs will be released within days of breaking news, and we'll dive deeper into events that have gripped the nation's attention. Our documentary slate for Paramount+ will include projects from some of the world's best filmmakers. First up will be Black Gold from Oscar nominated director Darren Aronofsky and Time Studios. It's a true life conspiracy thriller about big oils decade's long campaign to trade our planet for profit. From Smithsonian, we have a series on Watergate that illuminates a moment in our history that parallels so much of what's happening right now. And from MTV documentary films, we have the Oscar shortlisted 76 days, an extraordinary inside look at Wuhan, China in the early days of the COVID-19 pandemic. Take a look. [Video Presentation] I honestly can't think of a story more gripping, more powerful and more relevant to this moment. And this is just one of the many documentaries you will find on Paramount+. Now as you can see, we are bringing the full weight of our talent, our resources and our expertise to this new service, live sports, exclusive championship events, the richest in-depth storytelling, investigative reporting and high-profile interviews, 24/7 live news and compelling documentaries. Together, these offerings will put Paramount+ in a league all its own. No other streaming service will offer sports and news coverage of this quality and at this scale. But as Bob said, these are just two pieces of the puzzle. So to tell you about our mountain of entertainment, please welcome Chairman and CEO of Paramount Pictures, Jim Gianopulos.

Nicole Clemens:

Thank you, Jim. I know we both feel tremendous reverence for Paramount's legacy and library and see great opportunity to take that legacy into the future. For me, that starts with The Godfather. In our forthcoming event limited series, the offer screenwriter, Michael Token, brings us the true story of the making of one of the most celebrated movies in cinematic history. The story of how this film ultimately made its way from page to screen is nothing short of a miracle, one wrapped in intrigue, betrayal, sacrifice, menace and audacity. When it premieres on Paramount+, The Offer will journey with producer, Al Ruddy, on his quest to bring The Godfather to the screen. Al Ruddy wanted to make a movie about terrifying ice cold people who you love. He did and lived it [Technical Difficulty] scripted dramas like The Offer drive viewership and engagement. We know because nearly every major streaming service includes one of Paramount Television Studios biggest hits from Jack Ryan and Defending Jacob to the Haunting of Bly Manor, Catch 22 and 13 Reasons Why. And now we have the unique opportunity to harness Paramount's incredible library to create shows that come with a built-in fan base for Paramount+. While we have no shortage of source material, we're being very selective and strategic in choosing what IP is best positioned for modern streaming consumers, and there will be something for everyone. Grease

David Nevins:

Thank you, Julie. I'm here to talk about Halo, one of the most important game franchises of all time. The reason Halo has persisted in the culture for two decades is because of its incredible narrative and rich universe of stories and characters. With a cast led by Pablo Schreiber as the iconic Master Chief, the upcoming Halo series will weave intimate personal stories with incredible action and a lavishly imagined vision of the future. Halo has been in production in Hungary. And I can tell you, it's visually stunning, totally thrilling, and significantly, it offers true four-quadrant general audience appeal. Its so promising in fact that we’ve made the strategic decision to have Showtime serve as the studio that produces the series for Paramount+. That’s right, Halo premier on Paramount+ early in 2022 and we all believe it’s going to be defining show for our new super service. We see this as another example of us marshalling the finest resources of the company in service of Paramount+.

David Nevins:

It's my privilege for the first time ever to show you a sneak peek of Halo coming to Paramount+ early in 2022. [Video Presentation]

Chris McCarthy:

Thanks, Julie. Now we just heard some great new comedy projects that are coming to Paramount+, and I'm excited to share some new ones. But first, let me tell you why how comedy matters to streaming. Now when we look at total minutes consumed across the leading streaming services, comedy is the genre that rises to the top of the list. So what does that mean? Well, it means that comedy helps to capture new subscribers and it helps to keep existing ones. You see, viewers enjoy binging episode after episode of friendly faces and familiar characters. In many ways, comedy is our comfort food. And when it comes to beloved characters from iconic franchises, Paramount+ delivers. With over 6,000 episodes, it's clear that comedy is central to Paramount+. Now we've got it all. Everything from I Love Lucy to Everybody Hates Chris, from Hot in Cleveland to The Neighborhood and from Strangers with Candy to and the famous Friends and Cheers. Paramount+ also brings us some of the funniest families in television, including Family Ties, the Brady Bunch, Young Sheldon, Melissa, Mom, and of course, Frasier. Now Paramount+ will also be the home to iconic sketch shows from the man who reinvented the genre in Chappelle Show to the guys who took it to new heights with Kinpeo [ph] and of course, the women who made it their own, Sarah Silverman and Amy Schumer. In fact, Amy is back for a very special new season of Inside Amy Schumer. And if topical comedy is your thing, well, Paramount+ has you covered with the raining chance of late night. I'm talking about Stephen Colbert, James Corden and, of course, Comedy Central's, Trevor Noah. Plus exclusive new originals that offer a fresh take on the day's events, like Stephen Colbert's is turning out the news, and something very special from my friend, Trevor Noah, who is here to tell us more about that now. [Video Presentation]

Chris McCarthy:

Thanks, Trevor. We're also excited to share that we'll be doing exclusive original comedy movies that will reignite franchises for new and old fans alike. Like a new special from the guys of Workaholics, who are working hard for the pandemic and the gang from UNO 911, who returned to take us on the elusive search for quinone [ph] certainly not one to be missed. And we even have two of America's most famous couch potatoes, who went in on the action, and they are here joining us today via Zoom. [Video Presentation] Well, it's great to have certainty back where it belongs in animation. Okay. So it's clear that we know comedy. But there's another category that we know really well as well, and that's music, because for almost 40 years, MTV has chronicled the world of music through the eyes of the most important artists, telling their stories and only in a way that we can because we were there. And now we're bringing back some of our most iconic franchises and opening up our vault exclusively for Paramount+ with new seasons Behind the Music, Unplugged and the legendary TV Raps, plus new original music series like Cradle to the Stage with Dave Grohl and Foo Fighters. Now switching gears, I want to talk about another area that we know really well, and that's because we created it. It's reality television. Now reality television is one of the hottest genres today. It's long reined in the top 10 across broadcast and cable, and that's around the globe. But it's also the fastest-growing genre in streaming. Look at Netflix alone, and we see that reality made up half of the top 10 new series. Now that's a category that barely crack the top 10 just a few years ago. So let's take a look at where it all started right here back in 1992. [Video Presentation] That's right. You've guessed it. We're kicking off Paramount + with the first reality series in the first reality house with the first reality cast of all time, back together for the first time in over three decades. Now we've come a long way since the railroad. And as you've heard from Bob, we dominate the reality category today with over 5,000 episodes of some of the biggest hits. But what you might not know is how important reality is to sports fans. So guess what sports fans are watching when they're not watching the biggest game? That's right. It's reality TV. And as you heard from George, sports is a key differentiator for us. And so reality will help drive new subs and it will help us to retain the existing subs that sports helps to bring in. So we have all the biggest hits to help us do that from love and hip hop to Love Island from Drag Race to The Amazing Race from survivor to the challenge and of course from Big Brother to the big bros in Jersey Shore. And I'm excited to share with you today, a great new slate a Paramount+ originals using some of our biggest franchise IP, including The Challenge

Scott Mills:

Black audiences have long been a key driver of the TV viewer ecosystem. They make up an outsize share of the viewing audience for virtually every major network. For the Black Community, television is the go to source for news, public affairs and entertainment. Contrary to prediction, the revolution is very much being televised. In other words, black viewers are TV super consumers and when they tune in, they're looking for the very best of general entertainment and potentially relevant programs that speak to the black experience. BET was founded on this insight and we have flourished for 40 years by super serving our community with black stories that entertain and move us all. Now, we're very excited to bring a robust array of traditional scripted and unscripted BET originals and library favorites to Paramount+ including our top library series like Being Mary Jane, Real Husbands of Hollywood and The Bobby Brown Story. But that’s not all, we're bringing exciting new originals series to the platform as well. I brought a friend along to give you a sneak peak of his upcoming project, he is making exclusively for Paramount+.

Scott Mills:

Thanks so much, Kenya. As Bob said earlier, ViacomCBS is the only media company to fully embrace an ecosystem, a free pay and premium streaming services with strong products in each. Each of these services has a dedicated audience and combining them allows us to serve a broad array of consumer needs. You've heard all about the incredible content coming to Paramount+. Now I want to talk about our premium offerings starting with BET+. We launched BET+. BET is first ever standalone streaming service, 18 months ago. The enormous success we've seen already proves that Black Americans are also streaming super consumers. BET+ has rapidly grown to nearly 1.5 million paid subscribers by delivering a unique and powerful combination of provocative and edgy originals from top black creators, fan favorite movies, beloved sitcoms and exclusive stage plays amounting to over 2,000 hours of popular culturally relevant content. BET+ has great original series from star show runners like Tracy Oliver, who’s next season of the popular First Wives Club starring Jill Scott, hits the service in June. And the prolific Will Packer whose comedy series Bigger comes to BET+ plus in April with Tori Spelling adding a little drama. There's the brilliant Emmy Award winning, Lena Waithe, who's executive producing the scripted dramedy, Birth of Cool, which will debut later this year. And last, but certainly not least we've got the one and only Mr. Tyler Perry, created of the top three original series for black consumers right now. His popular streaming series Ruthless is coming back to the service in April and his stage plate recently broke every viewing record on the service. Not only does BET+ have Tyler's catalogue, one of the most valuable libraries of content and entertainment today, we have the man himself here to share more of what are we bringing next to BET+. Tyler, take it away.

Scott Mills:

Thank you, Tyler. BET plusses premium content offering and powerful brand are already prominent beacons in the streaming marketplace. As such, they're the perfect complement to Paramount+ and Showtime, pairing BET+ with Paramount+ and Showtime gives us a unique opportunity to tailor packages to black super consumers, with BETs unbeatable array of targeted marketing platforms, partners and insights, we're able to aggressively market these packages to our audiences to drive acquisition across all three. We're going to super serve our viewers with the perfect combination, the very best general entertainment and culturally relevant content that can only be found in our ecosystem. Next up, it's my pleasure to now bring out, David Nevins, Chief Creative Officer of CBS and Chairman and CEO of Showtime Networks. [Video Presentation]

Unidentified Company Representative:

Late of original programming and with even more coming beyond what we're able to preview today. Showtime will be offering the premium content that's going to define 2021. And it's all going to pair perfectly with Paramount+ and Pluto. To say more about Pluto and our commitment to free ad supported TV, I'd like to welcome back, Tom Ryan.

Kelly Day:

Thanks, Tom. 95% of the world's population, 7.5 billion people live outside the US. The International opportunity and streaming is massive. Let's start with Pluto. Since ViacomCBS acquired Pluto and began expanding outside the US, our monthly active user growth has gone through the roof. In 2020 with growth in the UK and Germany, as well as new launches in Latin America and Spain our international monthly active users jumped from 1 million to 13 million. This year with Pluto's expansion in France and Italy, we expect that incredible growth to continue. The SVOD space is still early in international markets. We expect over 350 million new subscriptions to come online in the next 3 years, giving us a lot of room to grow. With Paramount+, we have a four prong strategy to meet this global opportunity. First, we start with a truly global brand. An average of 91% of people in key markets we tested know the Paramount brand and 96% have a positive association with it. Around the globe, the Paramount brand means premium content, blockbuster films and must see TV. Second, we deliver a powerful mix of global and local content that lives up to that storied reputation. Internationally, Paramount+ will be the home of Paramount movies with select first run movies in certain markets, as well as some of the world's biggest scripted dramas from Showtime, CBS studios and others. This new service will feature many of the exciting Paramount+ series you've heard about today, including originals such as the Man Who Fell to Earth, Halo, and Kamp Koral, as well as fan favorites like NCIS. Paramount+ will also be the international home to many of the fantastic Showtime titles, you just heard about, including new ads like the First Lady and American Rust, as well as classics such as Dexter and Billions. You'll also see widely acclaimed dramas from third party studios in select markets, including award winning shows like The Handmaid's Tale, and Killing Eve, and local formats of some of MTVs biggest global reality franchises, such as Acapulco shore and Are You the One? Brasil. All of these will be available to international consumers as part of a single subscription. Here's a quick look. [Video Presentation] Offering this unparalleled collection of global content is key to our strategy, and through ViacomCBS international studios, we're also working closely with top global content creators to ensure we have a robust offering of premium scripted local dramas. These include, the envoys a supernatural thriller Produced with Academy Award winning director and screenwriter, Juan Jose Campanella, Cecilia, a female lead drama from renowned Argentine writer and director, Daniel Berman. And Last King of the Cross, an organized crime drama based on the best selling autobiography, by John Ibrahim will premiere all of these in 2021 with record coming 2022. The third pillar of our strategy is to provide this premium content experience at a value price point, creating a must have service. That's why all of this incredible content from Paramount, Showtime, and our global content creators will come at a considerably lower price than competitors in each market. Finally, we're leveraging the massive global reach of ViacomCBS to distribute this service. We have a deep history of relationships with MVPDs and Telco partners in every major market around the world. And we are thrilled to announce that our service will have broad distribution across dozens of platforms in Latin America, and the Nordics in addition to our direct to consumer distribution. Paramount+ will also be made available internationally through our global relationships with major platform partners such as Apple, Amazon, and Google. With a universally recognized brand, and unparalleled collection of local and global content offerings, a value price point, and a massive network of distributors, we are well positioned for rapid growth. So on the same day, we launched in the US will launch in all Latin American markets and in Canada. Just a few weeks after that will launch in the Nordics. And then later this year will launch in Australia. And this is just the beginning. We'll have more markets and more exciting growth opportunities coming soon. And now to hear more about our growth, both in streaming and across our enterprise, let me introduce Executive Vice President and CFO, Naveen Chopra.

Stephen Colbert:

Thank you, Naveen. Hey, everybody. And thanks for being here for today's ViacomCBS streaming event. I've been invited to talk about the company's future and the exciting things in store for our viewers. As you all might have noticed 2020 was a bit of a challenge, but the silver lining is that right now people are watching more television than ever. In fact, I'm watching Blue Bloods, while I tape this. Tom Selleck, don’t let Donny Wahlberg walk down that dark alley. He is your son. Being a policeman is in your blood. That’s why it’s blue. I'm sorry, I'm just invested. Save your mustache. To recap, today we talked about what makes ViacomCBS unique, namely that we are the only media company to fully embrace an ecosystem of free, pay and premium streaming services. It's a far cry from the limited entertainment options of my childhood, which were Gilligan's Island and Watergate hearings, great crossover episode though, when Committee Chairman, Sam Ervin made a subpoena out of coconuts. No matter what people are looking for, we’ve got the service for them as long as they're looking to stream TV. If they're looking for something else like a socket wrench set, try hardware store or something. I don't know. Take our new service. Paramount+, it's amazing and way more user friendly than my idea. Paramount squareroot. Paramount+ is the only paid streaming service to combine a mountain of entertainment like the offer, the rugrats reboot and the real world reunion. Are you guys sure you want to return to the real world, because the real world is a bit of a garbage fire right now. Now, Paramount+ has breaking news and live sports like the PGA Tour, The NFL, Champions League, Soccer and March Madness. But if you want to avoid any mention of sports whatsoever, it also carries the Late Show with Stephen Colbert, you know, our motto is Dungeons and Dragons of sport. ViacomCBS also offers a free streaming service Pluto TV loaded with top notch content, all to fulfill one mission to entertain the planet. Although, I do have one question which planet? Because they named it after Pluto, which Neil deGrasse Tyson says, isn't even a planet anymore. Damn you, Tyson. That's our business model. And last, but certainly not least, ViacomCBS offers Showtime with programs like Desus and Mero, Billions and Ray Donovan plus combat sports like Boxing and MMA and industry secret. If you turn on showtime at 3:00 AM, you can watch Ray Donovan fight SpongeBob in a parking lot, cross platform synergy. That's what this means. On top of all that ViacomCBS uses its massive reach across social, digital, linear and streaming to give audiences what they want and then direct them to even more within its platforms and streaming services is like a cruise ship buffet, folks can load their plates with béarnaise, [Indiscernible] a stir fried chicken fingers and popcorn shrimp. Then once we got him there. We're like, how about hitting the chocolate fountain and the unlimited Sheldon bar. Anyway, thank you again for coming. Now please welcome Bob Bakish, Naveen Chopra, Tom Ryan and Anthony DiClemente, who will take questions from investors. You know, you guys will talk about the Dow. You won't believe how many Dow units we have. Right now, so many Dow's tell them all the Dow points we want Bob.

Operator:

With that, we can now open the line. Our first question comes from Alexia Quadrani at JPMorgan. Alexia, please go ahead.

Bob Bakish:

Sure, Alexia, it’s Bob. Let me take the first part of your question. So we're very excited about the film offering we're bringing to consumers under Paramount+. It's multifaceted and robust. Part of that, offering is enabled by us getting access to the Paramount pay one product through this new deal we have with Epix. We will basically have two different models there, there'll be a subset of titles, including A Quiet Place

Anthony DiClemente:

Thanks, Alexia. We'll take our next question from Mike Morris at Guggenheim Securities. Mike, go ahead.

Naveen Chopra:

I'll start on the pacing of the growth. I want to remind you that, we talked about achieving 65 million to 75 million SVOD subscribers by 2024, by the end of 2024 and 100 million to 120 million global Pluto MAUs and $7 billion in revenue. We're already - we got a ton of momentum toward those goals finishing 2020 with 3.6 billion run rate of streaming revenue. And we expect that there will be significant growth along the way. We did not provide an annual breakdown because there will be parts where we might enter into certain new deals or launch certain content that could make it - be a little spiky here and there. But we do think that we'll continue to make progress both in 2021 and in the subsequent years. Bob you won't take the…

Anthony DiClemente:

Great. Thanks a lot, Mike. Our next question will come from Brett Feldman at Goldman Sachs. Brett, please go ahead.

Bob Bakish:

Yeah, Bret, let me hop in here, this is Bob, because if you look at the history of Viacom, particularly Viacom Legacy, what you see is over the last four years, we've substantially grown our book-of-business and diversified our book-of-business with in particular MVPDs. And what I mean by that is, we're not only licensing linear feeds, but we're also engaged in advanced ad partnerships, and more recently licensing apps, whether those are free apps, like Pluto, or paid apps like at the time CBS All Access. And that's really all about being a multifaceted and more important content supplier. We've found that works particularly well, particularly as those entities build our broadband distribution. So, we like being a valued content player to a broad range of distributors. That's very much, our strategy, and certainly will be so as we roll out Paramount+. Maybe Tom, you want to add a little more there.

Anthony DiClemente:

Great. Thanks a lot, Brett. Let's take our next question from Ben Swinburne at Morgan Stanley. Go ahead, Ben.

Anthony DiClemente:

Yeah. We can hear you well.