Someone Go Check on Paramount. Please?

Good days.

Folks, I am so flabbergasted - geese have teeth. Actual chewing teeth, so it’s lowkey terrifying.

But besides that, I hope you are having a awesome possum day, and buy that $7 dollar coffee!

This is Roll the Tape, our weekly market recap of recent transactions and updates in the industry. If you’re new here, welcome to The Produced. Check out our previous deep-dive issues:

• The Rise and Rise of A24

• Wall Street: “Make Movie Theatres Great Again”

• An Incubated Dragon of Asia’s Film Industry: Vietnam

Recent Transactions

• Titmouse, an LA-based animation studio, recently signed with WME of Endeavor Group Holdings, Inc of a.

  • The studio is behind Big Mouth and Star Trek: Lower Decks. You know how I feel about Shrek - it’s all love.

• UK’s Film and TV Charity launched the Reel Impact Fund, offering £10,000 for individuals and £25,000 for companies to amplify Black excellence: creatives and filmmakers.

• The movie “Mai” by Tran Thanh became the first Vietnamese movie to bank $1-million revenue within just 3 days of international debut.

Paramount? More Like Paradrown (Sorry)

As of March 27th, Paramount global debt is lowered down to junk status by S&P over leverage concerns and weak cash flows. For the record, Paramount has always been an investment status, not junk status. This is reported by S&P.

This means that Paramount Global’s credit is downgraded to BB+ from it's previous rating of BBB-. Based on the chart below, this new rating means Paramount bonds now have higher risk and a much higher interest rate.

Before we’re diving into it, let’s do a quick runthrough of terms and key players:

• Junk status on bonds: riskier bonds which have high interest rate. Investors are taking greater risks, so they want to get the bang for the buck.

• Investment status on bonds: these bonds are considered lower risk with a relatively low interest. It is because investors know companies with this status are capable of repaying debt.

  • It’s like you’d rather to have your chef friend cooking dinner than another friend who doesn’t rinse meat before cooking.

• S&P: it stands for Standard & Poor’s, a major rating agency that determines the financial ability of the company that issues bonds. They’re the boss.

What happened?

If you have not read our first deep dive: Wall Street: “Make Movie Theatres Great Again,” we highly suggest you do so!

As discussed in the article, investors are becoming more wary of the profitability of linear TV and streaming services. Hint: it’s not that great.

More analysts have advised studios like Disney and Paramount to churn out more theatre blockbusters while shifting away from TV and streaming services.

According to Bloomberg, reasons for this debt downgrade include:

• S&P is concerned that Paramount will not be able to improve streaming losses in the next two years.

• Paramount’s weak credit metrics.

• A downgrade will hopefully ensure a more stable outlook instead of risking further.

How are they planning to mitigate it?

Obviously, going from Paramount to Paradrown is traumatic, so the studio has gotten straight to work:

• It aims to replace lost in linear TV revenues with streaming and digital revenues.

• It argues that in the recent Q4 2024 earnings report, Paramount+ (streaming service) revenue jumped 69% jumped 69% due to significant subscriber growth. This goes back to their first argument: to have streaming revenues compensate for TV losses.

• Cutting approximately 800 jobs to streamline cash outflows.

• Potential usage of NFL games on Paramount Global to attract new Paramount+ subscribers. But it’s expensive

  • Personally, I subscribed to Paramount+ for the half-time show, then unsubscribed right away. So that’s rough.

I mean, these plans sound promising to me.

But S&P thinks otherwise: they actually acknowledged the effort but remained amandant of their decision: “Good one, bud. But nah.” If cash flow isn’t increased within the next 12-18 months, further downgrades are possible.

Music Shopping

Recently, I went to watch Noah Kahan and thought to myself: “where have folk and country music been in all my life?”

And no, I am not recovered from my post-concert depression. I don’t think I’ll ever be - follow up with me in 3 months, maybe? So here is my current Spotify rotation if you’re down for some stripped-down and raw convos.

Alright, that is everything for today. Gotta go back to my Noah Kahan playlist now.

Stay safe, warm, cool, collected, awesome, badass, slaying.