What CBS’ Executive Shakeup Means for Paramount in a New Belt-Tightening Era

What CBS’ Executive Shakeup Means for Paramount in a New Belt-Tightening Era

The recent leadership shakeup at CBS — with network entertainment president Kelly Kahl exiting after 26 years and programming head Thom Sherman shifting to a producing deal — has placed a new focus on Paramount Global’s cost-cutting efforts.

The thinning of the executive ranks was accompanied by another round of layoffs — about 100 employees across Los Angeles and New York, with employees in the ad sales, CBS Studios and Paramount Television Studios divisions most affected. And last week’s C-suite changes following the recent exit of Showtime chairman and CEO David Nevins and the transition of Paramount advertising president Jo Ann Ross into an advisory role.

The moves are the latest sign of Paramount CEO Bob Bakish’s attempt to put his own stamp on the company that he’s led for three years. All four executives were holdovers from when Les Moonves ran CBS, and according to former NBC network executive Tom Nunan, Nevins, Sherman and Kahl were “known for being highly creative, highly successful and highly opinionated.”

Indeed, the recent executive moves may be as much a changing of the guard as a culling of high-priced senior executives. “As the entire CBS ecosystem considers contracting and combining forces with their sister labels — Paramount+, MTV, BET, etc. — a less entrenched, less hard-line/old-school group of executives may make life easier for all,” Nunan said.

A rep for Paramount Global had no comment for this story.

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On Paramount’s Nov. 2 earnings call, Bakish warned that the company would be taking steps to “improve efficiency across our organization” due to “ongoing macroeconomic pressures” impacting the industry and advertising market.

These steps include integrating Showtime and Paramount Television Studios into other parts of the company and reassessing areas including international operations, marketing and ad sales — moves that CFO Naveen Chopra promised would lead to “meaningful and sizable” cost savings.

And cutting costs is key as a recession looms, ad revenues drop and linear TV continues to lose viewership. As with many entertainment giants, Paramount is challenged to squeeze every last dollar out of its broadcast and cable networks as it shifts focus to the Paramount+ streaming service where revenues are significantly lower.

“They can’t just give up on CBS and and Showtime and the cable networks because they still produce a whole lot of cash,” David Offenberg, an associate professor of finance at Loyola Marymount University, said. “And Paramount Global is in a position now where they desperately need cash because they say that Paramount+ is going to lose $1.8 billion in the coming year.” (The company also reported $15.6 billion in long-term debt by the end of the last quarter, a leftover from the 2019 re-merger of Viacom and CBS.)

Amy Reisenbach (Courtesy of CBS)

Paramount Global, whose stock price has slipped approximately 41% year to date, also faces an additional challenge that competitors like Disney do not: meeting shareholder expectations to pay out an annual dividend.

“So far this year, Paramount has paid out $514 million in dividends and their shareholders expect dividends,” Offenberg said. “The moment they realize they have to stop paying dividends, they share price tanks and they know it. And so they’re in this really tricky spot where the dividend has to stop. They know it has to stop. And they’re just trying to do everything they can to stop the bleeding so that they can keep paying the dividend as long as possible.”

In Paramount’s most recent quarter, overall revenue rose 5% year over year to $6.92 billion, thanks in part to box office hits like “Top Gun: Maverick.” But revenue in the TV Media segment fell 5% year over year to $4.95 billion, while direct-to-consumer revenue grew 38% year over year to $1.2 billion. Meanwhile, the company touted hitting nearly 67 million direct-to-consumer subscribers, with Paramount+’s subscriber base growing to 46 million.

For many analysts, though, streaming subscriber counts are no longer a key measure of success.

“Wall Street is looking at all the broadcast/OTT companies to become profitable as soon as possible while growing subscribers, reducing churn and increasing [average revenue per user],” streaming media analyst Dan Rayburn told the Wrap. “Profitability is more important than simply how many subs were added each quarter.”

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And in the transition period to an all-streaming future, Offenberg said, CBS will need to continue producing “a ton of cash for the rest of the company.”

In a memo to staff last week, CBS Entertainment’s newly elevated president Amy Reisenbach seemed to acknowledge the challenge the network faces. “We are in a time of immense change, but we are going to get through it together, as we always do, with spirit, grit, dedication to quality, and some fun,” she wrote, adding that “broadcast is not dead! ”

But others are more pessimistic about the future of the broadcast network.

“While [CBS] can boast about having the ‘greatest number of people watching broadcast TV’ in the last 14 years, that number continues to shrink and shrink and shrink,” Nunan said. “Eventually, just as everyone else has predicted, broadcast TV will be limited to reality TV, competition shows, specials, sports and news magazines. Broadcasting will likely always hang around, but scripted content is likely to move more swiftly to streaming than Amy or anyone else buying content on the big networks would like to admit.”

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