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Thursday, May 4, 2023

May the Fourth have been with you! The studios fire back at the WGA, Warner Bros. Discovery set to report earnings, Fox's ratings fall continues, the White House convenes A.I. meeting with tech CEOs, Ed Sheeran wins in court, and more. But first, the A1.

THE A1

Paramount Plummets

CNN Photo Illustration/Eduardo Munoz Alvarez/AP

Paramount is feeling pain — significant pain.

The company lost nearly 30% of its value on Thursday after it missed on earnings amid a soft advertising market and informed investors that it will slash dividends a staggering 79% so that it can afford to keep pouring money into its streaming operation.

Unfortunately, for Paramount, the days in which Wall Street tolerated dumping vast resources into the steaming business are long gone. Profitability has become more important than subscriber growth.

As The WSJ's Dan Gallagher pointed out, Paramount is in a "Mission: Impossible" type situation: "How to pay for an expensive pivot to streaming long past the time when investors were willing to write blank checks for that."

To be fair, Paramount has long said that 2023 will represent its peak year in terms of investment into streaming. And it did add 4.1 million subscribers to Paramount+, an impressive figure that represented 1 million more than had been expected.

But investors and analysts are still worried about the cash burn.

"Our bias is that first-quarter results and (the) dividend cut likely suggests forward (earnings) estimates have downside risk," Wells Fargo analyst Steven Cahall wrote in a report, reflecting the views of several analysts.

Chief executive Bob Bakish, who reiterated his promise of a return to free cash flow in 2024, urged patience on the earnings call. Bakish stressed that the "media landscape is evolving" and that he is "executing on our plan to transform Paramount with it."

"We are leveraging our traditional media base – both financially and operationally – to invest in, build, and scale a set of streaming networks for the 21st century," Bakish said, adding that the company is also "navigating a challenging and uncertain macroeconomic environment."

Bakish is not alone in this sentiment. The costly growth-at-all-costs streaming strategy of years' past in an effort to rapidly transition away from linear has led to anguish for even the biggest and deepest-pocketed media giants in recent months as expansion has slowed and investors demand greater fiscal restraint.

"Yes, [streaming] takes investment. And as we've described, 2023 represents our peak investment year," Bakish said, acknowledging the environment he is operating in. "But there is no question that our investment is producing results. And as we scale, we are very much on a related path to streaming profitability."

THE SIDEBAR

Paramount's stock "logged its worst day since Viacom and CBS merged in December 2019," Alex Sherman pointed out. (CNBC)
The bad earnings report seemed to send ripple effects through the industry. Warner Bros. Discovery ended the day ⬇️ nearly 4%. Disney ended ⬇️ more than 3%.
Bakish expressed optimism about the ad market: "There are signs of stabilization ... We like what we are seeing in many categories."
Paramount's earnings report included a $1.67 billion programming charge related to its plans to integrate Showtime with Paramount+. (Variety)
Bakish said that Paramount has restarted the process of selling Simon & Schuster after its $2.2 billion merger with Penguin Random House fell through last year. (Axios)
Bakish said there is a "pretty big gap" between the studios and the writers. He said Paramount has "many levers to pull" if the strike lasts for a prolonged period of time. (Deadline)
"With the exception of things like late night, consumers really won't notice anything for a while," Bakish added. (THR)

——— BELOW THE FOLD ———

CNN Photo Illustration/Marcio Jose Sanchez/AP

The Studios Return Fire: The Alliance of Motion Picture and Television Producers, the coalition that represents the major studios, broke its silence on Thursday, disseminating a document to the press that outlined key disputes it has with the Writers Guild of America. The move marked the first time the AMPTP has commented since the union of 11,500 writers went on strike earlier this week. The document tackled a host of issues, including mandatory staffing and duration, wage increases, residuals, and more. But, as Puck's Matt Belloni commented after, the "bottom line" is that "the strike isn't ending soon." THR's Katie Kilkenny has details.

THE WRITERS' ROOM

Drew Barrymore said she will step down as host of the MTV Movie & TV Awards in support of the writers strike. The Sunday night show will now have no host. (Variety)
Katie Kilkenny breaks down exactly "what writers can work on" during the strike. (THR)
Will the strike impact the Cannes Film Festival, which is set for later this month? "Two weeks ahead of the fest, things look like business as usual," Scott Roxborough writes. "But the prospect of drawn-out labor action could have longterm impacts on the film industry." (THR)
"TV and film writers are fighting to save their jobs from A.I.," Samantha Murphy Kelly writes. "They won't be the last." (CNN)
Jessica Washington went "behind the Netflix picket line" to ask Black writers about the strike. (The Root)
Production on "House of Dragon" and "Lord of the Rings: The Rings of Power" has yet to be impacted by the strike. (Deadline)

THE BUSINESS

WBD On Deck: Warner Bros. Discovery is set to report Q1 earnings before the bell on Friday. The earnings report comes weeks after the entertainment conglomerate unveiled its streaming service Max, which is set to launch later this month. The super-streamer is WBD boss David Zaslav's big bet to boost subscriptions and set the company up for success in the future. Expect Zaslav to talk about it, as well as how the writers strike might impact the company. Yahoo's Alexandra Canal has more here.

IN THE INDUSTRY

Shares in Live Nation are ⬆️ nearly 8% in after-hours trading after the company posted a record-breaking quarter. (Variety)
King Charles III's coronation is Saturday and networks are getting ready. Alan Cowell says that it is a "TV spectacle" for "the digital age." (NYT)
CNN will start coverage at 5am and has deployed Anderson Cooper to lead coverage with Christiane Amanpour and Max Foster; NBC News will have Savannah Guthrie in place; ABC News will rely on Michael Strahan; CBS News will have Michelle Miller, Dana Jacobson, and Jeff Glor; and Fox News coverage will be led by Martha MacCallum with contributions from Piers Morgan. (USA Today)
Tara Palmeri reports that T.J. Ducklo, who was fired from the White House after an altercation with the reporter, is heading back to Biden world for a campaign comms role. Reflecting on the incident and the aftermath, Palmeri writes, "There are some people who deserve to be canceled, but T.J. Ducklo is not one of them." (Puck)
Clare Malone's latest: "Jonah Peretti has regrets about BuzzFeed News." (New Yorker)
Diamond Sports Group "sued the Phoenix Suns on Wednesday, arguing the team breached its contract when it agreed to a new rights deal that will take its games off cable and put them on broadcast TV and streaming," Ben Strauss reports. (WaPo)

MEDIA MOVES

The NYT officially announced Joe Plambeck as its media editor. (NYT)
The WaPo hired Will Sommer as a reporter covering right-wing media and conspiracy theories. (WaPo)
The WaPo named Siobhán O'Grady as its chief Ukraine correspondent. (WaPo)
Yahoo News named Lauren Johnston as executive editor. (Editor & Publisher)
Vox hired Miranda Kennedy as executive producer of "Today, Explained." (Vox)
The Atlantic hired Tyler Watson as EVP of Marketing. (The Atlantic)
DC promoted Jim Lee to president. (THR)

THE INFO WARS

Proud Boys Punished: In the aftermath of the January 6 attack, one defense saturated right-wing media: "No one has been charged with sedition." That narrative was obliterated on Thursday when four members of the Proud Boys were convicted of seditious conspiracy. But, don't expect to see MAGA Media personalities who pushed the bad-faith narrative retract their claims. Instead, they're attacking America's system of justice. The Gateway Pundit — a blog once on the fringes of right-wing media, but now representative of so much of it — said the four Proud Boy members had been convicted by a "kangaroo court" and that it represented "JUSTICE DENIED." In other words, a new dishonest narrative has been born to replace a dishonest narrative.

CNN/Amy O'Kruk

Fox's Fall: It's not just the 8pm hour at Fox News that is suffering in the wake of Tucker Carlson's firing — the star host's ouster is impacting the entire prime time lineup. In the 8-11pm hours, the bloc of programming that makes up prime time, the right-wing talk channel has lost half of its age 25-54 audience. And in total viewership, the picture is just as grim. In Q1 this year, Carlson's program averaged 3.2 million viewers. In recent days, the 8pm hour has drawn little more than half of that. And despite rotating hosts in the time slot in recent weeks, the numbers haven't recovered. All in all, it's a bleak picture for Fox — a state of affairs very similar to the post-2020 election slump the network found itself in.

IN THE BATTLEFIELD

Election lies promoter Kayleigh McEnany is next up to host the right-wing talk network's 8pm hour, Colby Hall reports. (Mediaite)
Meanwhile: Newsmax is launching a five-person panel show at 9pm as it aims to capitalize on a surge of viewers. (Mediaite)
Tucker Carlson is plotting to independently host a GOP debate and has already captured the interest of Donald Trump, according to Jeremy Barr, Sarah Ellison, and Isaac Stanley-Becker. The trio add that Carlson might be willing to accept less money from his contract payout if he can unshackle himself from its terms sooner. (WaPo)
"A sizable number of GOP lawmakers are quietly cheering Fox News' decision to remove Tucker Carlson from its airwaves as making it easier to provide aid to Ukraine," Juliegrace Brufke reports. (Axios)
Media Matters continues to publish leaked video of Carlson. On Thursday, the progressive watchdog posted video of him asking a makeup artist if "pillow fights ever break out" in the women's restroom. (MMFA)
Corbin Bolies and Justin Baragona also obtained more text messages from the redacted Dominion filings, showing Carlson use the c-word yet again. (Daily Beast)
Josh Dickey: "Somebody's got the knives out" for Carlson, "but who?" (The Wrap)
Fox said in a court filing Wednesday that it settled the Dominion lawsuit to "buy peace," as it opposed motions to unseal additional redacted material in the case. "If $787.5 million is not enough to buy peace, parties will certainly think twice before settling in the future." (CNN)
Switching gears: Devin Leonard looks at The Daily Wire and how its leaders are "trying to build a right-wing Magic Kingdom." (Bloomberg)

THE VALLEY

Seeing Eye to AI: The White House on Thursday hosted top technology CEOs, including Microsoft's Satya Nadella and Google's Sundar Pichai, to discuss the risks of A.I. The meeting was hosted by Vice President Kamala Harris, but President Biden — who has experimented with ChatGPT himself — also stopped by. White House press secretary Karine Jean-Pierre described the conversation as "honest" and "frank." The meeting came as the White House announced a series of measures it will take to address concerns regarding A.I. CNN's Brian Fung has details.

TOO MANY TABS

Apple shares were ⬆️ about 2% in after-hours trading after the company beat on its earnings report. (CNBC)
Apple's services division, which includes Apple TV+ and Apple Music, "continues to grow at a rapid clip, reporting revenue of $20.9 billion, a new record," Alex Weprin reports. (THR)
TikTok is looking to hire a PR agency to tell its "safety story," Diana Marszalek reports. (Provoke)
Meta is leaning "into anti-TikTok rhetoric," Cristiano Lima points out. (WaPo)
Another day, another Twitter outage: Some users were unable to use the company's mobile web app on Thursday. (TechCrunch)
Andrew Wallenstein looks at the "race to replace Twitter." (Variety)

CURTAIN CALL

CNN Photo Illustration/Alexi J. Rosenfeld/Getty Images

Success for Sheeran: A jury has decided. Ed Sheeran did not plagiarize Marvin Gaye. The "Thinking Out Loud" singer had been accused of stealing the chord pattern from "Let's Get It On." But the jury decided that he had not done so. "I am obviously very happy with the outcome of the case," Sheeran said after the conclusion of the two-week case that took place in a Manhattan court. Sheeran said he is "just a guy with a guitar who loves writing music for people to enjoy" and that he is "not and will never allow myself to be a piggy bank for anyone to shake." CNN has more here.

OFF STAGE

Peter Rice is said to be discussing launching his own production company and hopes to make an announcement in the next few months, Peter Keifer reports. (Ankler)
Disney is eying a $110 million opening weekend over Memorial Day for "The Little Mermaid." (Deadline)
Billie Lourd confirmed in a public statement that Carrie Fisher's siblings have not been invited to the late actress' walk of fame event: "Their actions were very hurtful to me." (THR)
Gwyneth Paltrow says her 1999 Oscar win put her in "a bit of an identity crisis." (Variety)

Thank you for reading! This newsletter was edited by Jon Passantino and produced with the assistance of Liam Reilly. Have feedback? Send us an email here. We will see you back in your inbox next week.