Paramount woes raise questions about the long term viability of Network 10

Paramount’s share price has plummeted more than 30 per cent in the past month, down more than 50 per cent in just a year. So what does all of this mean for Network 10?

Even though Channel 10 has long been the minnow of Australian commercial television - out gunned and out rated by 7 and 9 now more than ever - when CBS (now Paramount) took the little Aussie battler over a few years back I assumed its future was bright.

Supported by a massive US media player - now rebranded Paramount - was a distinct advantage the other Aussie networks don’t have. It was one of the reasons I accepted the job as 10’s Political Editor, a role I walked away from earlier this year.

Paramount also has a streaming platform with international credentials, again an advantage domestic competitors don’t have. Another reason to have thought the network’s future was bright.

But the latest news coming out of the US is reason to doubt its long term viability. Paramount’s share price has plummeted more than 30 per cent in the past month, down more than 50 per cent in just a year. At its zenith just a few years ago the share price was above $97. Today it’s below $15. And the latest announcement from its American headquarters was an 80 per cent cut to its dividend followed by a hiring freeze to save some coin. Understandable given the more than a billion dollar first quarter loss posted this year, with more losses forecast.

You could choose to be a little more upbeat about Paramount (and Network 10’s) future if the streaming part of the business was firing, but it’s not. That’s actually where the losses are centred, but it’s also where the hope for growth has long been too. Subscription growth hasn’t been strong enough to make streaming profitable yet, and while Paramount+ is big by Australian standards, and growing, it is dwarfed by others in the US, playing catch-up since entering the streaming business later than its major competitors. A missed opportunity to be an early adopter by management.

Rating for The Project are struggling.

The likes of Netflix, Disney and Warner are much bigger and better established operators, doing better than Paramount. It’s so concerning that Paramount’s biggest shareholder, Warren Buffett who owns 15 per cent of the business, has intimated that he doesn’t think streaming is the future for Paramount, unless scale can be brought to bear and quickly.

That’s simply not going to happen, which begs the obvious question what does one of the world’s most acclaimed investors choose to do with his stake in Paramount? If he dumps it the share price will tank even more than it already has. Buffett exiting a business is a certain way to cause panic, and Paramount is already in panic mode. It would be a disaster for current management.

Irrespective of what Buffett does or doesn’t do (his shares have already halved in value and Buffet has shown a willingness to realise losses before when he loses faith in management) analysts have by and large put a sell order on Paramount shares, seeing far more downside risks than upside opportunities with the stock.

So what does all of this mean for Network 10? It could be fine, limping along with little attention paid to it by its big overseas owner (or its domestic competitors to be frank). It’s such a small part of Paramount that losses or gains at 10 matter little to its American owners. But even big companies that are struggling tend to cut their losses, dumping unprofitable parts of their businesses. There certainly won’t be the sort of investments in the brand once thought likely when the CBS takeover was announced. Since that time the network’s ratings have slowly ebbed lower and lower, elongating the divide between it and its more successful commercial rivals in Australia. In Sydney just this month 10’s news share dropped to a meagre 6 per cent, a new low that one rival news executive told me he’d “never seen in 30 years in the business”.

That’s despite Australia’s number one female news anchor, Sandra Sully, hosting. A sure sign the problem is the brand and management, not the host.

Network Ten Sydney newsreader Sandra Sully - 10’s news share dropped to a meagre 6 per cent this month. Picture: Britta Campion

Back in the US, Paramount executives are trying to remain upbeat, claiming that a return to profitability isn’t too far away. Maybe they are right. But you’d be brave to bank on such predictions given that those same executives didn’t predict the failures of the present.

If they had, the failures could have been minimised and not spooked the market resulting in a collapse of the share price. Whatever happens one thing is certain: Warren will be watching.

Peter van Onselen is a professor of politics and public policy in the business faculties at the University of Western Australia and Griffith University.