Paramount+ (PARA) has announced price hikes for some of its streaming offerings after controlling shareholder Shari Redstone halted talks with potential buyers. Citi Managing Director Jason Bazinet joins Market Domination to give insight into Paramount’s price hike plans and the probability of a potential sale of the company.
In terms of a deal, Bazinet states: “Do I think this asset gets sold? Yeah…Will it go for a premium? Yeah, probably will but, it’s sort of not the core tenant of our thesis. What’s really happening is investors are just glomming on to everything that’s tech-related, everything that’s growth-related and have just left a lot of these legacy media companies for dead.”
For investors looking to get into streaming or broaden out, Bazinet claims that the “Magnificent Seven” is still the dominant force on Wall Street, and investors will need to ride out that wave until pivoting: “I would say we’re probably in the early stages of sort of mean reversion. When will that end? It’s whenever Mag Seven stops working.”
For more expert insight and the latest market action, click here to watch this full episode of Market Domination.
This post was written by Nicholas Jacobino
Video Transcript
Paramount, the latest media giant to announce price hikes to its streaming service.
Paramount plus its plan will show time will now cost $12.99 and its Paramount Plus essential option will be 799 a month.
We’re looking at how to navigate the big picture with the Yahoo Finance Playbook City managing director, Jason Bas joining us now to discuss, I don’t know how essential the essential plan is and Paramount has a lot bigger fish to fry it seems than, you know, tinkering with the pricing of their, of their streaming plans.
Jason, I, I don’t know where do, where do they even fit in at this point?
Well, I, where do they fit in?
I mean, I I would just give you the, the big picture.
Um What if I sort of look at what the market is saying the market is saying that Paramount is essentially gonna be a niche app and I think these pricing actions are sort of consistent with that.
You can think of Paramount Plus being akin to maybe HBO and the linear days.
Um I’ll just give you one sort of metric we follow in the old linear days, you paid about a penny a minute uh to watch Linear TV.
Uh Netflix.
Today, the consumer pays about a half a penny a minute.
And even before these price hikes, uh Paramount uh was about two cents a minute.
And so they’re just positioning this as a niche product um driving towards profitability.
Um where do they fit in, in the broader ecosystem?
I mean, it’s certainly gonna be challenging um to be sort of the old paramount, but there’s still a role for niche players.
A a and I’m just curious, Jason, what, what kind of as you look ahead, you know, 6, 12 months.
Um I know you have a buy on the name, how much of that Jason is because you think, you know, ultimately, you know, this is an acquisition target and, and Sherry Redstone is gonna make a deal.
Yeah, it’s certainly embedded in our, in our valuation.
But I can tell you if you look at those deals that were talked about either Sky Dance or Apollo back in the old days.
Um There wasn’t a tremendous amount of upside from MN A, there was some upside uh but it wasn’t a huge amount.
And so do I think this asset, you know, gets sold?
Yeah, I do think it gets sold.
Um Will it go for a premium?
Yeah, probably will.
Um But it’s, it’s sort of not the core tenant of our thesis.
What’s really happening is, is investors are just climbing on to everything that’s tech related, everything that’s growth related and have just left a lot of these legacy media companies for debt.
I don’t think it’s that bad.
You don’t think it’s that bad.
So, among those that are not that bad, what do you think is sort of the most overlooked that you would encourage investors to take another look at?
Well, I would just say, um if you looked at the traditional media companies, their multiples right now are sort of almost like newspaper multiples, right?
Roughly five times.
Evdeb da um you know, Warner Brothers, I would certainly put in that camp, even Paramount I would put in that camp.
Um The, the question is really the way I would frame it for investors is all of these companies are generating cash flow.
All of these companies are using their cash flow to pay down debt.
What’s happened and that should accrue to the equity value.
What’s happened over the last two years is the multiple is compressed.
And so the question here is, can the multiple compress further?
You know, we’ve gone from eight times to seven times to six times to five times, you know, at some level, the the multiple compression stops.
And uh and then, and then I would also say that with these price hikes, uh what’s going to happen is these streaming services are actually going to begin to generate profits.
So let me ask you Jason bottom line, what would be the, the top streaming pick for you in 2024?
Because, you know, a lot of people, Jason listen to, they, you know, they come on the show, they’d, they’d pound the table for Netflix.
You know, the king, the king, right?
The war’s already been fought and won.
But I don’t, you don’t believe that you have a neutral on Netflix.
So what would you say, Jason?
give it, give us the top pick.
Well, let, let me just give you if I can just give you the framework for what’s actually happening.
I’ve run this by a lot of institutional investors and they agree what’s happening is P MS are, are way overweight mag seven, right?
And they’re, they’re a little bit nervous because mag seven has worked so well.
And so what they’re doing is they’re turning to their analyst and saying, give me a tier two tech stock, that’s not a mag seven stock and they all, all the analysts come to the same conclusion, right?
Which is, oh, you just go buy Netflix.
And so what’s really happening is that the multiples and the stock performance of some of these streaming, I’ll call them tier two tech winners uh is really disconnected from the fundamentals from the narrative and it’s really just sort of the afterglow of the massive performance of mag seven.
So it, you know, so what, what would I say?
I would say we’re probably in the early stages of sort of mean reversion.
When will that end?
It’s, you know, whenever mag seven stops working.
Right.
That’s gonna be sort of the answer.
Well, it’s been working less well, but that’s just for a few days now.
So we’ll see if that ends up last days.
I also wanted to ask you specifically about Disney Given, um, inside out too at the box office and that seeming to be, um, a big take there, um, which, you know, obviously shows that people, some people are still going out to the movies.
So, um, do you think that, that, you know, that, that also adds to the investment case for a legacy media provider like Disney?
Well, we’re restricted on Disney at the moment.
What I, what I can tell you broadly for the box office is we have been slowly crawling our way back to sort of golden $11 billion of domestic box, which is what it was prior to COVID.
Um, we’re sort of stuck at sort of the mid eights this year.
And, and I, I think that’s just a function of poor movies coming out.
I don’t think that there’s a secular bear case on theatrical, but Hollywood’s going to have to make better movies.
Um, and so I think, you know, probably 2526 we’ll get back to that $11 billion number and, and that’ll be good for everyone in Hollywood.
It’ll be good for the exhibitors.
Um but it’s just been a lot of bad movies have been made.
Jason.
Always great to have you on the show.
Thanks for joining us.
Appreciate it.
Yeah, you bet.
Absolutely.
Thank you.
