Wall Street hammered ViacomCBS Inc. on Thursday, underlining the stiff challenges the traditional media company faces as it struggles to compete in the streaming age.
Shares plummeted $6.38, or 18%, to $29.29 after ViacomCBS hosted its first earnings call since the two companies merged late last year.
Investors seemed spooked by ViacomCBS’ fourth-quarter net loss of $258 million, or 42 cents a share — a financial performance marred by costs associated with the Dec. 4 merger and a large write-down in the value of some of its programming assets. In the year-earlier period, the company posted a profit of $887 million, or $1.44 a share.
Revenue dropped 3% to $6.87 billion from a year earlier. The results were well below what analysts had expected.
In a worrisome sign, the company revealed that revenue from distribution deals with cable and satellite TV providers fell 8% — highlighting the toll that consumer cord-cutting is taking on its legacy cable TV channels, including Nickelodeon, MTV, Comedy Central and VH-1. Viacom, after years of ratings declines, has been forced to lower its fees to maintain distribution. Domestic advertising revenue, however, grew at the cable TV networks.
“There may be winners and losers in the space, but we feel good about taking share and getting deals done,” ViacomCBS Chief Executive Bob Bakish told analysts on an early-morning investor call. He noted that a potential benefit of the merger should be greater leverage for ViacomCBS in negotiations with distributors.
The company has lost about 30% of its stock value since the merger.
Bakish sought to assure investors that ViacomCBS had the management bench and programming firepower to compete against deeper-pocketed rivals Walt Disney Co., Netflix Inc., AT&T Inc. and Comcast Corp.‘s NBCUniversal. He also tried to allay concerns that CBS might lose out in the next round of NFL TV licensing deals, saying: “The NFL and CBS are long-standing partners” and that the combined company had the financial resources tosecure an extension of its Sunday afternoon package.
Larger media companies have been spending heavily to create original content for their new streaming services, with such shows as “The Mandalorian” on Disney+.
In contrast, the smaller ViacomCBS is pursuing what it hopes to be a less-risky strategy of supplying content for rivals, including Netflix, and bolstering its own streaming service, CBS All Access, which the company is calling a “House of Brands.” It will be expanded to include movies from Paramount Pictures and cartoons from Nickelodeon. CBS All Access produced a big hit with the original series “Star Trek: Picard.”
The company also is banking heavily on growth from its free streaming service, Pluto TV, which offers a lineup of existing channels. The service, also available in Britain and parts of Europe, will soon launch in South America.
ViacomCBS also wants to broaden the scope of its premium channel, Showtime, beyond its traditional strength of scripted series, including “Homeland,” “Billions” and “Shameless.” It is moving the popular “RuPaul’s Drag Race All Stars” to Showtime from the basic-cable channel VH-1 in June.
The company said it planned to use proceeds of its upcoming sale of the hulking Black Rock tower in Midtown Manhattan, the historic headquarters of CBS, to pay down debt and buy back its stock.