Paramount Skydance Corporation (PARA) Earnings Call Transcript & Summary

So I'm John Hodulik, I'm the media and telecom analyst here at UBS. And very pleased to have with me today, Bob Bakish, the CEO of Paramount. Bob, thanks for being here.

Great to be here, John.

So we've got about 40 minutes. I've got a bunch of questions. If anybody has any questions, they can log into the app, and I'll work them into the conversation that I've got here. So Bob, we always started late in the year. Can you just give us a sense for what the priorities are for the company as we look out into '23?

Yes, sure. So Look, we're really excited about the company overall and what we have going on. If we think about 2023 and you look at what we do, it really all starts and I could argue ends with content. So we obviously have continuing to make broadly popular content as a significant priority. The good news is '22 was really the year where we demonstrated the power of our content engine in film and television and streaming, and we look to very much continue that in '23. If there's any difference, it's probably that you'll see us lean even more into franchises. So that's priority one. Priority 2, obviously, streaming. We're building a scale asset in the most important really, the network of the 21st century. We look to continue to build on our momentum. Paramount Plus set an extraordinary year in '22, and we look to continue that in '23. And first, it's not only about the top line and subscribers. We've always built this with an eye of building a real business and profitability in mind, and we look to continue to make headway on that in '23. Third objective really is our earnings and cash flow. We obviously have -- continued to have a significant position in the traditional ecosystem. And we look to continue to take share, which we've been doing in '22. We look at optimizing our investment levels, both through organic decisions and some transformation work we're doing, which I'm sure we'll touch on and really extract significant earnings and cash flow from that. So those are our 3 objectives, broadly speaking. We're obviously doing it in not a perfect environment, but we're also really going to use that as a catalyst to go further faster, which you'll also see in '23.

Great. Maybe starting off with the ad market. We started off the conference with the ad panel, where they lowered some numbers a little bit and follow that up with Jeff Shell, who talked about some incremental weakness as we look at it from the fourth quarter to the third quarter. Just -- can you give us a sense in terms of what you're seeing in the ad market, the overall health of it? And maybe what are some of the sort of macro drivers that you're seeing affect your business from an advertising?

Yes, sure. So let me start with, we love the ad business. It's an extraordinary business. It's a way to obviously create significant incremental monetization around your investments. But that said, the current market is challenging. And we're in it every day, and we see it, and that challenge is both on the linear side and on the digital side, again, no surprise as probably what you heard yesterday, I didn't actually look at Jeff's remarks. But given that on our third quarter call, we talked about our fourth quarter performance being in line with the third quarter. And again, as we've transacted in the market, as we've seen the state of the scatter market, as we look to our international networks, which are impacted by the economy but also by what's going on in the FX on exchange rate side, we do now see the fourth quarter coming in a bit below the third quarter. And as we have navigated leading into this point, we had looked for some improvement in certain sectors. We haven't seen that. But nonetheless, again, I go back to the main point, we love the ad business, point one. Point 2 is while challenging, Advertising is cyclical. I've managed through a number of these cycles as recently as through the beginning of the decade. This too is a cycle. This too will turn. The only question is when -- and not being an economist, I can't tell you exactly when, but I know for sure it will turn. And when it does, you really see the power of the portfolio of assets that we have with the #1 broadcast network in the United States, which is gaining share the #1 fast service in the United States, Pluto TV, which continues to do extremely well on the MAU and engagement side. We've got a cable network portfolio at scale, which leads serving many specialized audiences. And of course, Paramount+, which from day 1, had an ad-supported tier which is a material part of the service and provides access to very high-quality reach for advertisers. So that kind of platforms all wrapped around popular content that advertisers and the agencies want to be associated with combined with the fact that we have a team that executes very well, in fact, and we'll talk about, I'm sure some of the [ odd ] changes. One change we are in the process of making is actually making us even easier to do business, particularly for the holding companies where we're going to have single points of contact versus multiple people they're dealing with. And a track record of delivering for folks. So you will see the value of that in spade as we come out of the cycle. And again, we continue to be very excited about the Ad business.

So yes, let's talk about the cost savings that you referenced, and there's been a fair amount of pressure on -- press around some of the changes you guys have made. I mean, could you just walk us through what you're doing in terms of these changes? And how much cost savings here. I do have to give us exact numbers, but maybe in terms of orders of magnitude, how much cost saving because this has been a multiyear process for you guys, but just how much cost saving is sort of left in the business to respond to the weakness you guys are seeing?

Yes, sure. So we both focus on the top line and also on the expense lines. And when we brought the companies together Viacom and CBS, we very quickly got to work at creating one company and unlocking certain economic benefits, single ad [ fill ] team, single affiliate team and put in place a single streaming team, et cetera. And that all yielded both strategic benefits and economic benefits. As we sit here today, we are embarking on a set of initiatives, which we were planning on doing anyway because they're strategic, but we are definitely accelerating and using really the current market as a catalyst. That includes , and I'm sure you've read some about this, we're doing a set of work around Showtime, both on the network side and the streaming side, which is really about consolidation economics, if you will, and unlocking cost synergies with the broader portfolio. We won a bunch of work on the studio side, which isn't about changing the creative facing capability of the studio, but it's very much about creating support scale and associated economics. We're doing work around the marketing side. The fact of the matter is, and I just talked about that ad sales, we have an incredible portfolio of owned and operated assets that people pay very good money to leverage to reach audiences. We're going to lean into that even more. We think there are some efficiencies there. And in general, we're just going to look at marketing expense and unlock some opportunity. International, we run a truly I'll say, globe-spanning company. We have operations on the ground in 30-plus markets. We're taking the next step and really globalizing certain aspects of that. We've got a portfolio of free-to-air networks. We've got a portfolio of cable networks. We're obviously going to market streaming. We're going to unlock some global benefit while continuing to, of course, have the benefit of on-the-ground execution. So we think there are some economies there. And lastly, ad sales, I referenced it, but -- we are -- when we created 1 ad sales organization representing the company, it still had -- I don't want to call it silos, but real leverage line of business representation. We're now taking the next step and streamlining it to a single point of contact and leadership by holding company. That's something that's been embraced by the agencies. They're very happy about it. And so again, both economic benefit and strategic benefits. So you'll see us executing. We're in the middle of executing on all of that. And it creates both economic, i.e., expense benefit, but it also continues to strengthen our positioning for the future, really as one Paramount transacting with important counterparties all around the world.

Great. So I think we can dive into some of the segments. Maybe we'll start with B2C and paramount's definitely seen some strong subscriber the companies we cover, I think it's been the best. I think if we look out for the fourth quarter, I think our numbers have you guys with the most growth. I guess the question is sort of what's driving the growth in the B2C segment? And has that trend continued into the fourth quarter?

Yes, sure. Well, I'm really happy to talk about the momentum we're seeing in the streaming business. We obviously set out to build a scaling asset, I don't know, 18 months ago in the sector. And I think at the time, people question our relative level of success. If you look at '22 Paramount+ has had an incredible run. In fact, if you look at just November for the most recent data, for November, we set our records on net subscriber additions on active users and on total hours of content consumed globally. And we just set the record we beat the prior record by double digits on all those metrics and strong double digits on one of those. So really happy with the momentum we're seeing. When you look under the covers, what's driving that momentum, starts with content, whether it's the CBS fall slate, whether it's the NFL, Paramount movies, most recently Smile, Signature originals, currently, we were talking about 4 Tulsa King, a new criminal mind. It's also performing very well. We're seeing a very strong content slate, which is resonating with consumers, but it's not just the content. It's also how we're connecting it, including through marketing and distribution. We're seeing the impact, for example, of our new deal with Walmart, Walmart Plus. That started in Q3, but continues to ramp. We're very happy with what we're seeing there. It's performing materially above the initial business plan, which I thought was a low call, but it's definitely working for us and stuff we're doing around the world. We launched Paramount Plus in December in France, I guess it was last week, I got a note from the CEO over the weekend. They're very happy to see how that's performing, and we're going to launch in Germany on Thursday, Austria and Switzerland. So all of this is driving really strong Paramount Plus performance. Like I said, we set a record in November by a material amount. And we now look at the fourth quarter as the biggest quarter in Paramount Plus history. We feel very good about it. And we're really proving that this is a cornerstone service for the world's consumers, and we're going to continue to keep driving it forward.

So when does top gun drop? I mean, you had a record quarter in November. And isn't that in the next couple of weeks?

So the next 2 things to drop in addition to more episodes of what we got going on is connecting is 1923 with Harrison Ford and Helen Mirren, -- and if you haven't seen a trailer, I'd encourage you to. I think that's December 18. Trailer's up now. And the big upside surprise for me was Hellemans. I mean I always have the Harrison Ford thing of work, but Hellemans bad ass like she is great, and that one is really going to work. and then there's Top Gun Maverick, which anywhere it shows up, it crushes and it's going to show up on the platform on December 22 as a gift kind of for the holidays, families, et cetera. So we feel very good about how we're going to finish out this quarter. And by the way, '23 looks great, too. So.

Just keep going. Okay. Maybe a little bit on the profitability of the business. First, churn, that's something that I think investors worry about when they look at the sort of long-term -- the value of the customers and the overall project. How has that been trending?

So I'm happy to say that we continue to see a great churn trajectory. We're seeing improved churn both quarter-on-quarter and year-on-year, really a couple of things driving that. One being content slate. We have compelling content. And importantly, when we first launched, it was very lumpy, not surprisingly, you were getting a service up off the ground. And now we're getting a much better, call it, year-round approach to content and that clearly helps. Two is you have the benefit of a growing sub base. And importantly, the larger and larger part of the sub base that's been around for a while. And if you look at cohorts of subscribers and by age or tenure you'll find that if they stick around for a couple of months, then they really don't churn. And so we're seeing that kind of flow-through benefit. And then there's the way we're going to business with partners. And again, whether it's the Walmarts thing or what we're doing internationally with Sky and Canal Plus on the hard bundle side, they also -- as those sub bases further in, they have very compelling churn characteristics, i.e., very low churn because you're really part of a tier. So we like what we see on churn. We're not all the way there yet. We see a lot of opportunity ahead, but it's tracking right.

How do you balance streaming profitability with subscriber growth? You're doing very well on the subscriber growth. You're still -- are you guys still sort of set up to have peak losses next year? And then how do you see that evolving beyond that?

So in reverse order, yes, we have, for a long time -- not a long time for a while, said '23 will be peak streaming investment, therefore, losses. And we continue to feel that's the case. At the same time, we didn't build a streaming business plan for only the top line and for subscribers. We knew from day 1 that we needed to turn this into a business, and we've focused on creating a business with TV media like margins. We believe that our multi-platform asset portfolio is a real advantage here. You think about using content across linear platforms and streaming that create cost advantages. You think about marketing and leveraging platforms that creates cost advantage. You think about films, releasing them theatrically and then following we like fast follow 45 data streaming, that really optimizes ROI in the film business. So we have built -- we are building a model, which is design with profitability in mind and is moving that direction. We're building out over a couple of years. We've only had Paramount Plus running for 18 months unlike some people who have run it for over a decade, so it takes a little while. But we are very focused on streaming profitability and building a financially compelling business here, and we are very much tracking in that direction.

What do you see as the sort of main drivers for getting the profitability in line with the TV margins you guys have seen in the past? I mean, I think that was the longer-term focus. I mean are there specific drivers like how do you pricing set role in that?

Oh, sure. The good news is there really are multiple levers on the path to profitability. And again, they're built partially off our multi-platform model, but they're also built on how we're going to market. If you think about it, we're building a scale asset. So obviously, subscribers matter to building profitability, things like global amortization of your content are tied to having a broad footprint. So subscribers want ARPU and subscriber price increases as a second one. There's no question that streaming continues to present an enormous and extraordinary value for consumers. And there's also no question that we are nowhere near the top of the pricing that. We're very much value priced, Paramount Plus at $9.99 for Premium and $4.99 Essentials, which is the ad supported here. really great value to the consumer. We will move price up. No question about it, and you got to build that into your models. Point 3 is the ad market, okay? The ad market is a little challenged at the moment. But on a -- certainly a multiyear basis, it is a very powerful financial driver. It's we included advertising in Paramount+ for 2 reasons initially. One being we wanted to get the widest possible TAM, so we wanted to provide that lower cost option. And 2 is it is significant incremental money. And so as this cycle plays out, you'll see that kick in once again -- last one, which is on the revenue side, which is tangentially related to it is licensing. We haven't ping-ponged on this. We certainly are pointing our major franchises including new original versions of it as exemplified by say, criminal minds this month at our streaming [indiscernible] assets. But at the same time, if you think about library product and kind of like season, I don't know, [ and minus 3 ]. We have been in the licensing business we're staying in license business. That's incremental revenue that feeds the model. Then go to the cost side of the equation. We learn more about content performance on our streaming assets every day, and the content portfolio is growing in size. That provides an inherent opportunity to continue to optimize that expense close link to that as marketing. As I said, again, we're learning about what works there. As the service gets bigger, marketing inherently gets more efficient. And again, we are continuing to create new ways to lean into our owned and operated portfolio to market Paramount Plus. If you watch CBS as an example, you'll see in the end cards, everything says on CBS on Paramount Plus. That is something that we are advantaged in doing. Also related to that is the churn benefit. I don't know if you want to call that expense or revenue, but clearly, that coming down is additive to the path to profitability. And finally, distribution and expansion, working with partners. If you look at the financial expression of the deal we're doing with Sky, it has ARPU benefits. It has churn benefit and it has marketing benefits because they're marketing it. And so that model of hard bundles, which I would argue we pioneered and we continue to lead into also has benefits. And more broadly, and there's recently been some conversation about this. We never went out there saying, we got to be owned and operated 100% all around the world. We believe in the power of partnership, including the potential for JV partnership, look at Sky Showtime. That is -- that was an opportunity that we have now operating, where we could plug our entire content amortization into it, but do it in partnership with someone. So effectively, we split the cost of entering the markets and operating in the market. So that, too, creates a superior inflow for perhaps to profitability. And some people have recently pulled back on some of their markets. We look at it and say there's extraordinary expansion opportunity. But again, we don't have to go it alone. And that can be more capital friendly. So as we look to '23 and beyond, don't be surprised if you see us doing that more, and it's all accretive to the financial model.

A quick follow-up. What are the triggers for a price increase? It would seem now you've got so much subscriber momentum, so much demand tons of content hitting including Top Gun, one of the biggest movies we've seen in a decade what's stopping you guys from raising prices now or in the first quarter? I mean is it more focused on churn? Or is it just the health of the consumer that's holding you back?

Yes. So I'd do 2 things on that. One is under the umbrella, we're going to be intelligent about it, which you would, of course, expect. One is definitely time in the content and looking at when you're -- you feel best about the stickiness of your content, maybe you're in the middle of maybe some things just came out, maybe you're in the middle of the season, maybe it's in-demand sports med, whatever it is. So yes, we'll think about that. And the second thing is we've actually -- we've done a bunch of work on this, and it turns out that the impact of price increases, you don't really see massive impacts when you raise price because what you can do you can manage through that with promotional pricing. And it's really the initial entry point pricing that dictates your net subscriber additions. So you can raise price maybe simultaneously [indiscernible] kind of feather through that. And again, you look at where we are on a price relative to other folks, we feel very comfortable with our ability to unlock that. Last thing I'd say is there is a benefit of the fact that we run a premium tier and an ad-supported tier, and you will probably see us raise price at different points in time in those. So that we can catch any churn down, et cetera, should that be the case, raise price on premium first and then follow up on the ad-supported side.

Makes sense. Let's talk about content spend. Obviously, for the last decade, we've seen content spend sort of up and to the right. It looks like a number of companies are sort of starting to reevaluate if not the actual level, certainly the growth. I mean maybe sort of more generally, just what do you think of -- are we -- is the industry spending too much on content versus what people are willing to pay for? And then if you boil it down to Paramount, how do you see your level of spend relative to your growth aspirations?

Well, we're very much -- I'll do it reverse order. We're very much executing on our plan. We spent about $2 billion on streaming content in 2021. We've guided to $6 billion in 2024. And we continue to be on that trajectory. That's part of a broader content investment, if you will, across our company, which is around $16 billion, $17 billion range today. And again, goes to the value of doing this on a multi-platform basis and being able to window and share some of it or do we illuminate some of that depends on what product you're looking at. And that funds frankly, tremendously popular content, whether it's the NFL, whether it's Top Gun Maverick, whether it's Tulsa King, whether it's FBI on CBS, really an extraordinary portfolio of content but not only the U.S. consumer, but the world's consumer likes to see. So we love the performance of our content engine, and we're very comfortable with our investment plan, and we see it paying dividends in the performance of our platforms. Again, you don't get the #1 broadcast network for 14 years running by accident. You don't have the fastest-growing fast platform by Act. You don't have what -- it's certainly one of, if not the fastest going Services by accident, it comes to the content. That's point one. Yes, there's been some content people call it cost inflation over a bunch of years, and we've certainly seen that. There is talk of and in fact, evidence of modernization in that regard. Now it's hard to really call the industry, if you will, because we only run our company. But there's no question that a very large competitor of ours is cut some of their -- we're cutting a bunch of projects, another both -- and that's sort of a global basis. There's another guy that's doing it both in the U.S. and internationally. And there's people talking about doing more. So maybe, again, early evidence it's the case. And certainly, if it happens, we will benefit from it. But we'll have to see what actually happens over the next, say, 12 months.

You talked about the consolidation economics of Showtime earlier in your remarks. Can you -- first of all, I think you've talked about that process, maybe in reference to the timing? Or is there a lot of savings that you could create? Or maybe just the justification of combining those [indiscernible] Showtime and Paramount Plus together if it makes sense.

Yes, sure. So I mean on some levels, it's pretty simple. If you look at the journey of cable networks over the last 6 years since I run what was Viacom and is now Paramount Global post-merger. We have progressively consolidated cable network operations. When I started as CEO at the end of '16, everyone had their own built-out organizations. By that, I mean Nickelodeon and Comedy Central and BET, et cetera. Today, the story is very different on the basic cable side. We basically have -- with the exception of BET, all the basic cable networks aligned under one group, and we've done material call it, expense synergies as part of that. So the Showtime piece is really the next leg. It doesn't make sense to run Showtime as a 100% stand-alone organization. Certainly, the brand is valuable. Certainly, it stands for a certain type of program with consumers, and it's going to continue to and we'll lean into that. But we don't have to do it as a stand-alone. We're doing it as part of an integrated strategy, and that's both true on the call, traditional television side and on the streaming. And by the way, I would point out an early win here from the new team, which is George & Tammy, which is a show that we launched was over the weekend on Showtime and low in the hold is the highest-rated premiere in Showtime history. And that's an example of Paramount coming together as one company and supporting a brand. We didn't develop that show for Showtime. We developed it for something else. But when you look at the actors in it and you looked at sort of the storylines, et cetera, so this totally works for Showtime. And we gave it an audience boost at launch by dual illuminating and also on TNT for its episode and Paramount Network. So Early days, but we're happy with what we're seeing there. Likewise, it doesn't make sense to have a fully built-out streaming infrastructure separate for Showtime and Paramount+, so we're going to bring that together. And there are economic benefits associated with it. But I want to be clear, the brand still matters. And if anything, I can promise you, the slates can matter even more. In fact, another thing we're going to do there is lean more into franchises. And you'll see we haven't announced anything on that, but you will see that as we move into '23. So it's hard. It's transformation. It does affect people. but it unquestionably will produce a superior financial results and strategic results, and we're really excited about what's going on.

High overlap between Paramount Plus subs and Showtime sales, number 1 . Number two, is that -- so as all this come together in '23, the sort of plan for combining all this?

Certainly, there's more to come in '23, and you'll be hearing about that. On your question of subbase overlap, it's actually relatively minor. Showtime tends to be I'm going to very generalize, but more coastal, more upscale. Paramount Plus tends to be more popular, more kind of the whole country, et cetera. So we think that is accretive from an overall consumer proposition standpoint. And in fact, if you use Paramount+ today in the version with Showtime inside because remember, Showtime was totally separate, then we introduced a price bundle. Now there's an option where you can have Showtime inside the Paramount Plus app. That's version I use. That's the version I encourage all you use. And you really see the value of broadening that experience further and Showtime being right -- product being right there in the carousels, whether it's George and Tammy this weekend or it's some films or it's billions or what have you. really works very well in the aggregate experience, and we'll continue to look for ways to create value therein.

Got it. So the DC industry is increasingly shifting from a dual revenue stream approach from originally subscription revenues now to ad-supported. And actually, we have Netflix speaking a little bit later today. And that's something you guys have been doing for a long time. Can you talk about sort of the ad ARPU at Paramount Plus today and sort of the underlying trends? And just how big could that -- could those numbers get?

Yes, we'll start with we believe in the ad business from day 1, when I as we acquired Pluto, people were like, what's this free streaming ad-supported, that doesn't make any sense. It's all premium. And the answer that I gave was very simple like, well, free television always existed. What makes you think it's not going to exist in streaming and not be a material segment. You're wrong, this is what we should do, and we did it. And Lo and behold now, others are following us. We got the best assets, $1 billion plus ad sales business in 3 years. But that was because we believe in advertising, then fast forward to Paramount Plus at launch, ad-supported tier. Why? Because we said, well, we want to maximize the TAM. We want to give consumers choice. There are inevitably some people who would be interested in paying less and watching ads, and there's inevitably some people who don't want to watch ads and will pay more. Why wouldn't we craft the product that way? Again, people were like, oh, that's not SVOD, what are you doing, et cetera? Fast-forward today, everyone today, validating our proposition. So again, we like the ad business. We think there is put aside the current market, which has its challenges, but in general, there's a great ARPU opportunity. There's a great growth opportunity as you add subscribers, potentially add fill rate and work on pricing. And what I'd point out in the streaming ad sector, we transact as IQ not as Paramount Plus. And IQ is the combination principally of Paramount Plus and Pluto. The so what of all that is on a CPM basis, it is value proposition in the market. It's probably mid high teens versus some other guys are going out at $50, $60, and that is very intentional on our part. We want to build a big business. We don't want to just cream the top, and it also gives us plenty of room to raise price over time, particularly as the market strengthens again. So we really like advertising. We totally -- we believe from day 1, it applied to streaming. And I think we're seeing that play out.

Right. You guys saw a pretty rapid slowdown in revenues at Pluto. And then obviously, it seems like the ad market has deteriorated for 3Q. I mean, how are trends in that business at this point?

Pluto, it's an extraordinary asset leads the space, continues to have. We build momentum on the monthly active user side growing those. And importantly, maybe more importantly, at this point, really growing engagement time spent. It's becoming part of at least the Pluto viewers part of their habitual consumption. So we love what we're seeing there. Yes, we saw a significant deceleration in ad revenue, not surprising in the current market given the size of Pluto the biggest of them. And given the fact that the digital and the programmatic market, in particular, was negatively impacted as people are looking to manage margins in the short term. And we're looking at places they could do that. And on a short-term basis, the common wisdom is you can always do that in marketing. On a long-term basis, you can't. But for a couple of months, a couple of quarters, you probably can. So was Pluto impacted by that?

Yes, for sure. I would point out that we, again, transact in multiple places in digital, and we have a single point of sale, particularly on the direct side but also on the programmatic side. We don't sell Pluto, we sell IQ. And that combination, you have a back growth rate, that grew 4% in the third quarter, our total DTC advertising. So it's still growing, although clearly a deceleration from where it was, but that will -- that ship will ride itself.

Right. Is competition having any impact, whether it's only -- it doesn't sound like it is on the engagement side or the sort of monetization side because you've seen a big investment from [indiscernible], Warner Bros. just talking about launching their own fast services. Do you think as we look out into '23, that the sort of the competitive aspects of the fast market changes?

Well, look, competition has been a reality in the media business for a long time. It's a reality in the advertising market. It's a reality in the fast market. That's true. There also has always been benefits to having a scale first mover position. It's not so easy to replicate what we do in the ad sales side, both the combination of platforms and the way we execute and the related capabilities we've built. So we feel good about that. And also, you got to look at pricing. Again, in particular, in the Fast segment, we like where we're priced, and we think that has some advantages. So we fully expected other people will enter and they are entering. But look, we've competed for a long time. We believe in the superiority of our proposition, and we'll continue to demonstrate that.

So with the remaining time, I got some questions on the TV media segment and then some more consolidated questions. First, we already talked about the ad market. Could you give us your view on what you're seeing in terms of cord cutting maybe now? And if you can -- your crystal ball sort of look out to '23.

Look, the TV ecosystem is under pressure, has been plenty -- has been spoken about that, that's bad news. The good news is we are very much a cornerstone supplier. I'd hate to be in this ecosystem without a broadcast network and carrying NFL as an example. And we're no longer in just the business of licensing linear feeds to video bundle operators. We are now in the multifaceted product business with distributors, including for broadband only. So we license [indiscernible] -- we provide on-demand sure. We're in the advanced ad business we [indiscernible] data effectively to our ad [indiscernible] our distributors, and we're in the streaming business, both the free streaming business, Pluto and the pay streaming business, Paramount Plus. And we provide an opportunity for distributors to create value therein, including through the [indiscernible] in the vMVPD space, like Charter is doing a -- that's fine. If they want to do it in the broadband-only space, which most of our -- you could think of them as MVPDs, but they all operate broadband business. So we're transacting with them in there and the mix of Pluto and Paramount Plus and typically both. So -- and then as we do that, we have deal structures in place, which help mitigate some of the decline aspects. And by that, I mean, built-in price escalators actually, our broadcast deals with stations are all fixed fees. So they're not per sub deals. So you have some isolation there. And again, you have this broader business. And look at the value of that, sure, you could look at TV media in isolation, but I'd also encourage you to look at our affiliate and subscription business overall. And you see that grew something in -- grew 8% in the third quarter. So this multifaceted product line is in demand and is growing even given the current state of the TV ecosystem.

Got you. Let's pivot to the film business. Can you just give us a sense for the momentum you're seeing in the film business and what the upcoming slate looks like? And then a little bit on the sort of profitability of the business. One of the things that sort of surprised me yesterday, Jeff Shell was talking about Universal on the profitability. He said the film business has gotten more attractive because of COVID and the new windowing that we're seeing. And then the different outlets which show the content. I mean, do you agree with that and talk about just what you guys have on deck for us.

Yes, I'd say a couple of things. I'd say first, we're thrilled with the performance of Paramount pictures. Again, you look at '22, 6 #1 films at the box office. And importantly, those #1s were all different kinds of films. You had everything from 2 hard films that were low budget, relatively speaking with Scream [indiscernible] and Smile as the other. By the way, Smile, $17 million movie, gross over $200 million probably $225 million at the box office, and it's now on Paramount plus 45-day fast follow. So Paramount Pictures is crushing it. And we just -- as you look at the slate for '23, it looks very good. You got everything from Mission Impossible 7, which is like a complete thrill [indiscernible]. I mean the movie is insane. And I think we'll clearly benefit from Top Gun and Tom's popularity, et cetera, but it's a really good move. We just over the weekend dropped the trailer on the Internet for the next TRANSFORMERS movie, and it set the record quite a reasonable amount for Paramount Pictures trailer draw in history. And in case you're wondering, the one that was now #2 was Top Gun Maverick. So just as an illustrator of what's coming, that one is exciting. Then we got another Paw Patrol movie, another Turtles movie for the younger family set, we got a Dungeon and Dragons picture, which is not our franchise, but we're doing in collaboration with Hasbro that we're excited about, and we've obviously seen a bunch of it. It looks good. So the Paramount slate and it's run is going to continue its '23. Very excited about that. So that's sort of point one. Point 2 is, and again partially related to Jeff Shell's comment, it is unquestionably a strategic asset. I mean -- and again, take a title like Smile, the ROI on that project is off the charts because we believe in theatrical -- we want to be there. We said that in the depth of COVID. We held titles, all that. And we've proven -- I mean is the theatrical market below 2019? Yes, it is. But it's still a very big market. And we found that we -- that our titles are performing strongly, and we can we can sort of clean the economics there and then bring the title to streaming, 45-day fast follow. And that's where this asset is incredibly strategic. Because if you don't own a studio, you're not going to be able to do that. And certainly, the product has an ongoing value on a licensing basis, things like Pay2 and library, et cetera, which we continue to participate on a co-exclusive, nonexclusive basis. It's a good business. So we very much like what's going on Paramount. We very much believe in the business, particularly the theatrical streaming hybrid, not the day and date thing that never makes sense to me. And we're really excited about what we're going to do in '23. And I'm sure you guys are all going to enjoy it.

And my last question just on M&A. I guess, first part is what's the path forward for Simon & Schuster at this point? And then second all just consolidation in the sort of traditional media space. Do you think that takes a step forward as we look out into '23? Or do you think further consolidation is going to be taking longer?

So a couple of things. So consolidation has been the rule in business for a long time. certainly in the rule in media. In fact, our company is a byproduct of consolidation, most recently ViacomCBS. So it's hard for me to bet on anything other than consolidation will happen in the future. When it will happen, what the combination is, who's on the top, who's getting acquired, who hell knows? But consolidation will happen and streaming will be part of that. on Simon & Schuster. And by the way, that's not a new view, that's what we believe for a long time. On Simon & Schuster, look, we are obviously disappointed in the court's decision. That said, we've collected our breakup fee, which we've disclosed as $200 million. And we haven't changed our point of view that it's not a core asset because it's not a video asset. Our company is a video company. And when you get into books and video, there are no synergies. So it continues to be a noncore asset. We're going to do something in the marketplace with it as we move forward to be discussed when and what that is exactly. But again, we were disappointed. And the only good news is that the company's financial performance is materially higher than when we auctioned it. Because obviously, the capital markets have gotten tough where interest rates have gotten tougher. And you would think, okay, is the asset value gone down. But we've had such a material increase in financial performance. We feel pretty good about it. And again, layer on the fact that we collected a breakup fee, it will all be fine eventually, but it's a suboptimal journey.

Okay. That's all we have time for. Bob, thanks for being here.

Thanks. Appreciate it, John.

We appreciate it.