S&P Global Ratings has downgraded Paramount Global's (PARA, Financial) credit rating from 'BBB-' to 'BB+', citing intense competition in the streaming industry as a significant challenge to the company's ability to generate free operating cash flow. This decision follows a negative watch alert issued in February, awaiting the fourth-quarter results of the company.
Paramount Global's latest quarterly earnings report revealed revenues falling below market expectations, impacted by a weak advertising market, the repercussions of last year's Hollywood strikes, and a declining demand for traditional TV services.
The downgrade by S&P was attributed to deteriorating credit metrics, driven by rapid declines in linear media and the uncertain, highly competitive shift towards streaming services. Paramount Global has not yet responded to the downgrade announcement.
Adding to Paramount's challenges, Apollo Global Management reportedly proposed an $11 billion acquisition of Paramount Pictures film studio, intensifying the takeover speculation surrounding the media conglomerate.
To counterbalance these pressures, Paramount is focusing on enhancing its streaming service offerings. Plans include launching an ad-supported streaming platform in Canada and Australia, alongside a premium service rollout across Europe. Despite these efforts, S&P anticipates some level of stability in the linear television segment, bolstered by events like the Super Bowl and increased political advertising in an election year.
