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Movies will continue to add value to the company: ViacomCBS CFO

ViacomCBS’ chief financial officer Naveen Chopra joins Brian Sozzi and Myles Udland on the heels of the company’s second-quarter results to discuss performance across key sectors and outlook as it expands its global footprint.

Video transcript

BRIAN SOZZI: Another strong quarter for Viacom CBS on the streaming front. The company said second quarter global streaming sales rose 92% from a year ago as it added 6.5 million new subscribers. Joining us now to discuss is Viacom CBS CFO Naveen Chopra. Naveen, welcome back. Always good to speak with you here. Walk us through these streaming numbers here. Why do you think we're able to gain so many subscribers to the extent you did?

NAVEEN CHOPRA: Yeah, thanks for having me back good. To see you again, Brian. As you said, Q2 was a really strong quarter for us. I think it's fair to say the business is faring well across multiple dimensions.

But streaming was really the standout both on the subscription side of the business, where we added 6 and 1/2 million subscribers led by Paramount Plus. But also on the advertising-supported side of our streaming business, which is led by Pluto TV, continues its rocket ship trajectory, going to do over a billion dollars of revenue in that business this year.

And the trajectory in both of those is really a function of expanded content, really starting to diversify what we make available across Paramount Plus, Showtime, Pluto TV. There's a big component of it that is about global expansion. And also some real strength in digital advertising sales. So when we've been able to put all that together, the streaming business grew 92% in Q2. So we're really proud of that.

But you know the other traditional parts of our business are also doing very well. We saw 9% growth in our affiliate business, 24% growth in our advertising business. So great momentum and a lot more to come.

BRIAN SOZZI: Specifically on Paramount Plus, Naveen, how many subscribers do you have? And just based on the response, do you think you're now at the point where you could push through a price increase or two?

NAVEEN CHOPRA: So our global subscriber base for Paramount Plus is now hitting 42 million. Excuse me, not just for Paramount Plus, for our broader streaming portfolio. And we do think that that's a meaningful level of scale.

And we're very optimistic about the ability to grow ARPU over time both through evolution of price as we expand our content portfolio, but also remember there's an advertising component to that. And we saw ARPUs in that side of the business grow very nicely in Q2. And we think there's more of that ahead. So we're very optimistic about where we can go from a pricing in ARPU perspective.

MYLES UDLAND: Naveen, it's Myles here. And coming back to what you guys saw on the ad side, certainly it was an interesting quarter in that you lapped, on the sports portfolio at least, you lapped a quarter where there kind of was nothing in Q2 of 2020. And I'm curious what that environment looked like as we went through this second quarter's sporting events and then also how you guys are seeing an NFL season that I think we're all expecting will be pretty much like 2019 and what your partners are saying about that.

NAVEEN CHOPRA: Yeah. Well as you said, it's been an interesting year because there's been a lot of movement. The timing of events, including some events that are very big from an advertising perspective. But the thing we're focused on is the fact that audiences are still coming back to these events from a viewership perspective, both in linear and on our streaming platforms. That's very exciting for us.

We're also looking forward to getting the benefit of a very strong up-front that we had this year and that'll start to kick in in Q4. And we'll be able to pair that with some really exciting content that we're bringing to our streaming platforms, both Paramount Plus and Showtime.

You mentioned the return of things like NFL football. That should be big for us. We'll have the Champions League back on in the fall. We'll have some great movies coming to the service, some new scripted content. So we think all of those things together will be some really powerful drivers.

BRIAN SOZZI: Going through the divisions, Naveen, in the operating profits in TV entertainment, the cable networks, and film segments, they were down on an adjusted basis. As you invest in your business, notably streaming, do you think you have reached peak investing as it pertains to streaming?

NAVEEN CHOPRA: Yeah, so there's a couple of things. Number one, relative to last year there's some comps you got to adjust for. We had a very big deal for licensing of "South Park" in 2020 that doesn't repeat. But the broader point, as you noted, is about streaming investment.

And we see a massive opportunity in streaming as you're seeing the growth, both in terms of subs and revenue. And we think it makes a ton of sense to continue to invest behind that. We've said that we intend to double the amount of streaming content investment in '21 relative to 2020. And we're starting to see the fruits of that. We're ahead of our plan in terms of growth around subs and revenue. And we're going to continue putting fuel in the tank to take that even further. It's just a tremendous opportunity and we're going to be a big part of it.

MYLES UDLAND: And Naveen, on the theater side, finally starting to see some returns to theaters there from releases. How are you guys thinking about that part of the business and how optimistic are you that we can start to talk about box office type levels that would have been familiar to the industry as we get into the second half of this year?

NAVEEN CHOPRA: Yeah, as you said, films are very important to Viacom CBS and we launched our first theatrical release, "The Quiet Place Part II" since the start of the pandemic through theaters. It did very well there and then we brought it to Paramount Plus 45 days later where it's also been a big acquisition driver.

So we think movies will continue to add a lot of value for the company both in the theatrical channel and on our streaming platforms. We don't think it's a one size fits all model, by the way. We think we've got movies that are ideally suited for theatrical release and we've got other movies that work really well in streaming. And then we've got movies that work in both. And you'll see us take advantage of all of those channels going forward.

I mentioned "A Quiet Place Part II." In August, we're going to be releasing "Paw Patrol" in theaters and then also, simultaneously, on Paramount Plus. And then we've had movies like "Infinite" which is a thriller that we released exclusively on Paramount Plus and it was very successful from an acquisition and an engagement perspective.

So we're really looking forward to being able to marry the slate that we got coming in the back part of this year and next year with all of those distribution channels that are available to us.

BRIAN SOZZI: And Naveen, I'm sure you're watching the situation over at Disney and with "Black Widow" and Scarlett Johansson. A lot of folks in the industry are very much focused in on this. You have simultaneous releases, streaming and theatrical. Do you and your team have to go back and rethink how talent is compensated and how much, in fact, they are compensated?

NAVEEN CHOPRA: Yeah. So you know, as I mentioned, we have multiple models for releasing movies. And the key for us is to look at those things on a title by title basis. And as we do that, and as we make the decision about what is the optimal channel or combination of channels for releasing any particular title, we do it with an eye to all of the constituents that are involved.

Those relationships that we have with talent truly are paramount for us. And we care deeply about those. And we're committed to having open dialogues with all constituents as we make decisions to maximize the value of content.

BRIAN SOZZI: And lastly, real quickly before I let you go, doing the math you have about $9 billion in total liquidity between cash and underdrawn credit facility. How do you plan to use that cash moving forward?

NAVEEN CHOPRA: That's right, Brian. And actually that's going to get even bigger later in the year when we close the sale of Simon and Schuster which should happen later this year subject to regulatory review. That'll put another $2 billion of cash on the balance sheet.

And as we've said, we love having that kind of firepower. Our number one priority is to invest in streaming. You can see the success that we're having there. So you'll see us continue to do more of that. And then I think we've also got a very balanced view of continuing to return some capital to shareholders through our dividend and managing leverage on our balance sheet.

But streaming is just such an exciting opportunity with great momentum. That's definitely our first priority.

BRIAN SOZZI: It's a great place to be in and. We'll leave it there. Viacom's CFO Naveen Chopra, always good to see you. Have a good rest of the week.

NAVEEN CHOPRA: Thanks for having us.