Paramount Global and AMC Networks Have ‘Material Estimate Risk’

By Sam Boughedda

Wells Fargo analysts told investors in a note Monday that the firm believes AMC Networks (NASDAQ:) and Paramount Global (NASDAQ:) have material estimate risk.

In the research memo focused on the “Death of the Linear TV CPM,” they said the firm forecasts that U.S. advertising-based video on demand and connected TV ad revenue is set to grow by ~$15bn from 2019-23.

“With significantly more AVOD platforms offering impressions, and  AVOD launching, we think linear TV is more at-risk than ever. Of the ~$72bn in ’23 linear TV ad revenue, we estimate only $18.5bn is live sports (the most protected),” wrote the analysts. “We think ~$35bn is entertainment—the immediate AVOD TAM. More critically, we think $10.5bn is the low-hanging fruit of non-sports/non-news/non-upfront sold via scatter (15% of non-political linear TV). 2023 could be the tipping point in scatter spend/CPMs, with the 2024+ upfronts then seeing a turning tide towards AVOD.”

As a result, Wells Fargo sees the risks representing material earnings downside to AMC Networks and Paramount Global, although “all Media and Broadcast stocks will need to grapple with the pressure over time.”

“We think AMCX and PARA have material estimate risk given they have lots of entertainment content selling in scatter, with this at-risk ad revenue representing ~50%+ of their total linear ad sales (and these stocks are sensitive to EBITDA cuts,” the analysts added.