Was this the year of peak ad revenues for Paramount and the Super Bowl?

Sunday saw the Super Bowl LVIII broadcast on CBS, Paramount+, and Nickelodeon, providing a bumper advertising windfall estimated at between $650-$700 million for parent company Paramount. The media majors’ entire business model is under intense scrutiny from investors made nervous by its losses (-$855 million for 2023 as of Q3 2023), and the overall share price being down 40% year-to-date. However, yesterday saw the share price rising 4% as the market responded favourably to Sunday’s ad revenue windfall. Unfortunately, much of this is a case of too little too late, with these positive numbers being excluded from the company’s full year 2023 earnings releasing in two weeks’ time. What is clear is the exposure that Paramount had, not just to its loss-leading direct-to-consumer business (Q1-Q3 2023 losses are at $1.2 billion) but also to its overall company outlook. While a Paramount+ surge in sign-ups for streaming access to the Super Bowl is expected, these are most likely savvy switchers rather than committed long-term subscribers, especially with the announcement last week of a Q3 / Q4 NFL-centric Hulu for sports.

Sports engagement and monetisation models are evolving rapidly 

The bigger concern for the TV ecosystem is the sustainability of charging $7 million for 30 second ads during a single sporting event. The Super Bowl 2024 had a viewership of 123.4 million, making it the most viewed TV show in US history. Of these, 112 million watched via the linear live CBS broadcast and the rest were measured across Paramount+, Nickelodeon, Univision, CBS Sports, and NFL digital properties such as NFL+. Therefore, with 91% of viewers watching on traditional TV, the argument can be made that linear still matters for the big sporting events. However, even here the brand effectiveness of the ads underperform when contrasted with prime time slots (a $7 million ad budget would buy approximately 400-plus prime time slots on US TV) due to the over emphasis on celebrity and big budget creativity – Super Bowl ads are effectively status-affirming assets for companies seeking national exposure.

This ties in with two other big trends. Firstly, video is (slowly) moving beyond display advertising to engage with digital audiences; examples include monetising watch parties, digitals merchandise, etc. Secondly, the Super Bowl, along with other major sporting events are aberrations in overall sports video coverage. Most sports’ content is niche. Additionally, younger fans are moving towards highlights and on-demand alternatives to live broadcast – less than a third of US consumers now watch live sports on TV or streaming services (MIDiA Research Q4 2023 consumer survey).

Paramount must plan for a new emerging ad landscape

Paramount would be naive to assume that the Super Bowl windfall is anything other than a one-off bonanza. The 10% increase in the valuation of the 30-second ad slots was possible as this is the last year that US domestic TV can maintain its pre-eminence as the home of the big sporting event(s). Paramount+ is now established as a cost-effective and credible alternative streaming home for big ticket events, following in the footsteps of January’s NFL wild card play-off game being shown on rival streaming service Peacock. However, the vast majority of linear viewers, and the imminent arrival of ESPN / WBD / Fox sports streaming at the end of the year, pose significant challenges to the ongoing development of live sports distribution on Paramount. What is indisputable is that Paramount must start investing in post-ad monetisation models for its sports streaming audience if it is to avoid losing out to the demographic and technological shift towards the coming sports monetisation revolution.