Paramount Global reached 60 million Paramount+ streaming subscribers worldwide at the end of March, a gain of 4.1 million from nearly 56 million by the end of 2022. But the Hollywood group on Thursday reported a widening first-quarter loss. The latest results missed Wall Street expectations, including streaming losses and an 11 percent drop in TV ad revenue.
It also issued a dividend cut, conserving cash amid economic and other challenges as management pushes to turn its streaming businesses into profitability. Paramount shares fell 14 percent in premarket trading.
Paramount’s ad-supported streamer Pluto TV increased its monthly active users (MAUs) from 78.5 million at the end of the fourth quarter to 80 million as of March 31. The company did not immediately disclose its total global streaming subscriber count, which stood at more than 77 million at the end of December.
However, higher streaming investments again dragged down the entertainment company’s bottom line, as the quarterly adjusted operating loss before depreciation and amortization at its streaming unit widened to $511 million compared to $456 million in the first quarter of 2022. The company cited higher costs to support Paramount+’s growth as a “key driver.”
Paramount, led by CEO Bob Bakish, took down $1.67 billion in the first quarter after the upcoming Paramount+ merger with Showtime to become a U.S. streaming platform later this year. Earlier this year, it said the consolidation would lead to $1.3 billion to $1.5 billion in content impairment charges in the first quarter, while forecasting annual cost savings of $700 million.
“We’re going to focus on driving market-leading streaming growth while navigating this changing macroeconomic environment. Know that the decisions we make will position us well on our path to return to streaming profitability, substantial revenue growth and positive cash flow,” Bagish told analysts on a morning call.
Paramount’s TV unit ad sales continued to fall in the January-March period. An 11 percent decline in the latest quarter followed a 7 percent decline in the fourth quarter of 2022.
“We are seeing signs of stability in the ad market. But most importantly, we see the undoubted and growing value of our content and platforms for both consumers and the business community, exemplified by growing usage and a wide range of deals and partnerships,” Bakish told analysts. Like the content of the studio Mayor of Kingstown, 1923 And Tulsa Raja As traditional cable channels continue to come under pressure, it underpins growth on its streaming platforms.
“Yes, it requires investment,” Buckish acknowledged, adding that Wall Street worries about the studio’s ability to reach streaming profitability have increased, as TV ad revenues decline and costs rise as Paramount+ merges with Showtime.
He reiterated that 2023 will be the peak investment year for streaming. “But there is no doubt that our investment is paying off. As we scale, we’re very much on a relative path to streaming profitability,” Bakish argued, without putting a timeline for Breaking Even.
“Parmount+ has the levers to continue to drive subscriber revenue and ultimately become profitable down the road,” Bakish said in response to a question about continued momentum in streaming subscriber growth. He argued that Paramount+’s content offerings and upcoming merger with Showtime will help drive growth.
Paramount Global has restarted the sale process for Simon & Schuster after an earlier attempt to sell the publisher to the owner of Penguin Random House to strengthen its balance sheet was blocked. Paramount Global CFO Naveen Chopra told analysts that the studio is looking at “a path to possibly completing a transaction this year.”
“We are always looking for ways to increase shareholder value,” Bakish added, without specifying that other non-core assets at Paramount Global could go on the auction block.
Paramount unveiled a dividend cut as the Hollywood giant focuses on increasing its profits through layoffs and other cost cuts, with a greater focus on achieving macro-economic clouds and streaming profits. It also cut its quarterly cash dividend to 5 cents a share from 24 cents a share.
The entertainment giant reported a first-quarter loss of $1.23 billion, or $1.81 per share, compared with a profit of $775 million, or 58 cents per share, a year earlier. Quarterly revenue fell 1 percent, driven by a 6 percent film unit decline and an 8 percent TV unit decline, which was outpaced by a 39 percent streaming revenue gain.
Paramount’s film division posted a 6 percent revenue decline to $588 million. Adjusted operating loss before depreciation and amortization at the film unit widened to $99 million from $37 million. Dungeons and Dragons: Honor Among Thieves on the last day of the quarter, as well as Miramax’s costs of publication Operation Fortune: Tactic Warand macro-driven flexibility in licensing consumer products.
TV Media unit revenue fell 8 percent to $5.19 billion, driven by a decline in advertising and “reflecting weakness
The global advertising market and fewer NFL games on CBS, as well as foreign exchange rate changes and a 15 percent decline in licensing and other revenue, “primarily reflect lower volumes of licensed content.”
To cut costs in its TV media division, CFO Chopra told analysts it would move studio production offshore or to “lower-cost formats” and begin using artificial intelligence tools for “content localization.” A very stressed economy.”
And on the promotional side, Paramount Global held a glitzy pitch and party at Carnegie Hall in April to talk to buyers of the studio’s intimate front-end additions. “A big presentation event, followed by a big party, is not really useful for the day,” he stressed.
Affiliate and subscription revenue declined 1 percent, driven by foreign exchange impacts
and “previous restructuring of certain international affiliate agreements, which resulted in a shift of revenue from our pay television services to our direct-to-consumer services.”
In late March, Bank of America analyst Jessica Reif Ehrlich upgraded her rating on Paramount stock from “neutral” to “buy” and raised her stock price target to $32 on a “shopping list of attractive assets.”
“We have our concerns about Paramount’s ability to manage the transition toward streaming while balancing the cannibalization of legacy businesses,” he explained. “Even with their admirable progress so far, we are skeptical of how well they can fare against their relatively small size and peers. However, we see two potential outcomes of this shift as positive for the stock 1) Paramount’s focus on streaming re-accelerating revenue growth in 2024 and beyond Successful execution or 2) Paramount+ and free cash flow, which could lead to a sale of the company, could be at a significant premium to current market levels in our view.
The analyst also highlighted that 2023 “seems to us as a revenue trough as streaming losses peak, ad market bottoms and cost management drives profits in Paramount’s traditional businesses.”
