Paramount Global on Wednesday reported that third-quarter sales were up 5% year over year, but results fell short of expectations as they suffered from cable cuts and a drop in advertising revenue.
Its shares closed down 12% on Wednesday.
Here’s what the company reported versus analysts’ expectations, according to Refinitiv:
- Adjusted earnings per share: 39 cents versus 43 cents expected
- Revenue: $6.92 billion versus $7.01 billion expected
Paramount said revenue for its TV media segment declined 5% sequentially to about $4.9 billion as pay-TV subscribers declined. The device includes the CBS broadcast network and cable television channels such as MTV, Nickelodeon and the premium network Showtime.
Ad revenue for its TV channels fell 3% to about $1.9 billion, a sign that macroeconomic headwinds are beginning to be felt. The company had warned in the summer that it was beginning to feel the slowdown in the advertising market.
Speaking to investors on Wednesday, CEO Bob Bakish noted that digital advertising faces more challenges, especially since television has the advantage of selling ads up front.
“If an advertiser wants to make an impact on a national scale, there’s no better medium than television,” Bakish said.
The scatter market, the market for TV advertising time that is bought and sold just before the advertising date, also experienced some weakness. Advertising for categories like travel and electronics has held up well, Bakish said, while the automotive sector, which typically accounts for a large share of the advertising market, still hasn’t improved due to supply chain issues.
The company noted that during the quarter it also restructured some of its international affiliate TV deals, shifting revenue from pay-TV services to streaming.
“We have two goals, generating cash flow and margins from traditional media while building scale from media’s key growth sector, streaming,” said Bakish.
Film studio Paramount Pictures reported revenue growth of 48% year-over-year to $783 million, driven by more releases compared to the earlier days of the pandemic when lockdowns were still in place. Paramount Pictures also grew its royalties from other platforms by 19% to $549 million.
The company’s direct-to-consumer streaming segment also fared better. Paramount+, the company’s answer to premium subscription services like Netflix and Disney+, added 4.6 million subscribers, bringing the total to 46 million customers. Paramount+ also lost 1.9 million subscribers during the quarter as SkyShowtime, its joint venture with Comcast in Europe, launched in Scandinavia and replaced Paramount+.
Paramount+ subscriber growth has been fueled by esports, particularly the NFL and international football, and the launch of its partnership with Walmart+. The company also announced on Wednesday that its blockbuster Top Gun: Maverick, as well as its recent blockbuster Smile, will be out on Paramount+ by the end of the year, likely giving the streaming service a boost.
Overall, Paramount said its total direct-to-consumer streaming customers, which include its Showtime, BET+ and Noggin services, grew to nearly 67 million at the end of the quarter. The company now expects that number to surpass 75 million by the end of the year.
Paramount said its total direct-to-consumer revenue was up 38% year over year and that subscription revenue was up 59% to $863 million, primarily due to growth in Paramount+ paid subscribers. Ad revenue for the segment grew 4%.
“We believe that long-term streaming operating margins will converge to TV media margins as the benefits of our multi-platform strategy materialize,” Chief Financial Officer Naveen Chopra said in his call to investors on Wednesday.
Meanwhile, Pluto TV, the company’s free, ad-supported streaming service, reached 72 million monthly active users worldwide and grew its total viewing hours by double digits, the company said. On Tuesday, Fox Corp. reported that its Pluto competitor Tubi was a bright spot for the company as revenue and promotion of the service surged significantly.
Disclosure: CNBC is owned by Comcast.