Paramount streaming subscribers, losses grow in first quarter – The Hollywood Reporter

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 reviewed our content portfolio in the first quarter of 2023 in connection with our plan to integrate Showtime with Paramount+ and rationalize and scale our international operations to align with our streaming strategy and to close or globalize some of our international channels. determined not to use certain content on our platforms,” Paramount said in its quarterly results report on Thursday. “Accordingly, we have recorded programming charges that include impairment charges for content removed from our platforms or abandoned, development costs rebates and contract termination costs.”

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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.

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 continues to demonstrate the strength of its content engine
streaming, television and theater,” Pakish said in Thursday’s earnings report. “As a result Paramount+ and Pluto TV hit significant milestones with 60 million subscribers and 80 million MAUs, respectively, while CBS is poised to remain #1 in broadcast for a 15th consecutive season.”

He added: “Looking ahead, we remain focused on continuing to drive market-leading streaming growth while navigating a changing macroeconomic environment. Additionally, the updated dividend policy we announced today will further enhance our ability to deliver long-term value to our shareholders as we move towards streaming profitability.

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 War, and macro-driven flexibility in licensing consumer products. Paramount Pictures’ franchise-centric approach delivered another #1 box office debut Scream VIIt is now the highest-grossing installment in the franchise domestically,” the company said.

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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.” 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.” Adjusted operating income before depreciation and amortization (OIBDA) in the TV media division fell 15 percent due to a revenue decline, “partially offset by lower content costs,” Paramount said.

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.”

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