Paramount Global’s direct to consumer division swung to a profit of $49 million during the third quarter of 2024 — its second quarterly profit in a row for its streaming business, which includes Paramount+ and Pluto — after adding 3.5 million subscribers for a total of 72 million.
But the overall results for the company were mixed, with total revenue falling 6% year over year, weighed down by a 71% plummet in theatrical revenue and 6% drop in TV Media revenue.
Paramount shares fell over 5% during Friday’s trading session following the release of the quarterly results.
Here are the top-line results:
Net income: $1 million, compared to $295 million a year ago.
Adjusted Earnings Per Share: 49 cents per share, up 63% year over year, compared to 24 cents per share expected by analysts surveyed by Zacks Investment Research.
Revenue: $6.73 billion, down 6%, compared to $6.92 billion expected by Zacks.
Operating income: $337 million, down 46%. Adjusted operating income rose 20% to $858 million, after accounting for $104 million in impairment and $321 million in restructuring/transaction-related costs.
Subscribers: Added 3.5 million subscribers for a total of 72 million.
“Our DTC segment successfully delivered profitability for the second quarter in a row, improving by more than $1 billion over the past four quarters, and, across the company, we continue to successfully execute non-content cost reductions that will result in $500 million in annual run rate savings,” Paramount Global co-CEOs Brian Robbins, George Cheeks and Chris McCarthy said in a statement. “With two very strong quarters under our belt, it’s evident that we have clear momentum and that our plan is working thanks to our very talented teams and creative partners.”
The latest results comes as the media giant’s $8 billion merger with Skydance Media is on track to close in the first half of 2025, subject to regulatory approval.
Ahead of the deal’s closing, Paramount is cutting its U.S. workforce by 15%, or around 2,000 employees, in an effort to generate $500 million in annual run rate cost savings. Paramount expects to complete the cuts, which are focused on redundant functions and streamlining corporate teams, by the end of the year. They have impacted marketing and communications, advertising, finance, legal and technology and other support functions. The company also shuttered Paramount Television Studios in August.
Skydance, led by CEO David Ellison, has said it is eyeing a total of $2 billion in cost savings from the merger.
Paramount has hired bankers to help the company with possible asset sales. TheWrap exclusively reported that the company sold the ComicBook and PopCulture websites to Nashville-based Savage Ventures for an undisclosed amount. In March, Paramount sold its 13% equity stake in Viacom18 to Reliance Industries for $517 million, with the sale expected to close in the fourth quarter of 2024.
Four individuals familiar with the co-CEOs’ plans previously told TheWrap that other possible assets that could be put up for sale include Pluto TV, BET, VH1 and the Paramount lot, which would be leased back for the studio’s use.
“We remain diligent as we optimize our asset mix,” Robbins told analysts on Friday. “The sale of our equity interest in Viacom 18 is a great example, which will result in an attractive financial return on our investment.”
The company is also in “active discussions” about potential strategic partnerships or joint ventures with other streamers.
“We are evaluating potential partnerships in streaming through a lens of creating value for the business and our shareholders over the long term,” Robbins added. “Given the complexity, we are being deliberate and thoughtful in our approach and assessment.”
Executives also addressed Paramount’s ongoing contract renewal dispute with Nielsen, noting that the two parties remain engaged and are hopeful for a resolution. Cheeks said there had been no adverse impact on revenue to date and that there’s no material impact is expected in the fourth quarter. While acknowledging that Nielsen is a valuable resource, he argued that the economics “have to make sense for the business.”
Paramount streaming a bright spot
The traditional majors’ ability to achieve — and sustain — streaming profitability has been a big theme in entertainment his year.
Revenue growth and cost efficiencies helped Paramount’s direct-to-consumer division swung from a loss of $238 million a year ago to a profit of $49 million.
But Paramount’s two-quarter profit run for streaming will not extend to three. CFO Naveen Chopra warned that the DTC segment would report a quarterly loss in the fourth quarter of 2024 due to the timing of content spend. But executives said that Paramount+ remains on track to reach domestic profitability in 2025, with the international side trailing 12 to 18 months behind.
Total DTC revenue rose 10% to $1.86 billion, including an 18% increase in advertising revenue to $507 million. It was driven by growth from Paramount+ and Pluto, a 7% increase in subscription revenue to $1.34 billion and a 150% increase in licensing revenue to $10 million. Paramount+ revenue grew 25% to $1.43 billion, fueled by year-over-year subscriber growth and an 11% increase in average revenue per user. ARPU, which is not broken out by the company, was tempered by a price increase last year and a greater-than-expected shift in the mix of its subscriber base toward Essential tier and hard bundle subscribers.
Subscriber trends benefited from the expansion of an international hard bundle deal, the return of NFL and college football, new originals and theatrical releases and Paramount+’s bundle with Charter Communications’ Spectrum TV.
Paramount+ subscriber growth is expected to continue in the fourth quarter, driven by its slate of originals and the CBS fall schedule. It does not expect to add new hard bundle partnerships in Q4.
Free-streaming service Pluto delivered its highest consumption ever of 5% to 5.6 billion viewing hours. The use of video on demand continue to rise as a result of more available content and the platform’s enhanced discoverability and user experience.
TV/media takes a hit
Paramount’s TV/media segment saw its profit fall 19% to $936 million, down from $1.15 billion a year ago. Total revenue for the segment slipped 6% to $4.3 billion, primarily driven by lower affiliate revenue and fluctuations in licensing revenue.
Advertising revenue fell 2% to $1.67 billion, reflecting declines in the linear advertising market, which were partially offset by higher political advertising and the recognition of underreported revenue by an international sales partner in prior periods. Affiliate and subscriptions revenue fell 7% to $1.87 billion, driven by subscriber declines and a 2-percentage point decrease from the absence of pay-per-view boxing events. Licensing and other revenue decreased 12% to $760 million, which reflected a lower volume of licensing in the secondary market.
In August, Paramount took a $5.98 billion write-down for its cable networks due to a downward adjustment to the unit’s expected cash flows from linear TV affiliates.
Looking ahead, the segment’s advertising growth in the fourth quarter is expected to be similar to Q3. Executives said it should benefit from record political spend but also be impacted by less sports inventory compared to the prior year.
Filmed Entertainment swings to a profit, but revenue tumbles
Paramount’s Filmed Entertainment segment swung to a profit of $3 million, compared to a loss of $49 million in the prior-year period due to the Hollywood strikes. Total revenue fell 34% to $590 million.
Advertising revenue fell 60% to $2 million. Theatrical revenue plunged 71% to $108 million, reflecting the number and timing of releases in the quarter compared to the prior year. Licensing and other revenue slipped 6% to $480 million, as lower revenue from home entertainment and the licensing of film library titles were partially offset by higher studio facility revenue compared to last year, which was impacted by the labor strikes.
During the third quarter, Paramount delivered $214 million in free cash flow. The company expects it will be negative in the fourth quarter due to the timing of content spend and $150 million of cash restructuring payments. That is not expected to impact leverage, which was fell to 3.8 times during the quarter due to nearly $500 million in proceeds from the Viacom18 transaction.
