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Paramount+ accounts for the bulk of the company’s streaming subscribers.
Dreamstime
The streaming-stock bloodbath continues:
Paramount Global
(ticker: PARA) is the latest company in the business to see its stock drop after its first-quarter report.
Subscribership for services including Paramount+ continued to grow rapidly, but without a commensurate increase in profits. And money-losing subscriber growth is no longer enough to impress investors increasingly skeptical of the streaming business model, especially as revenue from legacy movie-studio and TV operations stagnate or decline.
The market’s preference is at direct odds with Paramount’s strategy for years of planned streaming losses in pursuit of subscriber growth, which management promises will lead to a profitable, at-scale streaming business in the future. Fierce competition from peers and tech giants leaves little room for mistakes.
Paramount is “executing on a differentiated playbook for a diversified entertainment company and building a financially attractive business with healthy long-term margins,” said CEO Bob Bakish on Tuesday morning’s earnings call.
Paramount stock was down 5.5% in Tuesday morning trading, to about $28.60.
The company’s earnings release showed first-quarter revenue was down 1% year over year, to $7.3 billion—about $100 million short of the Wall Street consensus. That reflects the fact that in the first quarter of 2021, CBS aired the NFL Super Bowl, which moved to
Comcast
’s
(CMCSA) NBC in 2022. Excluding that mega-advertising event from last year, Paramount said its revenue would have been up 5% year over year in the quarter.
Paramount, which changed its name from ViacomCBS in February, said it earned 58 cents per share, or 60 cents after adjusting for one-time factors. That was down 61% year over year, as streaming investment increased, but better than the 52 cents that Wall Street analysts had been forecasting on average. Paramount’s preferred profit measure, adjusted operating income before depreciation and amortization—or Oibda—came in at $913 million, down from $1.6 billion in the year-ago quarter.
Paramount’s subscription streaming services counted 62 million users worldwide, up by 6.3 million in the first quarter—with almost 40 million of those on Paramount+. Its other services including Showtime, BET+, and Noggin lost about half a million subscribers in the first quarter, which management attributed to a lull in the release of new content early this year.
The free, advertising-supported Pluto TV service increased its monthly active users to almost 68 million in the first quarter, up by 3.1 million.
Paramount’s total streaming-related revenue from subscriptions and advertising were nearly $1.1 billion in the first quarter, up by 82% from a year earlier. But losses tripled to $456 million, from a $149 million deficit in the first quarter of 2021, as Paramount poured money into content and marketing.
And the rest of the company didn’t grow: Traditional TV revenue declined 6% year over year, to $5.6 billion, while movie-studio revenue was down 27%, to $624 million. The TV business’s adjusted Oibda was $1.5 billion, down 13%, while the movie segment had a loss of $37 million, versus $179 million in adjusted Oibda in the year-ago period.
The overall picture is of a legacy media company—85% of revenue come from TV, movie theaters, and licensing—in the midst of an expensive pivot to streaming. Expenses were roughly $1.42 for every dollar of revenue at the segment.
Still, the promise of long-term streaming growth remains. Management expects to have more than 100 million streaming subscribers, for Pluto to have up to 120 million monthly active users, and for streaming revenue to exceed $9 billion annually by 2024. It still forecasts that streaming losses will peak next year, before declining.
But with interest rates on the rise and investors preferring businesses that show cash profits now, there is less appetite for underwriting a multiyear investment in an unproven streaming story. The fact that the streaming market is competitive and potentially saturated makes winning there all the more challenging.
The market certainly isn’t pricing in high odds of success for Paramount: shares trade at less than 12 times expected earnings over the next four quarters, while the
S&P 500 index trades at close to 18 times.
The stock was about flat in 2022 through Monday’s close, versus a 13% decline for the S&P 500. Shares of media rivals
Walt Disney
(DIS) and
Warner Bros. Discovery
(WBD) were down 27% and 18%, respectively, while
Netflix
(NFLX), the pioneer of streaming, had tumbled 67%.
Write to Nicholas Jasinski at [email protected]
Source: https://www.barrons.com/articles/paramount-streaming-subscribers-earnings-51651585856?siteid=yhoof2&yptr=yahoo