Paramount Global (NASDAQ:PARA) reported adjusted earnings per share of 30 cents in the third quarter of 2023, beating the Zacks Consensus Estimate of 8 cents. Revenues for the quarter increased by 3% year-over-year, primarily due to growth in Direct-to-Consumer (DTC) and Filmed Entertainment revenues, partially offset by a decline in TV Media revenues.
DTC revenues increased by 38% year over year to $1.69 billion, driven by subscriber growth and improvements in engagement and monetization, which exceeded expectations and contributed to the company’s profit beat. DTC subscription revenues also saw significant growth, rising 43% year over year to $1.3 billion, driven by pricing increases for Paramount+ and revenues from pay-per-view events.
Paramount+ experienced strong growth, with approximately 63 million subscribers, including 2.7 million additions in the quarter. The platform also saw a 46% increase in total viewing hours across Paramount+ and Pluto. Paramount+ has been integrated into Delta’s in-flight entertainment, and the partnership with Walmart+ has continued to add subscribers and increase viewer engagement.
Filmed Entertainment revenues increased by 14% year over year to $891 million, with theatrical revenues rising by 63% year over year to $377 million. The quarter featured the extension of popular franchises, including Mission: Impossible – Dead Reckoning Part One, Teenage Mutant Ninja Turtles: Mutant Mayhem, and PAW Patrol: The Mighty Movie.
Despite these positive results, Paramount Global continues to face near-term challenges related to declining TV Media revenues, driven by factors like the ongoing Screen Actors Guild – American Federation of Television and Radio Artists’ strike. This strike has affected programming and ad revenues, and near-term challenges in the ad market have impacted revenue trends for the network.
Paramount Global’s exposure to linear Pay-TV businesses, which are in decline, remains a concern. The company faces the challenge of pivoting and reinvesting cash flows from linear TV into streaming and other business lines.
The company’s OIBDA also incurred a $60 million hit due to idle costs to retain production capabilities during the strike, and the delay of Mission: Impossible 8 to 2025 affected its release schedule. Paramount Global has been adjusting its release slate to accommodate production delays, although films slated for the first half have largely been completed.
Despite these challenges, Paramount+ remains an attractive service with a portfolio of content, including theatrical releases available in the streaming window, and increased sports availability that can support ad revenues. The company continues to adapt to the changing landscape and invest in its streaming offerings.
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