Getting into the streaming business isn’t easy.
Shares of Paramount Global fell more than 10% in early trading Thursday after the New York owner of the CBS broadcast network and Paramount movie studio said third-quarter net income fell due to investments in content for streaming and declines in its main business of securing revenue from advertisers and affilates.
Bob Bakish, the company’s CEO, told investors during a conference call that the company was aware of concerns about the stock market and the economy weighing down ad spending, but noted that Paramount was “putting points on the board” by building a broad media portfolio that included broadcast TV, streaming and a movie studio, among other assets.
To be sure, Paramount added 4.6 million subscribers to its Paramount Plus streaming service in the third quarter, news that should be welcomed by Wall Street. To get there, however, it has to invest in new content and marketing, dynamics that took a 36% bite out of operating income and created a tumble in net income for the period.
Net income fell to $231 million, compared with $538 million in the year-earlier quarter. Total revenue rose 5% to $6.92 billion, compared with $6.61 billion in the year-earlier period. On a per-share basis, Paramount posted net income of 33 cents per share. Adjusted for one-time gains and costs, earnings came to 39 cents per share.
The company’s Class A shares were off $2.25 per share in early trading Thursday,
During the call, Bakish told investors that economic headwinds were largely affecting ad spending on digital properties and noted that travel and electronics advertisers were continuing to invest. He also pointed to robust activity at the company’s film operations, which continue to enjoy a boost from the performance of “Top Gun: Maverick.”
Yet Paramount faced challenges in one of its biggest areas of business — traditional TV. Revenue from its traditional TV networks fell by 5% during the period, with ad revenue down 3%, and affiliate fees off by 5%. Paramount said declines in viewership and subscribers could not offset gains from political advertising or rate increases.
