Paramount Global said it would it cut its dividend as continued investment in streaming weighed on the company while it saw declines in its traditional revenue from advertising and cable distribution.
The owner of CBS, Nickelodeon and the Paramount movie studio said its first-quarter loss came to nearly $1.12 billion, or $1.81 a share, compared with a profit of $775 million, or 58 cents a share, in the year-earlier quarter. Revenue was essentially flat, down 1%, on shortfalls in its TV media and filmed entertainment units, while its streaming operations saw revenue rise 39%.
The company also took a $1.67 billion charge in connecting with the restructuring of Showtime, which is being consolidated with the Paramount+ streamer.
Paramount Global CEO Bob Bakish and chief financial officer Naveen Chopra fielded tough questions about cost controls and asset sales during the company’s earnings call. Bakish opened by acknowledging “the challenging and uncertain macroeconomic environment” and said the red ink in the quarter reflected the perfect storm of “peak streaming investment intersects with fiscal ad softness.”
At the same time, Bakish insisted that the company “sees a path to streaming profitablity and a return to free cash flow in 2024.”
The company’s growth prospects remain healthy even as it navigates a difficult transition for its traditional linear TV operations. “Our momentum is strong,” Bakish said, adding that they are “seeing signs of stabilization in the ad market.” On the writers strike that ensued on May 2, Bakish insisted: “We are confident in our ability to weather through it given the many levers we have to pull.”
Like other media conglomerates, Paramount is grappling with intense pressure to ramp up streaming operations, even as the economics of its traditional businesses are in decline. The company boasts of steady consumer interest in Paramount+ and other streaming operations like Pluto, but its TV networks and movie studio remain its biggest contributors to cash flow.
Paramount Global reported a loss of $511 million in its direct-to-consumer operations, compared to a loss of $456 million in the year-earlier quarter — a widening of 12%. The company said Paramount+ added 4.1 million subscribers in the quarter, coming to a total of 60 million overall.
The company’s overall revenue came to $7.3 billion, missing Wall Street estimates. Revenue in its TV operations fell 8%, due to shortfalls in advertising and affiliate fees, while revenue from filmed entertainment was off 6% due to timing of releases.
Chopra noted that 2023 should mark the peak of Paramount Global’s outlay for content to fuel Paramount+. Spending on TV series and movies will go down next year. “The reduction in the dividend does not mean we intend to spend more than previously planned on streaming,” he said. “We’ll be spending less in 2024 than we originally indicated.”
Moreover, Chopra said the company is keeping close tabs on the overall menu of content served up on its channels. There’s a push to “evolve the mix of genres by transitioning some of our programming to lower-cost formats,” he said. That’s the case with CBS’ late-night lineup, where “The Late Late Show with James Corden,” which signed off last week after seven years, will be replaced by a reboot of the Comedy Central series “@midnight,” to be produced at a much lower cost.
Paramount Global has also restarted the sale process of its Simon & Schuster publishing division. In 2021, the Justice Department sued to block the $2.2 billion sale agreement that Paramount Global struck with Penguin Random House. Bakish said he had hopes that a deal could be concluded by year’s end. Simon & Schuster’s “operating performance is substantially superior than when we brought it to market before,” Bakish said.
