Paramount+ Hits 67.5M Subscribers As Streaming Loss Shrinks to $490M

Paramount Global hit 67.5 million Paramount+ streaming subscribers worldwide at the end of its fourth quarter, a gain of 4.1 million from the previous financial quarter.

The Hollywood conglomerate, with its future the subject of mounting speculation on Wall Street, on Wednesday said it expected to deliver “significant total company earnings growth” in 2024, and reach profitability for Paramount+ domestically in 2025.

On an after-market analyst call, Paramount CEO Bob Bakish underlined increases in viewer engagement, reduced churn and a subscription price increase as bringing profitability to Paramount+ next year, which represented a “significant and exciting milestone in the company’s transformation.” The studio’s CFO, Naveen Chopra, also forecast a lower programming spend for Paramount’s streaming platforms.

“I do think sub growth in 2024 will be lower than 2023, though importantly I’d point out we do still expect very healthy Paramount+ revenue growth and, of course, revenue is the more important metric than subs,” Chopra added of Paramount+ subscriber growth expected this year during the analyst call.

Paramount posted first-quarter net earnings of $514 million, compared to a year-earlier net earnings at $21 million, on overall revenue down 12 percent to $7.63 million. Adjusted for one-time items, the studio recorded per-share earnings at 4 cents, compared to a year-earlier 8 cents per-share earnings. Analysts forecast a loss of 1 cent and revenue of $7.84 billion for the fourth quarter.

The studio posted a smaller streaming loss of $490 million, against a year-earlier $575 million loss, representing some upbeat news for Wall Street. Having reduced full year direct-to-consumer losses in 2023 had Paramount indicating it hit peak streaming losses in 2022, a year ahead of schedule.

The direct-to-consumer division saw advertising revenue rise 14 percent to $526 million on growth from Paramount+ and Pluto TV, and subscription revenue grew 43 percent to $1.33 billion. Paramount traditional TV revenue, comprising assets like CBS and its MTV, Comedy Central and Nickelodeon cable networks, dropped by 12 percent to $5.16 billion in the latest quarter.

TV advertising revenue fell 15 percent to $2.28 billion, and affiliate and subscription revenue dropped 1 percent to just over $2 billion. Paramount ‘s film studio division, home of the Mission Impossible and Top Gun franchises, reported $647 million in revenue, down 31 percent from a year-earlier $936 million, due to sharply lower licensing revenue.  

The Shari Redstone-controlled conglomerate is battling to replace lost linear TV revenues with streaming and other digital revenues as it responds to fast-changing consumer TV viewing habits. On the advertising side, direct-to-consumer ad revenue was up and TV media was down in the fourth quarter, which includes a 5 percent impact from lower political advertising. Paramount advertising revenue in the quarter was also impacted by the dual Hollywood strikes.

“While these headwinds are not unique to Paramount, Paramount shares are uniquely exposed given large exposure to linear TV, elevated debt leverage, and lack of meaningful FCF (free cash flow,” Morgan Stanley Research analyst Benjamin Swinburne said in a Feb. 27 analyst note coming ahead of the studio’s latest financial results.

Linear TV advertising declines and accelerating cord-cutting has sparked increased cash flow concerns as the major studio looks to higher marketing and subscriber acquisition costs and raising its original content production spending coming out of the dual Hollywood strikes.

Paramount said it generated $558 million of net operating cash flow and $443 million of free cash flow during the fourth quarter.

As streaming gains offset a weaker advertising market during the fourth quarter, CEO Bakish in a statement that accompanied his latest financial results said: “Our disciplined execution and strong content offering drove our results in 2023, as we continue to evolve our business for profitable growth in 2024 and beyond.”

Bakish added: “Looking ahead, we continue to be focused on maximizing the return on our content investments and scaling streaming, while transforming the cost base of our business. And I couldn’t be more thrilled with the early momentum we’ve had across every platform in 2024, demonstrating the power of our strategy and assets.”

The Paramount boss also addressed Disney, Warner Bros. Discovery and Fox unveiling plans to launch a joint sports streaming venture to fend off competition from…