NEW YORK—With streaming companies seeing their stocks rally on Wall Street, Paramount Global seemed to confirm investor confidence in the future of the streaming industry by reporting healthy subscriber growth and reduced losses in its streaming operations.
In its Q3 2023 earnings report, Paramount reported that its Paramount+ streaming service added 2.7 million net subs for more than 63 million globally.
Management also said that Paramount continues to progress on the path to streaming scale and profitability and that its direct-to-consumer (DTC) segment remains on track to drive significant earnings improvement in 2024.
“Q3 was yet another significant step in our building of a scaled, profitable streaming business,” president and CEO Bob Bakish said in a call with analysts.
The DTC segment saw revenue increase 38% year-over-year as subscription revenue grew 46% to $1.3 billion, driven by subscriber growth and pricing increases for Paramount+, and revenue from pay-per-view events.
In addition, ad revenue in the DTC segment rose 18%, reflecting growth from Paramount+ and Pluto TV as global viewing hours across Paramount+ and Pluto TV grew 46%.
Overall, Paramount+ revenue grew 61%, driven by subscriber growth and increased advertising revenue as Paramount+ global ARPU expanded 16% year-over-year.
Streaming losses also narrowed. Adjusted OIBDA improved 31% as higher revenue more than offset incremental costs to support the growth of Paramount+.
The company is now forecasting that full-year DTC losses in 2023 will be lower than in 2022, with DTC losses in Q4’23 similar to Q4’22.
During the Q3 earnings call with analysts Paramount Global president and CEO Bob Bakish noted that “there's no question the media industry remains dynamic and in many ways, complex, but our performance this quarter demonstrates clear progress against strategic goals, as we set the company up to return to significant earnings growth in 2024. In the third quarter, we grew streaming revenue in Paramount Plus subscribers while narrowing D2C losses.”
“Q3 was yet another significant step in our building of a scaled, profitable streaming business,” he noted later in the call. “Paramount Plus crossed 63 million subscribers, and we delivered 38% D2C revenue growth aided by a successful price increase. We also narrowed our D2C adjusted OIBDA losses by over 30%. In fact, we now believe 2022 was our year of peak streaming investment meaning D2C losses in 2023 will be lower than in 2022. We're clearly advancing on the path to streaming profitability and this continued D2C improvement will be a key driver of the total company earnings growth we expect next year. Related to that, our integration of Paramount+ and Showtime continues to deliver as we expected. Since it launched at the end of June, the combination has driven increases in acquisition and engagement, ARPU and operational efficiency. The power of partnerships is also a meaningful contributor to our momentum.”
Bakish also argued that the strengthening of their streaming operations would help them as their traditional pay TV business continues to decline.
“Recent negotiations in the industry have raised questions about whether the hard bundling of streaming and pay TV will become the norm in the U.S. and what that could mean for companies like ours,” he said. “The reality is, operators have different priorities, but we've shown that we can adapt our partnerships to accomplish common objectives. As we go forward, it is possible that some of our partners will embrace the strategy that more tightly integrates DTC into the Pay TV bundle. And we expect that if they do, the bundles would have many of the same advantages we've observed in the various hard bundles we've deployed internationally, namely a dramatically lower cost of acquisition and improvement in streaming churn, and it may improve TV ecosystem trends as well.”
“In addition, adding the scale of U.S. pay TV to Paramount+ ad supported tier would bring incremental benefit to our digital advertising offering as well as an additional marketing and promotional value and it would provide an opportunity to upsell to Paramount+ with Showtime,” he added. “As a result, these deals, when structured with the right economic value have the potential to be additive to our model while improving simplicity and increasing value for the consumer. As a related point, it's worth noting that we have already finalized agreements with multiple distributors to offer Paramount+ with Showtime to their customers as a true multi-platform product. Importantly, this includes linear subscribers getting app credentials. That's where we are and where we're headed on distribution.”
