© Reuters. Figurines of people are seen in front of the displayed Paramount+ logo, in this illustration taken January 20, 2022. REUTERS/Dado Ruvic/Illustration/File photo
By Chavi Mehta and Dawn Chmielewski
(Reuters) – Paramount Global’s investments in its fast-growing but unprofitable streaming unit peaked a year ahead of target, the media company said on Thursday, sending its shares up 10% in extended trading .
The company also beat third-quarter profit estimates as the integration of streaming service Paramount+ with Showtime improved its subscription numbers and advertising revenue, while potentially reining in its content spending.
“We now expect DTC losses in 2023 to be lower than in 2022, meaning streaming investments have peaked sooner than expected,” CEO Bob Bakish said.
The company’s upbeat quarterly results and comments come a day after the streaming device maker. Roku (NASDAQ:) reported a rebound in the advertising market, lifting its shares as well as those of Warner Bros. Discovery (NASDAQ:) and Paramount in regular trading on Thursday.
Warner Bros rose another 3.5%, while Fox Corp added 2% in extended trading.
However, Craig Huber, an analyst at Huber Research Partners, said production shutdowns, caused by the Hollywood strikes, could have been a factor helping Paramount predict lower streaming losses.
Paramount+ added 2.7 million subscribers in the third quarter, beating analyst estimates of 2.02 million additions, according to Visible Alpha estimates.
Despite a 23% increase in expenses at the streaming division to $1.93 billion, the company managed to narrow its adjusted operating loss to $238 million from $343 million a year earlier, thanks in part to to price increases.
Quarterly revenue for the filmed entertainment business rose 14% to $891 million, driven by releases like “Mission: Impossible – Dead Reckoning Part One.”
However, the division reported an adjusted operating loss of $49 million, citing the timing of theatrical releases, as well as costs associated with strike-related production shutdowns.
Revenue from its television media division fell 8% to $4.57 billion, driven by a 14% drop in advertising revenue due to a weak global advertising market and a decline in political advertising, Paramount said.
This decline also reflects a decline in third-party licensing revenues. Hollywood strikes halted production, leading to a decrease in content available for licensing.
The company said it expected fourth-quarter advertising revenue to be impacted by a “significant decline” in political ads.
Revenue was $7.13 billion for the quarter ended September 30, compared with analysts’ estimates of $7.10 billion, according to LSEG data. The company’s adjusted earnings per share were also higher than estimates.