Paramount Global on Wednesday missed analyst revenue expectations for its third quarter earnings, as the media giant buckled amid weakness in advertising sales and a lack of original content.
The conglomerate, which runs CBS, Viacom and the Paramount film studio, reported revenue rose 5% to $6.92 billion during the quarter, compared with $6.61 billion in the third quarter of 2021. Analysts on average had expected $7.06 billion.
Earnings per share plunged 70% to 21 cents, from 69 cents a year ago, well short of the 44 cents per share forecast by Wall Street. Adjusted earnings per share, stripping out one-time items, fell 49% to 39 cents a share.
Shares of Paramount fell 8.4% in pre-market trading to $17.56. The stock closed Tuesday up 4.6% at $19.17. Investors also sold off shares of rival entertainment companies, with Disney, Warner Bros. Discovery, Fox and Lionsgate all falling about 1% pre-market.
The biggest hit to the company’s results came in a 5% drop in revenue in its TV Media division, which houses CBS and its cable networks.
Despite heavy political spending and higher pricing, advertising revenue slid 3% year-over-year to $1.97 billion, thanks to the impact from lower impressions and foreign exchange.
The company said that a shift of revenue from pay television services to direct-to-consumer services, along with affiliate agreement restructuring, led to a 5% drop in affiliate revenue, to $2 billion. Revenue from licensing dove 9% to $975 million.
Direct-to-consumer subscriptions rose by 4.7 million, bringing global subscribers to nearly 67 million on its Paramount+, Showtime and BET+ services, with Paramount+ specifically adding 4.6 million subscribers, a slowdown from the 4.9 million to the service in Q2. Direct-to-consumer revenue grew 38% in the quarter quarter to $1.23 billion.
Paramount Pictures, however, had a stellar quarter, with revenue leaping 48% thanks to No. 1 movie of the year “Top Gun: Maverick” and the horror flick “Smile.” The film unit reported revenue of $783 million as the releases drew crowds back to the box office.
“Looking forward, we couldn’t be more excited about the array of sensational content coming to Paramount+ in the fourth quarter, as well as the launch of the service in France, Germany, Austria and Switzerland,” President and CEO Bob Bakish said. The entertainment giant added 4.7 million new streaming subscribers overall in the quarter.
Though the studio didn’t provide specific viewership figures, it said that “1883,” “The Lost City,” the return of “Beavis and Butthead,” “Orphan: First Kill” and the ever-present “Star Trek” television shows generated strong acquisition and engagement as both domestic and international hours watched per household grew year-over-year.
Paramount’s theatrical success in the third quarter was mostly confined to “Top Gun: Maverick,” which will debut on Paramount+ at some point during the next three months. Tom Cruise’s legacy sequel earned approximately $482 million of its $1.5 billion global theatrical ticket sales from late June to late October. However, Parker Finn’s R-rated original “Smile” opened with a robust $22 million domestic in late September, so the vast majority of its $186 million-and-counting theatrical earnings will apply toward the fourth fiscal quarter.
The year’s final quarter will also include the theatrical release of Damien Chazelle’s “Babylon” (starring Margot Robbie, Diego Calva and Brad Pitt) and (as of Tuesday) the physical media debut of “Top Gun: Maverick.” The blockbuster sequel, which was delayed by two full years due to the Covid pandemic, has been available at home to digitally rent or purchase since late August.
“Smile” was the sixth Paramount release of 2022 to debut at the top of the weekend box office, in what has been a remarkable theatrical comeback for a studio struggling at the multiplex long before Covid. Next year offers a reissue of “Titanic” and potentially promising franchise titles like “Dungeons & Dragons: Honor Among Thieves,” Tom Cruise’s “Mission: Impossible – Dead Reckoning Part I” and another “Paw Patrol” movie.