Although Paramount Global saw advertising revenues decline in the third quarter due to macroeconomic headwinds and unfavorable currency exchanges, executives said they are confident the revenue segment will soon return to growth.
During the three months ended Sept. 30, Paramount Global saw its ad revenue decline 2.1% to $2.34 billion from $2.39 billion. The measurement would have improved by 1% on a constant currency basis, according to CFO Naveen Chopra.
The TV segment saw advertising recede by 3% year over year to $1.97 billion, as political advertising and pricing increases could not overcome the impact of lower impressions and unfavorable currency exchanges.
President and CEO Bob Bakish conceded that a difficult macroeconomic environment hurt third-quarter ad sales, especially in the scatter market, where clients purchase schedules close to a program's air date. He said the economic impact had been far greater on the digital side of the business.
Upfront advantage
Bakish said the linear side has held up better for a couple of reasons, including the company's decision to capitalize on its growing share of the viewing market and sell more inventory in the upfronts ahead of marketplace uncertainly. During the upfront events, content providers look to sell linear and digital schedules before the upcoming TV season.
Paramount Global registered upfront pricing gains in the high single digits. This is helping Paramount's TV business, which also benefits from a relatively limited inventory supply.
Conversely, the digital market is a bit more demand-constrained. "When you have strong demand market, you can really benefit," Bakish said. "But when there's demand constraint, that tends to be rougher."
Down cycle recoveries
Chopra expects continued macroeconomic advertising weakness in the fourth quarter to impact the company's TV media and direct-to-consumer units, as he anticipates the year-over-year rate of decline will mirror what occurred in the third quarter.
From a historical perspective, Bakish pointed to a trio of recent down cycles in the ad market — after 9/11, the 2008 recession and the impact of COVID-19. Noting that while circumstances were different for each, the recovery times were similar, with growth re-emerging after a few quarters.
The ad market, he said, will turn as it always does. The company will then expect to benefit from its position as the market leader in broadcast TV with CBS (US); the appeal of its cable group among young and diverse audiences; Pluto, the top free-ad-supported service in the U.S.; and ad sales against its growing aggregate streaming service, Paramount+.
Direct-to-consumer gains
Chopra said that together Paramount+ and Pluto TV delivered a 4% rise in adverting revenue to $363 million from $348 million. "Given the engagement trends across our [direct-to-consumer] platforms, we are confident growth will reaccelerate when the digital ad marketplace improves," he said.
Revenues at the company's direct-to-consumer segment advanced 38% to $1.23 billion from $890 million overall, with subscription revenue ahead 59% to $863 million.
The segment's adjusted OIBDA loss widened year over year to $343 million from $198 million, reflective of investments in content, marketing and international expansion.
Paramount Global finished the period with 67 million streaming subscribers globally across Paramount+, BET+, Noggin and Showtime OTT, up from 63.7 million at the end of the June quarter.
The primary Paramount+ platform added 4.6 million global subs to reach 46 million as of Sept. 30, up from 43.3 million in the second quarter. The count excludes 1.9 million subs in the Nordics, who were migrated to the SkyShowtime joint venture with Comcast Corp.
'Top Gun' aids Q3 results
All told, Paramount Global's third-quarter revenue increased 5% to $6.92 billion from $6.61 billion, boosted by a 48% jump in filmed entertainment revenues. The gains on the theatrical and licensing sides were tied largely to blockbuster "Top Gun: Maverick."
Companywide, profits declined to $231 million, or 33 cents a share, from $538 million, or 80 cents a share. Stripping out one-time items, adjusted earnings were 39 cents a share.
