By Chavi Mehta and Dawn Chmielewski
(Reuters) -Paramount Global’s investments in its fast-growing but unprofitable streaming unit have peaked a year ahead of the target, the media company said on Thursday, sending its shares 10% higher in extended trading.
The company also beat estimates for third-quarter earnings as the integration of streaming service Paramount+ with Showtime helped its subscription numbers and advertising revenue, while potentially keeping its spending on content in check.
“We now expect DTC losses in 2023 will be lower than in 2022 – meaning streaming investment peaked ahead of plan,” CEO Bob Bakish said.
The upbeat quarterly results and company comments come a day after streaming device maker Roku (NASDAQ:) signaled a rebound in the advertising market, lifting its shares and also 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, Huber Research Partners analyst Craig Huber said production shutdowns, caused by the Hollywood strikes, could have been a factor helping Paramount forecast lower losses from streaming.
Paramount+ added 2.7 million subscribers in the third quarter, beating analysts’ estimates of 2.02 million additions, according to Visible Alpha estimates.
Despite expenses at the streaming division jumping 23% to $1.93 billion, the company managed to narrow its adjusted operating loss to $238 million from $343 million a year earlier, partly due to benefits from price hikes.
Quarterly revenue from the filmed entertainment business rose 14% to $891 million, thanks to releases including “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 at its TV media division fell 8% to $4.57 billion, driven by a 14% drop in advertising revenue due to softness in the global advertising market and lower political advertising, Paramount said.
The decline also reflected a drop in licensing revenue from third parties. The Hollywood strikes shut down production, resulting in less content available for licensing.
The company said it expected fourth-quarter advertising revenue to be impacted by a “sizeable decline” in political ads.
Revenue was $7.13 billion for the quarter ended Sept. 30, compared with analysts’ estimate of $7.10 billion, according to LSEG data. The company’s adjusted earnings per share were also above estimates.
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