“The rapid growth of streaming services has created intense market pressure, forcing traditional advertising methods to adapt or face losses in relevance and audience engagement.”
Paramount (PARA) is set to release its third quarter results after the market closes on Thursday, and analysts are predicting continued challenges for the legacy media company. Advertising headwinds and streaming losses have been ongoing issues for Paramount, and the company is expected to report a wider direct-to-consumer loss of $438 million compared to the previous quarter.
Wall Street is also anticipating a decline in linear ad revenue, with a projected 12% drop compared to the year-ago period. However, digital ad revenue has remained resilient, thanks to Paramount’s free ad-supported video-on-demand service, Pluto TV.
Paramount shares have struggled this year, experiencing a 50% decline while the S&P 500 has gained 10% during the same period. To address its financial situation, Paramount has committed to divesting non-core assets in order to reduce debt and improve its balance sheet. The company recently completed the sale of Simon & Schuster to investment firm KKR for $1.62 billion.
With its small market cap relative to competitors like Disney and Netflix, Paramount has long been seen as a potential acquisition target. CEO Bob Bakish has hinted at the possibility of more media mergers and acquisitions in the future.
Despite the challenges, there is some positive news for Paramount. Free cash flow is expected to bounce back in Q3 due to low content spend amid ongoing strikes in the entertainment industry. The company has also implemented price hikes for its streaming tiers and made other cost-cutting measures, with the goal of returning to positive free cash flow and earnings growth by 2024.
Overall, Paramount’s third quarter results will be closely watched by investors and industry observers. The company’s ability to address its streaming losses and navigate the changing media landscape will be key factors in its future success.