stock fell sharply on Thursday after the media company reported a big miss on quarterly profits due to a slump in advertising and its CEO announced price increases in 2023.
For the fourth quarter, the media company (ticker: PARA) delivered adjusted profits of 8 cents per share on Thursday. That’s much lower than the consensus expectation of analysts tracked by FactSet, which was 24 cents per share. Revenue of $8.13 billion slightly missed expectations of $8.2 billion, driven partly by lower advertising income.
The company said advertising revenue fell 5% versus the same quarter a year ago. It attributed the damage to the international market and currency fluctuations. Domestic advertising declined 2%
Advertisers have been reluctant to commit dollars in a weak macroeconomic environment in which consumers are seemingly holding their money tight. Other companies, such as Snap (SNAP), that rely heavily on advertising-related revenue also posted losses in 2022.
Paramount CEO Robert Bakish said: “The ad, as we know, has been cyclically tough and, like our peers, we felt its impact in 2022.” He acknowledged the downturn on a call discussing earnings, although the company said it is seeing early signs of stabilization in advertising.
Paramount announced last month it would integrate its Showtime cable channel and Paramount+. When the two combine, the cost of the Paramount+ Premium tier will increase to $11.99 from $9.99, while its lower-priced Essential tier (without Showtime) will cost $5.99 instead of $4.99.
The price rises will affect both new and existing customers and they come after Paramount added a record 9.9 million subscribers in the fourth quarter, due to growth in its streaming platform.
Some have accused the company of arriving late to the streaming party—it launched Paramount+ about two years ago. The move has mitigated the company’s exposure to a declining linear-TV business, but has also racked up heavy content costs.
Paramount’s stock tumbled 3% to $23.77 after markets opened on Thursday.
Rising expenses at Paramount likely added to investor displeasure. Costs and expenses at the company rose to $8 billion, up 5.2% from the same quarter last year.
analyst John Hodulik rated the stock Sell after the earnings report, calling the report mixed.
Write to Karishma Vanjani at [email protected]
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