Paramount Global reached more than 77 million streaming subscribers worldwide as of the end of 2022, up from 67 million as of the end of September, as Paramount+ posted a record quarterly user gain, the Hollywood giant said on Thursday. However, higher streaming investments were a drag on the entertainment company’s bottom line, and TV unit advertising sales dropped.

Paramount, led by CEO Bob Bakish, reported that its Paramount+ streamer hit nearly 56 million subscribers as of the end of the year, after adding a company-record 9.9 million subs compared with the 46 million recorded as of the end of September, driven by such popular content as blockbuster movie Top Gun: Maverick.

“Subscriber growth was driven by a strong content slate, including the NFL, the expansion of existing franchises like Top Gun: Maverick and 1923, the success of new franchises like Tulsa King and Smile, as well as CBS’ overall entertainment slate,” the company said. “Internationally, Yellowstone and Top Gun: Maverick were top acquisition drivers for the service.”

Paramount’s free, advertising-supported streaming service Pluto TV also continued to grow its monthly active user (MAUs) in the latest period, the latest earnings report unveiled before the stock market open. Pluto TV increased global MAUs by 6.5 million in the final quarter of 2022 to 78.5 million, “driven by growth in all markets and expansion into Canada.” It also grew global total viewing hours by “strong double digits quarter-over-quarter and year-over-year,” it added.

Paramount’s direct-to-consumer (DTC) unit posted strong fourth-quarter revenue growth of 30 percent to $1.4 billion as subscription revenue jumped 48 percent, which the company touted as proof that its investments are paying off and its content engine continues to function well, and advertising revenue rose 4 percent. The quarterly adjusted operating loss before depreciation and amortization (OIBDA) in the DTC segment again widened though to $575 million from $502 million in the year-ago quarter.

On Jan. 30, Paramount became the latest Hollywood conglomerate to revamp its streaming setup and strategy, unveiling a sweeping combination of the Paramount+ streaming service and Showtime. The move will bring changes to programming — originals like Kidding, Super Pumped and American Rust, among others, were removed from the Showtime platform — along with additional layoffs. Back then, Wells Fargo analyst Steven Cahall estimated that the company could reach $300 million-$400 million in cost savings, “or around 5-6 percent of Paramount’s ‘22 estimated selling, general & administrative [expense].”

“Paramount continues to demonstrate the success of its global multiplatform strategy, with popular content at its core,” said Bakish in the earnings update on Thursday. “Nowhere was this more evident than in the growth of Paramount+, which added a record 9.9 million subscribers in the fourth quarter, driven by hit content like Top Gun: Maverick, 1923 and Criminal Minds: Evolution. In addition, in
2022, Paramount Pictures had six films open at number 1 in the U.S. box office, and Paramount regained its position as the most-watched media family in linear television.”

And the CEO vowed: “Our content and platform strategy is working and, with even more exceptional content coming this year, we expect to return the company to earnings growth in 2024.”

Paramount’s TV Media unit posted a stronger bottom line despite lower revenue. For the segment, the company reported a 7 percent revenue drop for the fourth quarter to less than $5.9 billion as advertising revenue fell 7 percent “as increases from political advertising and pricing only partially offset lower impressions” and an unfavorable foreign-exchange impact, while affiliate and subscription revenue declined 4 percent “as the evolution of certain international affiliate agreements resulted in a shift of revenue from our pay television services to our streaming services and rate
increases for our domestic networks only partially offset subscriber declines.” Licensing and other revenue fell 11 percent driven by a lower volume of programming produced for third parties.
TV Media adjusted OIBDA rose 5 percent though “as the revenue decline was more than offset by lower costs.”

Paramount’s filmed entertainment unit boosted its fourth-quarter revenue by 35 percent “as the strength of our 2022 releases drove growth in both theatrical and licensing revenues.” Theatrical revenue jumped 149 percent, driven by the box office success of Smile, which, the firm noted, “became 2022’s biggest global horror movie and the studio’s third-biggest revenue driver behind Sonic the Hedgehog 2 and Top Gun: Maverick.” Licensing and other revenue in the film division grew 28 percent, benefiting from 2022 releases in the home entertainment window, led by the continued success of Top Gun: Maverick. Film unit adjusted OIBDA in the fourth quarter rose from breakeven to $87 million, “reflecting higher
profitability of our theatrical slate in 2022,” the company highlighted.

Overall fourth-quarter revenue at Paramount edged up 2 percent to $8.1 billion. Operating income fell 93 percent to $182 million. Earnings from continuing operations swung from $3.05 per share to a loss of 29 cents per share.

Shortly after 7:40 a.m. ET, Paramount shares were down 7.5 percent in pre-market trading to $22.70.

“The fourth quarter 2022 was a mixed bag,” Wells Fargo analyst Steven Cahall wrote in a first reaction, noting “strong streaming key performance indicators.” He added: “With Paramount up 45 percent year-to-date (the S&P 500 up 8 percent), for the stock to hold, we think the bogey is cost cuts and/or better (streaming) losses that lead to positive free cash flow revisions amidst tough linear trends.” Summarized the Wall Street expert in the headline of his report: “Mixed Fourth Quarter – All About ’23 Outlook.”