Paramount's Q2 Results: Streaming Profits Offset Declining TV Revenue, Subscriber Losses Linger

Paramount Global reported Q2 results with top-line growth and DTC profits, but muted streaming subscriber trend. The company experienced a net loss of 1.3 million Paramount+ subscribers, attributed to the end of an international wholesale agreement. Direct-to-consumer revenue grew 15% YoY, with Paramount+ outperforming the broader segment. Despite this, the reliance on linear TV keeps Paramount from having a moat. The company maintains a $20 fair value estimate and awaits pro forma financials from the Skydance integration and incoming management's strategy.

Paramount Global reported its second-quarter results, highlighting top-line growth and direct-to-consumer (DTC) profits despite a muted streaming subscriber trend. The company experienced a net loss of 1.3 million Paramount+ subscribers, primarily attributed to the end of an international wholesale agreement. This loss, however, did not significantly impact the overall financial performance.

Direct-to-consumer revenue grew by 15% year over year, with Paramount+ outperforming the broader segment. Average revenue per Paramount+ subscriber increased by 9%, driven by price increases, and the subscriber base expanded by 14% over the past year. These gains helped offset the decline in TV media adjusted EBITDA, which decreased by $155 million or 15%.

Despite the streaming subscriber loss, the company's reliance on linear TV revenue, which still constitutes about 60% of total sales, continues to obscure the value at Paramount. The company maintains a $20 fair value estimate but awaits pro forma financials from the upcoming Skydance integration and the incoming management's strategy.

The merger with Skydance Media, set to close on August 7, is expected to bring significant changes to Paramount's streaming strategy. The new management may alter streaming investment and potentially boost profits. However, the company has not provided details on how the merger will impact streaming subscriber losses or overall financial performance.

In summary, Paramount Global's Q2 results demonstrate a mixed bag of performance. While the company shows strong growth in DTC revenue and a robust subscriber base for Paramount+, the reliance on linear TV and the muted streaming subscriber trend pose challenges. Investors and financial professionals should closely monitor the upcoming Skydance integration and the new management's strategy to gauge the company's future prospects.

References:
[1] https://www.morningstar.com/stocks/paramount-earnings-top-line-growth-dtc-profits-dampened-by-muted-streaming-subscriber-trend
[2] https://www.imdb.com/news/ni65407578/?ref_=ttnw_art_perm