Q3 2024 Summary
Published Feb 18, 2025, 5:23 PM UTC- Significant Progress Toward Direct-to-Consumer (D2C) Profitability: Paramount's D2C segment achieved profitability for the second consecutive quarter, with adjusted OIBDA improving more than $1 billion over the past four quarters. Paramount+ added 3.5 million subscribers in Q3 2024, reaching 72 million subscribers overall. The company remains on track to reach Paramount+ domestic profitability in 2025.
- Effective Cost Reductions and Operational Streamlining: Paramount has executed 90% of its planned $500 million in annual run-rate cost savings, including a 15% reduction in the U.S.-based workforce, with the remaining reductions expected to be completed by the end of the year. These cost savings contributed to a 20% year-over-year increase in adjusted OIBDA to $858 million in the quarter , setting the company up well for the future.
- Strong Content Portfolio Driving Engagement and Revenue Growth: Paramount continues to deliver popular content, fueling subscriber growth and engagement. Hits like "Tulsa King," which broke records as the #1 global debut in Paramount+ history, and the return of the NFL and College Football have boosted viewership and advertising revenue. Upcoming high-profile film releases, such as "Gladiator 2" and "Mission: Impossible," are expected to sustain momentum.
- The international direct-to-consumer (DTC) business is lagging behind in profitability, tracking 12 to 18 months behind the domestic market, leading to uncertainty about the overall DTC profitability timeline.
- The ongoing dispute with Nielsen over measurement services poses a risk to advertising revenue if not resolved, as advertisers may insist on Nielsen metrics, even though the company has not seen adverse impacts yet.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | -6% | Reduced linear advertising demand and fewer licensing deals offset gains in streaming. Continued shifts from traditional TV to DTC also weighed on overall revenue. |
TV Media | -6% | Declines in linear advertising and affiliate revenues overshadowed incremental pricing benefits. Market softness in traditional advertising contributed to the segment’s drop. |
Direct-to-Consumer | +10% | Strong subscriber growth for Paramount+ and Pluto TV boosted revenue, supported by higher DTC advertising and subscription pricing. This aligns with broader market shifts toward streaming. |
Filmed Entertainment | -34% | Lower theatrical performance compared to the prior year’s stronger film slate. Fewer major releases and tougher comparables contributed to the segment’s steep revenue decline. |
Operating Income (EBIT) | -46% | Higher content and marketing costs, coupled with softer advertising, compressed margins. Some one-time expenses also amplified the decline in profitability. |
Net Income | $1 million (-100%) | Minimal net earnings primarily reflect weakened performance in key segments and increased costs. Although DTC grew, declines in TV Media and Filmed Entertainment offset those gains. |
EPS (Diluted) | $0.04 (-91%) | Substantial decrease driven by lower net income and higher expenses compared to the prior year. The limited EPS figure underscores the impact of soft advertising and elevated spending. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
D2C segment profit | Q4 2024 | quarterly loss | quarterly loss | no change |
TV media advertising | Q4 2024 | no prior guidance | similar to Q3’s reported growth rate (2% decline) | no prior guidance |
D2C advertising | Q4 2024 | no prior guidance | continued double-digit growth | no prior guidance |
ARPU | Q4 2024 | no prior guidance | growth will remain tempered | no prior guidance |
Free cash flow | Q4 2024 | no prior guidance | expected to be negative, offset by ~$500M in proceeds | no prior guidance |
Free cash flow | FY 2024 | grow in 2024 relative to 2023 | expectations for full-year FCF growth remain unchanged | no change |
Total company OIBDA | FY 2024 | significant growth in adjusted OIBDA for 2024 | remains on track for significant full-year OIBDA growth | no change |
Licensing revenue | FY 2024 | modest decline for the full year 2024 | expected to decline relative to 2023 for the full year | no change |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
TV Media Affiliate | Q3 2024 | TV Media affiliate revenue growth is expected to decelerate modestly in Q3 2024 compared to Q2 2024. | 3,215In Q3 2024, compared to 3,275In Q2 2024 (showing a modest deceleration) | Met |
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DTC Profitability Timeline
Q: When will overall DTC be profitable, including international?
A: Management expects the domestic DTC business to achieve profitability next year, with international profitability trailing by 12 to 18 months. Significant progress has been made this year with subscriber growth, ARPU improvements, strong digital advertising growth, and marketing efficiencies, setting them up well for 2025. -
Impact of Dropping Nielsen
Q: Has dropping Nielsen data affected advertising revenue?
A: There has been no adverse impact on ad revenue from dropping Nielsen, and none is expected in Q4. The decision was about ensuring the economics make sense amid declining linear audiences. Management recognizes Nielsen's value but won't pay fees exceeding the ad revenue generated by certain networks. -
International Underreported Ad Revenue
Q: What was the impact of underreported international ad sales?
A: The underreported international ad revenue in Q3 was approximately $50 million, slightly larger than in Q2. The next quarter's forecast assumes no further true-up due to underreporting. -
Potential Streaming Partnerships
Q: Will you consider deeper streaming integrations beyond bundles?
A: While confident in their stand-alone position with Paramount+, management remains open to strategic partnerships that drive value. They currently have successful partnerships and bundles with companies like Walmart and Delta Airlines, and continuously evaluate opportunities to enhance value. -
Content Cost Allocation
Q: How are content costs allocated between DTC and TV media?
A: Content costs are allocated based on the relative value of content windows on each platform. As more viewership moves to streaming, more costs are allocated to DTC and less to linear TV. This approach applies to sports, movies, and library content. -
DTC Marketing Efficiencies
Q: Can you expand on DTC marketing efficiencies?
A: Marketing efficiencies stem from a diverse subscriber base across multiple channels, including direct channels, platform partners, and bundles. This diversified approach reduces acquisition costs and churn, contributing to improved profitability. -
Charter Partnership Impact
Q: What is the impact of the Charter partnership on DTC?
A: The Charter bundle has begun contributing to domestic subscriber growth, though it's still early. Management is pleased with the uptake and expects the contribution to grow over time, enhancing both subscriber acquisition and retention. -
TV Media Employee Count
Q: How many employees are in TV Media after cost cuts?
A: There are about 6,000-plus domestic employees and 3,000-plus internationally in TV Media, including those in sports production and local stations. Management continues efforts to make operations more efficient.