• by Wayne Friedman , November 3, 2023

As legacy TV-network-based media move toward better streaming financial results, Paramount Global reported it has narrowed its negative cash flow in direct-to-consumer (D2C) for the most recent period -- and believes those losses peaked in 2022.

Wall Street investors cheered that result, boosting the company’s stock 10.5% to $11.92 at the close on Thursday. It tacked on another 5% in after-market trading.

The company narrowed negative cash flow in the third quarter by 31% to $238 million -- down from $343 million in the same period a year ago.

“Credit to Paramount for executing on D2C costs, global distribution, and now profit improvements,” says Steven Cahall, media analyst for Wells Fargo Securities. 

He adds: “The next steps are proving earnings growth can be sustainable, but we're not quite there yet. A view to D2C break-even would go a long way to assuage the bear cases. We still think a break-up to sell the studios is the most accretive strategy.”

Revenue for the Paramount D2C business -- primarily Paramount+ --  grew 38% to $1.7 billion. This growth was mostly attributable to subscription revenue, which was up 46% to $1.3 billion, with advertising revenue climbing 18% to $430 million.

Cahall noted that earlier in the week Comcast’s Peacock also posted some improvement. He added: "There's been a collectively falling D2C tide.”

Still, negative news continues to come from advertising revenues for Paramount’s legacy TV/media segment -- TV networks (broadcast/cable) and TV stations. 

Those revenues were down 14% to $1.7 billion due to overall global advertising softness. For the last nine months, advertising revenue has been down 11% to $5.9 billion.

Overall TV/media revenues were down 8% to $4.6 billion in the third-quarter period.

These declines were largely offset by retransmission and cable revenues, which were flat over the last three months -- $2.0 billion -- and slightly down 1% over the last nine months to $6.1 billion.