Paramount pays Wall Street jitters over challenges from streaming players

Paramount Global does (almost) nothing in half measures. Under the weight of huge costs linked to its attempt to break into streaming and cancellations of programs, the American media giant had a tough week on the stock market, with a drop of almost 30% following the announcements, Thursday, of its quarterly results. The owner of Simon & Schuster whose sale process he will relaunch, becomes a symbol of the financial difficulties of streaming players and the nervousness that surrounds them on Wall Street.

In the first quarter, Paramount suffered a net loss of around 1.1 billion dollars (1 billion euros) against a profit of 433 million dollars a year earlier. Exceptional costs of nearly $1.7 billion on programs largely explain the poor performance, but the significant increase in streaming costs (+31% to $2 billion) and a sluggish advertising market also weigh.

Sale in sight for Simon & Schuster

It is to give itself room for maneuver without giving up its ambitions in streaming that the owner of MTV and CBS is once again preparing the Simon & Schuster sale after the Red fire issued last year by the American antitrust on the proposed takeover by Penguin Random House (Bertelsmann).

According to the “Wall Street Journal”, which quotes a memo from the boss of Simon & Schuster, the process is underway and “there are several interested parties”. The timing seems propitious as the publishing house records revenues up 19% in the first quarter.

Dividend drop

Thursday, Paramount also announces an unprecedented drop in its quarterly dividend. It falls to 5 cents per share against 24 cents previously. Enough to save about 500 million dollars. According to the American press, the Redstone family, which controls Paramount, approves of this sacrifice and supports the management.

But the scissor cut to the dividend came as a shock to minority investors. The media industry is going through a rough patch and some analysts remain skeptical of Paramount’s strategy. Will the band be able to catch up on streaming against netflix Amazon Prime Video and Disney+?

For his part, Bob Bakish, the general manager of Paramount, remains convinced that his streaming service (Paramount +) is on the right path to becoming profitable. Paramount+ added 4.1 million subscribers in the first quarter and now has 60 million followers.

Very deep catalog

To grow, Paramount + relies heavily on a very deep catalog ranging from the “Star Trek” franchise to the western universe of Taylor Sheridan series, behind in particular “Yellowstone” and “1923”… even if these productions are very expensive.

But the famous “cord cutting” – that is to say the propensity of American households to “cut the cord” of the cable – continues to bite and, for its large free channels such as CBS, the advertising situation is particularly negative with revenue down 11% in the first quarter.