Paramount Global disappoints on slow subscriber growth, weak ad market

By Tiyashi Datta and Helen Coster

(Reuters) -Paramount Global Inc missed first-quarter revenue estimates on Thursday after it added fewer subscribers to its flagship streaming service and advertisers cut spending in a challenging economic environment.

Shares of the New York-based company, formerly known as ViacomCBS (NASDAQ:), fell by 17% in trading before the bell. They have gained more than 35% so far this year.

The company also cut its dividend to $0.05 per share.

Paramount invested in original content to try to attract subscribers to its streaming platform, but is up against competition from established players such as Netflix (NASDAQ:) and Walt Disney (NYSE:) Co’s Disney+.

Paramount+, the company’s flagship streaming platform, added 4.1 million subscribers during the quarter, compared with 9.9 million in the preceding quarter.

Several factors, including higher prices, lower consumer demand across products and services, and weak markets, have forced companies to reduce advertising spending.

“The company’s 79% dividend cut is not encouraging, but it was necessary,” said Huber Research analyst Craig Huber. “They should have done it years ago, but better late than never.”

Sales for its TV media segment declined by 8% from a year earlier, and advertising revenue fell by 11%.

Revenue at the company was $7.27 billion in the first quarter ended March 31, compared with analysts’ average estimate of $7.42 billion, according to Refinitiv IBES data.

Overall, revenue in the company’s direct-to-consumer unit, which includes streaming platforms Paramount+ and PlutoTV, grew 39% in the first quarter. Revenue from its filmed entertainment business, which makes and distributes movies and TV shows, fell 6%.

Investment in original content and expansion of its streaming platform are consuming cash at the owner of the CBS network.

The operating loss was $1.23 billion for the quarter, compared with an operating income of $775 million a year earlier.

On an adjusted basis, the company earned 9 cents per share, below Wall Street’s estimate of 17 cents per share, Refinitiv IBES data showed.