It’s Already Cost $1.7 Billion to Merge Showtime and Paramount+

Paramount recognized a giant $1.674 billion programming charge in the first quarter of 2023, due in large part to its plans to merge Showtime with Paramount+. With dwindling revenue (-8 percent) thanks to the struggling ad market, some lackluster timing at Paramount Pictures, and a $511 million streaming investment, the company reported an operating loss of $1.23 billion.

Basically, that massive programming charge is stems from removing content from platforms, abandoning development, and terminating contracts. There were also some international cuts to align those operations with the “Paramount+ with Showtime” push.

In the end, Paramount missed Wall Street’s earnings estimates, even with adjusting for those one-time charges, reporting 9 cents of (adjusted) earnings per share vs. a consensus of 17 cents. Revenue also came in shy of expectations at $7.265 billion against a consensus $7.42 billion.

Pre-market, Paramount Global shares (PARA) are trading down double digits. A heavy dividend cut didn’t help.

The news wasn’t all bad. Paramount+ added 4.1 million subscribers in the first quarter of 2023, bringing its grand total to 60 million. Paramount Global’s FAST service Pluto TV increased global monthly active users (MAUs) by 1 million to 80 million.

“Paramount continues to demonstrate the strength of its content engine, driving momentum across streaming, television and theatrical,” President and CEO Bob Bakish said in a prepared statement Thursday. “Looking ahead, we are focused on continuing to drive market-leading streaming growth while navigating a dynamic macroeconomic environment. In addition, the updated dividend policy we have announced today will further enhance our ability to deliver long-term value for our shareholders as we move toward streaming profitability.”

“Mayor of Kingstown” Season 2 and Damien Chazelle’s “Babylon” were among the titles making Q1 premieres on Paramount+. “80 for Brady,” “Scream VI,” and “Dungeons & Dragons: Honor Among Thieves” were the big theatrical releases. However, since the D&D movie came out on the final day of the quarter, all the marketing for “Dungeons & Dragons” took place in Q1 but the box office won’t be recognized until Q2. Good things can come to those who wait.

In addition to its plans to fold Showtime into Paramount+ (and sunset the Showtime OTT app), Paramount Global is attempting to sell a majority stake in BET, which has attracted prominent potential buyers like Byron Allen, Tyler Perry, and Diddy, and reportedly looking to unload its preschool brand Noggin.

Bakish and his senior executive team will host a conference call at 8:30 a.m. ET to discuss the first quarter in greater detail. Paramount Global’s annual meeting of shareholders, a virtual event, will take place May 8. The company did cut one major event from its May schedule: Paramount will not host its usual upfront event at Carnegie Hall (and party to follow at the Plaza Hotel). Netflix, which now has an ad-supported tier, took its date.

Paramount Pictures made a splash at CinemaCon last week. The studio showed 20 minutes of “Mission: Impossible Dead Reckoning — Part One,” unveiled ambitious animation plans, and showed first looks for “A Quiet Place: Day One” and its upcoming Bob Marley biopic, among other feature films.