Paramount Global shares sink as results miss and TV revenue falls
Paramount Global on Wednesday reported third-quarter revenue that was up 5% from a year ago, but the results missed expectations as it suffered from cord cutting and a drop in advertising revenue.

Its shares closed down 12% on Wednesday.

Here's what the company reported compared with analysts' expectations, according to Refinitiv:

Adjusted EPS: 39 cents, vs 43 cents expected

Revenue: $6.92 billion, vs $7.01 billion expected

Paramount said revenue for its TV media segment was down 5% to about $4.9 billion compared to the previous quarter, as pay-TV subscriber numbers declined. The unit includes broadcast network CBS and cable TV channels such as MTV, Nickelodeon and premium network Showtime.

Advertising revenue for its TV networks was down 3% to about $1.9 billion, a sign that macroeconomic headwinds are beginning to hit. The company had warned over the summer that it was beginning to feel a slowdown in the advertising market.

On a call with investors Wednesday, CEO Bob Bakish noted digital advertising had more challenges, particularly since TV has the benefit of selling ads in advance.

"If an advertiser wants to make an impact on a national level, there's no better demonstrated media than TV," Bakish said.

The scatter market, which is the market for TV ad time bought and sold closer to its ad date, also experienced some softness. Advertising for categories such as travel and electronics remained good, Bakish said, while the automotive sector, typically a big share of the ad market, still hasn't improved due to supply chain issues.

The company noted it also restructured some of its international affiliate TV agreements during the quarter, which shifted revenue from pay-TV services to streaming.

"We have two objectives, producing cash flow and margins from traditional media and simultaneously building scale from the most important growth sector in media, which is streaming," said Bakish.

The movie studio Paramount Pictures saw revenue grow 48% to $783 million compared to the same period last year, on the back of more releases compared to the earlier days of the pandemic when lockdowns were still in place. Paramount Pictures also grew its licensing revenue to other platforms by 19% to $549 million.

The company's direct-to-consumer streaming segment also performed better. Paramount+, the company's answer to premium subscription services like Netflix and Disney+, added 4.6 million subscribers, bringing its total to 46 million customers. Paramount+ also lost 1.9 million subscribers during the quarter as SkyShowtime, its joint venture with Comcast in Europe, launched in the Nordics and replaced Paramount+.

Paramount+'s subscriber growth was driven by sports, particularly the NFL and international soccer, as well as the launch of its partnership with Walmart+. The company also announced Wednesday that its blockbuster "Top Gun: Maverick," as well as recent box office hit "Smile," would hit Paramount+ by the end of the year, which will likely provide a boost to the streaming service.

Overall, Paramount said its total direct-to-consumer streaming customers, which also includes its services Showtime, BET+ and Noggin, rose to nearly 67 million at the end of the quarter. The company now expects this number to exceed 75 million by the end of the year.

Paramount said its total direct-to-consumer revenue increased 38% year-over-year, and that subscription revenue grew 59% to $863 million, mainly due to paid subscriber growth on Paramount+. Advertising revenue for the segment increased 4%.

"We believe long term operating margins in streaming will approach TV media margins as the benefits of our multi-platform strategy plays out," Chief Financial Officer Naveen Chopra on Wednesday's call with investors.

Meanwhile Pluto TV, the company's free, ad-supported streaming service, reached 72 million monthly active users globally and grew its total viewing hours by double digits, the company said. On Tuesday, Fox Corp. reported that its Pluto competitor, Tubi, was a bright spot for the company, with revenue and advertising growing significantly for the service.

Disclosure: CNBC is owned by Comcast.