Paramount Loses Hundreds Of Millions On Streaming But Gains Millions Of Subscribers
Paramount lost over half a billion in establishing a streaming service.
They say you have to spend money to make money, and this sentiment couldn’t ring more true in regard to the growth Paramount intends to make over the next year. According to The Hollywood Reporter, Paramount+’s streaming numbers have climbed up to 60 million subscribers, but the company also saw a loss of $511 million in its streaming unit. Though this doesn’t make much sense on the surface, it has been speculated that this initial loss will lead to profitability over the next year.
Paramount attributes this depreciation and amortization to their staggering investments to grow their streaming brand. Additionally, Paramount+’s merger with Showtime is a hefty investment as well, which involves racking up $1.67 billion in impairment charges. Though this merger is still being finalized, the intent is to combine the two assets into a single U.S. streaming platform later in 2023, which will ultimately lead to $700 million in annual expense savings.
In other words, the more expenses considered “non-cash” through the breakdown of the merger, the lower the tax liability will be on these assets, leading to future savings that will help propel Paramount toward profitability. Simply put, a large up-front investment will surely hurt a company’s bottom line in the short term. But with the right assets in place and steady, incremental growth over time, we will not only see a return on the investment, but profits will start to roll in.
Paramount+’s growth efforts aren’t anything out of the ordinary. While there certainly is a ton of capital tied up in growing the platform into a streaming giant, we have to think of the long play involved in growing any media platform. Other major streamers, including Disney+ and HBO Max, are still operating at a net loss due to the incredible start-up requirements of the subscription services.
Weighing in on Paramount’s growth efforts, CEO Bob Bakish stated that the decisions they’ve made thus far will result in a positive cash flow that will lead to streaming profitability. If all goes according to plan, the combination of Paramount+’s content alongside Showtime’s offerings will be instrumental in harnessing growth.
Bank of America analyst Jessica Reif Ehrlich has weighed in on Paramount’s finances and has gone on record stating that Paramount should be considered an “attractive asset” in its current state. But she does go on to say that there are two possible outcomes that could emerge from Paramount’s transition toward streaming.
The first outcome is that the current losses that Paramount is facing will accelerate earnings in 2024 and beyond. The second, less desirable outcome is that Paramount+ will not be able to reach the free cash flow they need to push forward, which would force them to sell off the asset, but with a hefty price tag.
So hang tight. We’re witnessing Paramount putting a monolithic amount of effort into building their streaming platform, and they’re going through the necessary motions to reach profitability. Though they’re currently facing the usual growing pains that come along with expansion, if they play their cards right, Paramount+’s offerings and profitability will grow exponentially over time.
