Paramount Looks For Ad Improvement In Fourth Quarter

After reporting advertising revenues down 10% for its TV Media division in the second quarter to $5.16 billion on Monday, Paramount Global CFO Naveen Chopra is telling investors to expect more of the same in the current third quarter and an improving ad market in the fourth quarter. The company is also sticking with its guidance that it will return to earnings growth in 2024.

“D2C advertising growth accelerated by 21%, fueled by subscriber growth and strong engagement across Paramount+ and Pluto, along with improvements we are seeing in direct programmatic buying activity,” Chopra said in the company’s quarterly conference call Monday.

“Looking ahead, we expect to see continued acceleration in D2C advertising growth in Q3 — and we’re also bullish about the long-term,” he added.

“The year-over-year change in TV Media advertising was similar to Q1. In the national domestic market we’re seeing strength in key categories including pharma, retail, movies and travel. That said, we see linear advertising recovering more slowly than digital, and we expect the Q3 rate of change for TV Media advertising will be relatively similar to Q2, with improvement in Q4,” Chopra told analysts.

During Q&A, President-CEO Bob Bakish was asked about the secular and cyclical headwinds facing TV advertising.

“We see the combined impact of cyclical and secular. On the cyclical side, [interest] rates are coming down a bit, things are marginally improving. But what we’ve really been focused on is the secular side. And you see that in the terms of how we’re participating and really driving the digital ad market. For us, direct digital is very strong, and it wouldn’t be had we not configured our product line to prosecute it basically. And we’re going after that with EyeQ [the connected TV product], in combination of course with Pluto TV and Paramount+. We are seeing direct-to-consumer strong and we are seeing improvement in programmatic — and we expect both of those things to continue. So that’s all about secular,” the CEO said.

“And as we roll forward through the year, in Q3 we expect to see a slight improvement overall on a year-to-year basis, but that will be driven by D2C, so back to the secular piece. But as we get to Q4, there sports are going to be the key driver, frankly the NFL, The Big 10 — that timing has turned out to be great for us — as well as our modified CBS slate, which is strong and has plenty of scripted programming,” he said.

Bakish said in his opening remarks that he “remains hopeful for a timely resolution” of the dual writers and actors strikes.

“At the same time, we have a responsibility to minimize disruptions to our audiences and other constituents. To that end, we’ve adjusted our CBS fall slate by leaning into the full power of Paramount’s content capabilities. On top of the strong sports lineup, new additions to the CBS schedule include Paramount Network hits like Yellowstone and Paramount+ favorites like SEAL Team, as well as pairing the British hit Ghosts with CBS’s own popular version of the show, to name a few,” he said of the network TV schedule.

As Paramount released its second quarter results, it also announced a $1.62 billion sale of Simon & Schuster to KKR, after a previous sale to a competing publisher, Penguin Random House, was blocked on antitrust grounds. The cash influx will be used to reduce debt leverage.