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ViacomCBS Reports Q3 Streaming Growth But Subdued Overall Results; CEO Bob Bakish Says Release Windows Will Continue To Vary, Ad Revenue Hit By Supply Chain Issues – Update

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UPDATED with executive comments. ViacomCBS cracked the $1 billion mark in streaming revenue in the third quarter, but overall results were more subdued, with total revenue rising 13% to $6.6 billion and earnings per share declining to 69 cents.

The revenue number just slipped past Wall Street analysts’ expectations, while the earnings-per-share tally, down from 92 cents in the same period of 2020, came up short of analysts’ consensus.

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Streaming revenue jumped 62% from a year ago, reaching almost $1.1 billion, with overall subscriptions increasing 4.3 million around the world to hit 47 million. Earlier this year, the company rebranded and expanded CBS All Access as Paramount+. Along with third-quarter financials, the company also announced a deal with T-Mobile offering postpaid customers of the wireless provider with one year of Paramount+ at no extra charge.

Advertising inched up 1%, with the company citing a dip in political spending compared with the 2020 period. Cable network ad revenue gained 6%, while streaming advertising revenue climbed 48% to $531 million. Free, ad-supported streaming outlet Pluto TV continued to be a mainstay, with revenue up 99% and monthly active users rising to 54 million, paced by global expansion.

The pace of streaming growth slowed from the previous quarter, when ViacomCBS added 6.5 million subscribers. The company has continued to report a consolidating streaming number, which includes Paramount+ and Showtime’s subscription service, as well as niche offerings BET+ and Noggin.

Paramount Pictures revenue dipped $10 million from a year ago to $580 million. Theatrical proceeds of $67 million grew tenfold from the Covid-afflicted 2020 period, with contributions from Paw Patrol: The Movie, Snake Eyes: G.I. Joe Origins and carryover grosses from spring release A Quiet Place Part II. Licensing and other revenue decreased 12% year-over-year, with the company citing a drop in programming produced for third parties.

Paw Patrol has taken in more than $40 million in theaters while also helping draw subscribers to Paramount+ given its simultaneous release there. CEO Bob Bakish, asked during a conference call with analysts about windows, said the company is committed to theaters but is continuing to mix and match. The third quarter saw three different flavors of film releases – a 45-day “fast follow” theatrical-to-streaming, day-and-date and original movies debuting on Paramount+. “We’re experimenting with a bunch of different models,” Bakish said, “based on what we think is best for a specific film, obviously keeping in mind all the constituents who are involved in that. But the reality is, we’ve seen them all work, so it’s not a question of moving away from one or the other. We’re going to continue to optimize on a film-by-film basis.”

In the TV Entertainment division, which includes CBS Entertainment and CBS Sports, revenue grew 24% to $2.9 billion. The company credited higher licensing, streaming, and affiliate revenue, saying those positives were offset by lower advertising revenue.

Ad revenue, notably the crucial automotive category, has been squeezed at a number of media companies and agencies by tangles in the global supply chain. With stocks of many goods depleted (and vehicles also bedeviled by chip shortages), many advertisers have throttled back on spending.

Bakish said he was “super-happy” with the quarterly results, but said the current fourth quarter is showing “a combination of headwinds and tailwinds.” The former include comparisons with a record political surge in 2020 as well as “softness” in auto as well as “physical, tech products” due to the supply chain. But Bakish said many ad buyers are merely shifting their dollars out of the holiday quarter and into 2022. “We’re not seeing cancellations,” he noted. Plus, healthy upfront pricing should pace fourth-quarter growth.

“We don’t really know about the supply chain issue and the timing of it reverting,” Bakish said. “But when it does come back, we do see the potential for upside as clients will need to move product.” Political races in 2022, including mid-term elections for Congressional seats across the U.S., will also be a boost.

Bakish reaffirmed his confidence in the company’s blend of linear TV, streaming and digital options for advertisers. CBS EyeQ, which was introduced a year ago as a unified solution across broadcast, cable and digital platforms, already accounts for 25% of overall ViacomCBS ad revenue,

During the call, executives said they are planning to update the way they report financial results, grouping TV and streaming into more distinct units. Paramount’s film performance will continue to be tracked separately. The company also announced an investor day in the early part of 2022, when they plan to provide updates on programming, distribution and other aspects of their streaming efforts.

Next month will mark the two-year anniversary of the closing of the merger of Viacom and CBS, who share a common controlling shareholder in Shari Redstone’s National Amusements. The long-anticipated merger has been viewed as an initial step, with the company considered a prime candidate for an additional consolidation move.