Paramount Global revealed an agreement to transfer book publisher Simon & Schuster to private equity firm KKR for $1.62 billion upon reporting second-quarter earnings on Monday.Total revenue of the media company was $7.6 billion, a decline of 2%.The TV sector was adversely affected by reduced advertising proceeds.
Paramount Global announced Monday that it has agreed to sell book publisher Simon & Schuster to private equity company KKR for $1.62 billion, while also reporting its quarterly earnings. This follows the canceled merger between Simon & Schuster and Penguin Random House — which was valued at $2.2 billion — being blocked by a federal judge. As a result of the sale, Paramount's stock rose 4% during after-hours trading. The company plans to use the proceeds, along with the $200 million termination fee received from Penguin when that deal was scrapped, and the money saved from cutting its dividend, to pay down debt. Regarding further possible divestment efforts, Paramount CEO Bob Bakish said the company was open to divesting, acquiring, and partnering to drive shareholder value — he did not comment on any specific moves. Moreover, Paramount's quarterly revenue was $7.62 billion — down 2% year-over-year — due to a 10% decline in advertising revenue in its TV segment. Quarterly net loss was $299 million, or 48 cents a share, compared to earnings of $419 million, or 62 cents per share, in the same period the previous year. Executives expect the advertising revenue on traditional TV in the third quarter to be similar to the first half of the year but to improve during the fourth quarter, due to businesses having less chronic worry about the prospect of a recession.
Revenue from digital platforms such as Paramount+ and Pluto, which is free and relies on advertising, is expected to grow. Media companies have been relying more heavily on advertising in order to achieve profitability for their streaming services, especially as the rate of subscriber growth has slowed. Paramount noted that its streaming segment saw an increase in revenue of 21%. As of the end of the quarter, Paramount+ had around 61 million subscribers, and subscription revenue surged 47% to $1.22 billion. The higher prices that came when Paramount+ combined with Showtime's streaming app are causing average user revenue and overall streaming revenue to grow, something that will be more visible next year, according to Chopra. By raising prices and introducing ad-supported tiers, media companies have begun to move streaming services closer to profitability. Chopra also mentioned that similar pricing and tier changes will be happening internationally, and due to their strong collection of content, the company believes that there is potential to continue raising prices. As for Paramount's film business, revenue dropped 39% to $831 million, since the period in 2021 included the release of "Top Gun: Maverick", which was the highest grossing domestic release of the year.
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