The near-term outlook for ViacomCBS’ high-growth streaming business appeared to be on track following its third-quarter earnings results Thursday morning; however, the long-term picture remains hazy.
The media company reported overall revenue increased 13% year-over-year to $6.6 billion in Q3, and streaming revenue jumped 62% and crossed $1 billion for the first time ever. ViacomCBS stock rose as much as 1.5% in the pre-market session before paring those gains and opening the regular session down 2%.
ViacomCBS added 4.3 million global streaming subscribers during Q3, which brought the total to nearly 47 million. In addition, the company announced a key partnership with T-Mobile, and eligible T-Mobile customers will get the ad-supported version of Paramount+ for free for one year beginning Nov. 9.
As VIP has previously outlined, partnerships between major telecom companies and streaming services have been an important and mutually beneficial strategic move as of late.
Management said on the conference call that the most important thing for Paramount+ right now is to drive awareness, and the partnership with T-Mobile is an efficient way to increase Paramount+ subscribers. Furthermore, the partnership will drive streaming ad revenue. Streaming advertising revenue in Q3 surged 48% from last year and 6% from Q2.
But if there’s one thing we’ve learned about the highly saturated competitive streaming space, it’s that companies need deep pockets to play. ViacomCBS’ long-term plan includes about $5 billion in content spend over the next few years across both linear and streaming, as it looks to beef up its overall content arsenal.
So far, it looks like its balance sheet will be able to support such spending. ViacomCBS had about $4.8 billion of cash on hand as of Q3, which was up from $3 billion at the end of 2020, and debt decreased to $17.7 billion in Q3 from nearly $20 billion at the end of last year.
On the surface, ViacomCBS delivered on all of the closely watched aspects of its business in Q3, and in the near term, things look promising. Still, concerns remain.
For example, much of that cash pile was built by selling off its non-core assets, which won’t be sustainable long term if the company runs out of stuff to sell.
Q3’s results delivered enough to keep investors content and will likely buy the company more time to prove itself, but it’s worth remembering that just as of Q2, there was heavy speculation that ViacomCBS would have to resort to some M&A action in order to survive in the streaming wars, and Comcast was looking like the most likely partner. As we learned following Comcast’s Q3 results, things aren’t exactly rosy for its streaming platform Peacock, either.
It’s been about nine months since ViacomCBS rebranded its streaming service, so there’s at least two more quarters (at the one-year mark) before investors start getting antsy. But the rumor mill can be unforgiving.
CEO Bob Bakish said ViacomCBS will be holding an investor event early next year to highlight the streaming business and showcase content. While that would certainly be a positive catalyst, it could be much more dangerous if there’s not much positive highlighting going on.
