Salma Hayek in Paramount Pictures’ ‘Like A Boss’, which was released in 2019. The studio has been badly hit by the closure of cinemas
Salma Hayek in Paramount Pictures’ ‘Like A Boss’, which was released in 2019. The studio has been badly hit by the closure of cinemas © Eli Joshua Ade/Paramount/Kobal/Shutterstock

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ViacomCBS has become the latest media group to suffer from a precipitous fall in advertising spending over the summer, reporting a 27 per cent year-on-year drop in ad revenues in the second quarter as the pandemic ravaged sales.

But strong growth in its streaming services helped power the company behind the Paramount film studio to better-than-forecast earnings and revenues in the three months to June.

ViacomCBS highlighted its growth in streaming, which the entertainment industry has widely accepted as the future of its business. Like its peers, the group has been trying to grow subscribers and revamp its services to compete with Netflix.

By the end of June, ViacomCBS had reached 16.2m subscribers across its streaming services, adding almost 3m customers during the quarter. Revenue from online video and streaming grew 25 per cent year on year to $489m.

“We’re successfully managing through the effects of the pandemic,” said chief executive Bob Bakish, pointing to the “rapid acceleration” of its streaming business.

However, the group’s results were dragged down by a weak advertising market and the shutdown of cinemas because of lockdowns, which wiped away revenues at the Paramount film studio. 

Total revenues in the quarter fell 12 per cent year on year to $6.3bn, while adjusted earnings per share fell 16 per cent from a year ago to $1.25. However this was better than the $6.2bn in revenues and 95 cents a share that Wall Street analysts had forecast.

Adjusted net earnings fell 16 per cent year on year to $769m.

Shares in ViacomCBS, which have dropped 38 per cent this year, rose 5 per cent in morning trading.

Consolidation in the entertainment business has left smaller media groups seeking safety in scale. Viacom, the home of MTV, last year reunited with CBS, the broadcaster behind TV sitcom The Big Bang Theory

But with a market capitalisation of about $16bn, ViacomCBS is still a relative minnow following the tie-ups of Disney with Fox, and AT&T with Time Warner. 

Analysts are unconvinced that the combination can solve the big structural problem facing the group: the long-term decline of traditional television. 

Ahead of the results, Todd Juenger, an analyst at Bernstein, said: “Nothing has happened since the formal recombination to change our view”, noting that cord-cutting trends had worsened while competition in streaming had increased. He was pessimistic about ViacomCBS’s streaming services, which includes a general product called “House of Brands”, a Showtime subscription and PlutoTV, an ad-supported service.

“We're not sure ViacomCBS is in a position to offer one compelling [streaming service] to the marketplace, let alone three,” Mr Juenger said last month. “Especially this late in the game.”

While the company’s streaming subscriber numbers are growing, the group remains well behind market leaders Netflix and Disney+, which have 193m and 60.5m subscribers respectively.

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