Paramount to sell Simon & Schuster to KKR, PARA beats Q2 earnings

Paramount Global Book publisher Simon & Schuster has agreed to sell to private equity giant KKR for $1.62 billion, the media company said Monday, beating Wall Street estimates.

KKR’s foray into book publishing comes months after a federal judge rejected the merger and its initial agreement to sell Paramount Simon & Schuster to rival Penguin Random House after raising red flags with the government.

Shares of Paramount rose nearly 4% in after-hours trading.

Paramount executives said on Monday’s earnings call that proceeds from the sale of Simon & Schuster will be used in the company’s ongoing efforts to pay down debt.

CFO Naveen Chopra said Monday that the $200 million termination fee Paramount received from Penguin when that deal was canceled and money saved when the company cut its dividend will also go toward reducing leverage.

Paramount is also considering offloading a majority stake in BET Media Group, which owns the BET cable network and studio, VH1 and the BET+ streaming service. Paramount CEO Bob Bakish said in a phone call Monday that he would not comment on any specific moves, but that the company is open to divestitures, acquisitions and partnerships to increase shareholder value.

According to Refinitiv, the company reported for the quarter ended June 30 against analysts’ estimates:

• Earnings per share: 10 cents excluding items versus the expected 0 cents
• Income: $7.62 billion vs. $7.43 billion expected

Paramount reported revenue of $7.62 billion in the quarter, down about 2% year over year, as the company’s television segment was held back by lower advertising revenue.

For the quarter ended June 30, Paramount reported a net loss of $299 million, or 48 cents per share, compared with earnings of $419 million, or 62 cents per share, in the same period last year. Excluding certain items such as programming and other costs related to the integration of Paramount+ and Showtime, the company reported adjusted earnings of 10 cents a share.

Media companies are struggling with a soft advertising market, which is affecting the traditional TV business in particular.

Advertising revenues in the television segment decreased by 10%. Revenue from the TV business overall fell 2% to $5.16 billion.

Executives said Monday that traditional TV ad revenue in the third quarter will be similar to the first half of the year, but they expect to improve in the fourth quarter. Advertising has been weak as businesses worry about the prospect of a recession.

However, ad revenue is expected to increase on digital platforms such as Paramount+ and the free, ad-supported Pluto. As subscriber growth stagnates, media companies rely on advertising to generate revenue for their streaming businesses.

Advertising revenue for the streaming business grew by 21%.

Paramount said the streaming segment continues to grow. By the end of the quarter, Paramount+ had approximately 61 million subscribers and subscription revenue grew more than 47% to $1.22 billion.

Paramount+ recently merged with Showtime’s streaming program and raised its prices.

Chopra said Monday that the price increase is increasing average revenue per user and total streaming revenue, and the company will see the full benefits of the change next year.

Raising prices, while adding ad-supported tiers, has allowed media companies to push their streaming businesses toward profitability. Chopra noted that pricing and tier changes will also roll out internationally, and the company believes it has the ability to raise pricing over time due to its strong content portfolio.

Meanwhile, revenue from Paramount’s movie business fell 39% to $831 million from last year, which includes the release of top-grossing domestic release Top Gun: Maverick in 2022.