CFO: Paramount+, Showtime Streaming Merger Justifies Pending Subscription Price Increases
February 28, 2023
Paramount is set to combine its branded Paramount+ and Showtime Anytime streaming services into a single platform, which will include monthly subscription price increases from $1 to $2 (without ads), according to CFO Naveen Chopra.
Speaking Feb. 28 at the 31st Annual Deutsche Bank Media, Internet and Telecom confab in Palm Beach, Fla., Chopra said the merger and price increase would be a benefit to consumers as well as help Paramount reduce content spending and related direct-to-consumer costs (marketing, content, technology, etc.), upwards of $700 million alone this year across Showtime.
Paramount reported a $1.81 billion loss on revenue of $4.9 billion for its direct-to-consumer streaming operations in 2022.
“With Showtime content [currently] integrated [on the Paramount+ bundle], we know customers are willing to pay [more] for that,” Chopra said, adding that the bundle has also driven subscriber growth.
“A pretty sizable chunk of customer adds today, so clearly that combination helps drive pricing,” he said. “What that says to us is that the risk in [increased] pricing is less about churn [existing subs not renewing] and more about the top of the funnel: engaging new customers.”
Chopra said the current bundle has proven to be “highly accretive” from a customer engagement and retention perspective. He said he believes the merger would also help reinvigorate the Showtime studio by taking historical content and creating new franchises.
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Showtime original shows include “Billions,” “Dexter,” “Yellowjackets” and “Your Honor,” among others.
“From the consumer perspective, there’s a lot at play,” he said.
All of this maneuvering is aimed at transitioning Paramount’s streaming video business from topline growth to bottom line profitability driven in part by average-revenue-per-user (ARPU) and other measures that included last year partnering with Comcast-owned Sky Group for a co-branded (SkyShowtime) streaming platform in Europe. Paramount is also debuting original Paramount+ content across alternative channels for incremental license revenue.
“Not everything has to be exclusive to [Paramount+] streaming,” Chopra said regarding the business’ economic fundamentals.
Paramount has said it expects the streaming business to generate $9 billion in revenue and $6 billion in content spend by 2024. The CFO admitted the former is now challenged by existing macro advertising trends across pay-TV and streaming, but offered no changes to the fiscal outlook.
“We’re always doing things to unlock new efficiencies,” Chopra said, alluding to changes in how Paramount markets content, including levering international platforms rather than purchasing third-party media ads.
Restructuring includes the creation of holdings companies rather than individual ad teams for separate distribution platforms, in addition to ongoing efforts to realign international operations, which has meant transitioning away from separately operating companies.
“We clearly were not getting leverage on a global basis,” Chopra said. “There’s a lot of opportunity there that we’re unlocking.”
That opportunity includes offering tiered subscription pricing in Europe for the first time. Chopra said a lower-priced ad-supported option will be rolled out, in addition to higher priced premium tiers depending on the market. The executive said the move from a single pricing tier to multiple options will help broaden the consumer market.
“Our expectations in most of these markets is that ARPU will actually grow,” Chopra said. “We’re very proud of what we’ve accomplished in the first couple of years [since the launch of Paramount+], but we’re also very focused on turning streaming into a business that has profitability characteristics that we like.”