Paramount is going all out to fix itself

Paramount Global didn’t end 2022 on a good note — unless you’re still only interested in growing streaming subscribers.

In addition to rising costs, Paramount’s total operating income fell 93 percent in the fourth quarter, and the company’s bottom line was quite poor. That will all change, Paramount Global chief Bob Bakish said on the next conference call — just give him and CFO Naveen Chopra one more (bad) year. The two then outlined a number of ways they intend to scale the giant mountain (of entertainment) in front of them.

Bakish told investors that 2023 will be the company’s “peak investment” in streaming. That, plus ongoing advertising problems everywhere, will hurt the bottom line, he acknowledged — but Paramount will weather this storm through “scale” and “resilience.” And franchises (and layoffs and price hikes)—my god, the franchise.

In 2024, Bakish projects “valuable total company revenue growth” and a “return to positive free cash flow.” Here’s how they get there.

Whatever Paramount+ means with Showtime

It didn’t come as much of a surprise on January 30th when Paramount announced that it would further integrate Showtime and Paramount+. The company is working on merging payment platforms, first through a streaming package and later through a tile; is now discontinuing the standalone Showtime OTT app. And who knows how long the linear Paramount+ with Showtime will last? For example, the name doesn’t even make sense on cable.

Paramount executives expect this latest combination to reduce churn — subscribers canceling their service — similar to previous bundling efforts. Paramount+ with Showtime, in both its linear and streaming iterations, will launch in the third quarter, Bakish and Chopra said in the fourth quarter.

The integration will result in technology, marketing, content and staff cost savings, executives said. Going forward, Chopra projects “approximately $700 million in future annual cost savings.” More immediately, this quarter, the combination of services and personnel results in a write-down of $1.3 billion to $1.5 billion.

Dennis P. Mong Jr./Paramount +

What Paramount+ with Showtime costs

So Paramount+ with Showtime will save Paramount Global money (after all), but how will it save money? Price increases of course!

Paramount+, the Showtime (“Premium”) tier of Paramount Global’s main streaming service, will increase from $9.99 per month to $11.99 per month. The Paramount+ “Essential” tier, which does not include Showtime content (but commercials), will increase from $4.99 to $5.99.

The price hikes may be unpopular, but given industry trends, they’re overdue, Chopra said. While the price increase applies to both new and existing subscribers, he expects it to have a greater impact on new sign-ups than major cancellations.

Cleared for takeoff

For more revenue, Paramount is looking for new partners—and to the skies.

Paramount Global has partnered with Delta on an agreement that provides airline loyalty members with a free in-flight trial of Paramount+ Premium. We imagine Paramount Pictures’ 2022 blockbuster “Top Gun: Maverick” wasn’t meant to be seen from a screen on the back of an airplane seat, but market share is market share. (Just don’t let the commercial airline pilots watch and get ideas.)

Delta “subscribers” do not count towards the Paramount+ total.

Those Other pilots

One way Paramount keeps its costs down is by maintaining a stable season-to-season schedule on its broadcast network, CBS. The math is very simple: fewer drivers = cheaper tracks.

High-rated series means more renewals and less new shows — and marketing for new shows. According to Nielsen, CBS was No. 1 in primetime (2+) last season for its 14th year (and 19 of the past 20); the network is currently on track to make it 15 in a row.

Like many networks these days, CBS relies more on series production and multi-season orders to keep the expensive development process under control.

Terence Patrick/CBS

After the Primetime Party is the Afterparty and…

Deadline first reported that James Corden’s concluding “Late Late Show” will be replaced by former Comedy Central format “@midnight” at 12:30 p.m. At the time, a person with knowledge of the situation told IndieWire that “@midnight” was the lead among three formats still being considered for a final decision.

A show like “@midnight” costs about half, perhaps $30 million, a year as a traditional late-night talk show like “Late Late.” Time to lose to Seth Meyers for less.

Second screen experience

Cord-cutting was the trend that drew companies like Paramount Global into this streaming pickle. They count on cost cutting to get them out. One way to reduce content spending, at least on a per capita basis, is to run series and movies on multiple Paramount platforms. So that’s exactly what they’re going to do.

They also…

Yellowstone (verb: to keep spinning) the hits

“By far the biggest tool for managing expenses is our focus on franchisees,” Bakish said. “Higher levels of consumer awareness and built-in fan bases associated with this IP result in significant subscriber acquisition volume, lower acquisition costs, lower churn and expansion (credit to value ratio). Simply put, franchising gives people what they want.”

Paramount has fully embraced the “Sheridan verse,” Bakish’s term, approach to programming — and we’re well beyond Taylor Sheridan’s “Yellowstone” and its many, many spinoffs. Showtime is basically betting on the ranch—er, farm—strategy.

Showtime’s “Billions” has several spinoffs in the works, including (but not limited to!) the ridiculously named “Millions” and “Trillions.” The future Paramount+ with Showtime will do the same with “Dexter” through its prequel “Dexter: Origins” and additional spinoffs focusing on other characters from the serial killer series. (They’ve already followed up the original “Dexter” with “Dexter: New Blood” in 2021. Even “The Chi” may soon be added.

©Paramount/Courtesy Everett Collection

We all “scream”

It only makes sense that Paramount Global would want to apply the same logic to the film side of things. So while Paramount Pictures has done well at the 2022 box office with movies like “The Lost City,” “Smile” or this month’s “80 for Brady” (but not “Babylon,” even though they don’t make the Damien Chazelle business too), the studio’s 2023 schedule is full of franchises.

Paramount won’t have another “Top Gun,” but Tom Cruise has another “Mission: Impossible” movie this year (and another year after that). And the sixth “Scream” movie was released the following month after last year’s reboot shook up the franchise. The “Paw Patrol” sequel also came together quickly.

Although the “Transformers” franchise stalled after 2018’s “Bumblebee,” Paramount is hoping that “Rise of the Beasts” (and a 2024 animated project) and its new human characters (along with some familiar robots) can grease the wheels . The studio also has a new “Teenage Mutant Ninja Turtles” movie and hopes that next month’s “Dungeons & Dragons” won’t be a one-off. Down the pike are the sequels to ‘Gladiator’, ‘A Quiet Place’, ‘Star Trek’ and ‘The Smurfs’, and this is the top of the mountain (the snowy part).

While these films should have healthy theatrical windows, Bakish said they really shine financially as they create value across multiple screens.

Consolidate staff, not just services

Showtime isn’t the only thing (essentially) going away. Earlier this week, Showtime laid off 120 employees as part of its transition to Paramount+ and merger with MTV Entertainment Studios. Showtime co-chairman Gary Levine and Jana Winograde are among them, and it looks like there will be downsizing this year.

Sorry, Hollywood, this story doesn’t have a happy ending. Maybe in 2024.

Additional reporting by Brian Welk.

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