29 FEB 2024

Paramount+ added 4.1 million subscribers in the Q4 and reaches 67.5 global users

Paramount Global's subscription revenue grew 43% to $1.34 billion from $936 million the previous year, driven by subscriber growth and pricing increases for Paramount+.

29 FEB 2024

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Paramount Global reported that its branded Paramount+ subscription streaming VOD service added 4.1 million subscribers in the fourth quarter, ending Dec. 31, 2023, and ending last year with 67.5 million subscribers. The tally is up from 56 million subs at the end of 2022. Subscription revenue grew 43% to $1.34 billion from $936 million in the previous year, driven by subscriber growth and pricing increases for Paramount+. Paramount+ global ARPU expanded 31% year-over-year, and the company expects Paramount+ to reach domestic profitability by 2025. Q4 also benefited from strong performance of the domestic Paramount+ with Showtime tier that helped subscription revenue rise by 80%.

Advertising revenue rose 14% to $526 million from $460 million, reflecting growth from Paramount+ and Pluto TV. Global viewing hours across Paramount+ and Pluto TV grew 27%. Direct-to-consumer losses at Paramount Global appear to have picked up in 2022, a year ahead of plan. Paramount's direct-to-consumer business segment reported an operating loss of $490 million on revenue of $1.86 billion. That compared to an operating loss of $575 million on revenue of $1.39 billion in the prior year period. The operating loss decrease was due to higher revenue, which more than offset increased costs to support the growth of Paramount+. However, Paramount's linear business declined by 12%, hit by a fall in advertising revenue of 15%, amid a soft global advertising market.

"We now expect to reach domestic Paramount+ profitability in 2025 , a significant milestone," Bob Bakish, CEO of Paramount Global, said in a statement. "The disciplined execution of our strategy, including the integration of Showtime into Paramount+ led to a reduction in full-year D2C losses, and meant we had peak streaming losses in 2022, a year ahead of schedule, with further significant improvement expected in 2024," Bakish added.

"I do think sub growth in 2024 will be lower than 2023, though importantly, I'd point out we do still expect very healthy Paramount+ revenue growth, and, of course, revenue is the more important metric than subs. We've learned that Paramount+ subscribers outside the United States spend nearly 90% of their time with our global Hollywood hits, meaning we can keep them engaged while rightsizing our investment in content that does not travel around the world. In some cases, this change will result in slower international subscriber growth," Paramount's CFO Naveen Chopra stated.

According to Parrot Analytics, the structural forces challenging the entire media and entertainment ecosystem have hit Paramount Global harder than any major legacy firm. In a beleaguered industry, there may not be another conglomerate as beleaguered as Paramount Global.
 The company has lost over 70% of its value since re-merging in late 2019, and a growing number of prominent suitors/vultures have been kicking the tires and circling the wagons. CBS, delivering the most viewed Super Bowl in history, couldn't save 800 jobs that were cut just days later.

Paramount Global still owns one of the most valuable content libraries in the business, to say nothing of its iron grip on NFL rights for another decade to come. But the combination of a money-bleeding DTC segment, struggling studio, and exposure to linear TV has made Paramount Global as a whole worth less than the sum of its parts. The primary question facing chairwoman Shari Redstone is whether to combine forces with a larger company or sell its various assets off piece by piece. Does the future Paramount look like a content arms dealer à la SONY Entertainment? Do any prospective buyers care about Paramount+, the very reason that CBS and Viacom re-joined forces in the first place?

According to PwC, "The number of TMT megadeals dropped from 42 in 2021 to 24 in 2022 and just 11 in 2023. Bankers have made it well known they expect deals to recover in 2024 and beyond. However, legacy media M&A has decidedly not paid off for shareholders when it comes to three prominent deals over the past five years."

Another media mogul, Byron Allen,  made a play for Paramount Global by revealing a $14.3 billion offer to buy all outstanding shares in the studio. Bakish also discussed partnering with rivals in the U.S. market and internationally to offer streaming bundles that help land and keep subscribers by making content offerings more attractive and affordable. "In terms of M&A, look, at Paramount, we're always looking for ways to create shareholder value. And to be clear, that's for all shareholders. But I'm not going to get into commenting on any speculation or timeline. But it's obviously something we are focused on. We already have substantial experience with the power of bundling and streaming. We have hard bundles internationally with people like Sky, Canal, and others. They've been key to our market entry strategy. They're unquestionably additive to our Paramount+ sub-base and economics. There's also things like Walmart+ in the U.S., which is another form of bundle," he said.

Bakish also addressed Disney, Warner Bros. Discovery, and Fox's unveiling plans to launch a joint sports streaming venture to fend off competition from tech giants. "There's still a lot we don't know about this service, things like price, packaging, consumer appetite. And to the consumer point, for a true sports fan, this product only has a subset of sports. It's missing half the NFL, a lot of college, and virtually no soccer or golf. So look, that's hard to believe that's ideal, especially at the price points that have been speculated," he stated. Bakish added that sports fans were already embracing the offerings available on CBS and Paramount+, and he argued that for viewers who come to Paramount+ for sports, 90% of their engagement is with non-sports programming. "Bottom line, we very much like where we are with respect to sports execution and see the Paramount strategy creating substantial value," he added.