Paramount is betting that new and existing subscribers to Paramount+ are big fans of Showtime. Executives touted the integration of the streaming service and the cable television channel as a key justification for raising prices for the direct-to-consumer service’s premium tier Thursday as they discussed the media giant’s earnings.
Later this year, the top tier of Paramount+ will rise from $9.99 per month to $11.99 per month. The cheaper, ad-supported Essentials tier, which will not include Showtime, will increase from $4.99 to $5.99 per month. Consumers who already pay for the Paramount+/Showtime bundle will not be affected by this price increase.
“We all know streaming represents incredible value for consumers and the Paramount+ offering is far from the industry price leader. We are on the value end of the pricing spectrum,” Paramount Global CEO Bob Bakish told analysts on the earnings call. “And so, in 2023 we will raise prices, both for Paramount+ Premium and Essential, both in the U.S. and in select international markets.”
Such comments echo Disney CEO Bob Iger’s remarks last week about the notion that the urge to entice consumers to sign up for streaming may have resulted in underpricing the services. In other words, the sheer savings that streaming provided over cable may have been a temporary scenario until streaming gained a real foothold over its linear competition.
Paramount management emphasized a record 9.9 million new subscribers for Paramount+ in the quarter amid declining income from the legacy television business and stressed the benefits of franchises and the value offered in combining Paramount+ and Showtime into one offering. No mention was made of 120 recently laid-off Showtime employees as a cost-saving measure, though executives obliquely referred to expense reductions.
Bakish and company are betting that the notion of getting both “1923” and “Billions” under one roof, with “Billions” getting a handful of spin-offs, will be enough to keep subscribers and retain existing ones, even at a higher price point.
Noted Paramount CFO Naveen Chopra, “The Showtime/Paramount+ combination also represents an opportunity to reduce operating expenses in marketing, technology and operations over time. In combination with reductions in content expense, we expect to realize approximately $700 million of future annual expense savings.”
The core reasoning behind the integration was the notion of a single entity requiring less new content to retain subscribers compared to two services, which will reduce one of the key drivers of overall losses — the money being spent to make a constant deluge of new television shows and movies to reduce churn. The company said it expected 2023 would be a peak year in terms of streaming-centric content spends.
Bakish noted that box-office hits like “Top Gun: Maverick,” “The Lost City” and “Smile” boosted Paramount+. He also pointed out that the audience on Paramount+ was 20 years younger than that of CBS. “Star Trek” and “Paw Patrol” notwithstanding, key Paramount+ franchises like the “Yellowstone” universe alongside “Criminal Minds,” and the upcoming “Fatal Attraction” miniseries remake positions the service as a one-stop shop for older subscribers with more conventional viewership desires. The addition of Showtime hits like “Yellowjackets” will likely only add to that notion.