All the Ways Paramount Plans to Fix Itself

Paramount Global did not end 2022 on a high note — unless you still only care about streaming-subscriber growth, that is.

With soaring costs, overall Paramount operating income sunk 93 percent in the fourth quarter, and the company whiffed pretty badly on earnings. That’s all going to change, Paramount Global chief Bob Bakish said on the subsequent conference call — just give him and CFO Naveen Chopra another (bad) year. The two then laid out a whole bunch of ways they plan to scale the giant mountain (of entertainment) in front of them.

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Bakish told investors that 2023 will see the company’s “peak investment” in streaming. That, plus ongoing advertising woes everywhere, is going to hurt the bottom line, he acknowledged — but Paramount will weather this storm through “scale” and “flexibility.” And franchises (and layoffs, and price hikes) — my God, the franchises.

In 2024, Bakish foresees “meaningful total-company earnings growth” and “a return to positive free cash flow.” Below is how they’ll get there.

Whatever Paramount+ with Showtime means

It came as not much of a surprise on January 30 when Paramount announced it would further integrate Showtime and Paramount+. The company has been working toward the merger of pay platforms via a prior streaming bundle and later a tile; now, it will shutter the standalone Showtime OTT app. And who knows how long linear Paramount+ with Showtime lasts? Like, the name doesn’t even make sense on cable.

Paramount execs expect this latest combination will lower churn — subscribers canceling their service — much like prior bundling efforts have. Paramount+ with Showtime, in both its linear and streaming iterations, will come out in the third quarter, Bakish and Chopra said on the Q4 call.

The integration will create savings in technology, marketing, content, and staff costs, the execs said. Chopra anticipates future savings of “approximately $700 million of future annual expense savings.” More immediately, this quarter, the combination of services and staffs will create a write down of $1.3-$1.5 billion.

Matt Gerald as Davidson and Jeremy Renner on Paramount+ series “Mayor of Kingstown” - Credit: Dennis P. Mong Jr./Paramount +

Dennis P. Mong Jr./Paramount +

What Paramount+ with Showtime costs

So Paramount+ with Showtime will save Paramount Global money (after it doesn’t), but how will it make money? Price hikes, of course!

The Paramount+ with Showtime (“Premium”) tier of Paramount Global’s core streaming service will see its price rise from $9.99 per month to $11.99 per month. The Paramount+ “Essential” tier, which does not include Showtime content (but does include commercials), is rising from $4.99 to $5.99.

The price increases may be unpopular, but they are overdue when you look at industry trends, Chopra said. Though the price increase will be for both new and existing subscribers, he expects it will impact new signups more so than lead to significant cancellations.

Cleared for takeoff

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

Paramount Global partnered with Delta in a deal that will give the airline’s loyalty members a free trial of Paramount+ Premium to use when they fly. We imagine Paramount Pictures’ big 2022 smash-hit “Top Gun: Maverick” wasn’t meant to be seen from the screen on the back of a plane seat, but market share is market share. (Just don’t let the commercial-airline pilots watch and get any ideas.)

The Delta “subscribers” will not count toward the overall Paramount+ tally.

Those other pilots

One way Paramount will keep costs down is by maintaining a stable schedule, season to season, at its broadcast network, CBS. It’s very easy math: Fewer pilots = a cheaper slate.

Having highly-viewed series means more renewals and fewer new shows — and marketing of those new shows — needed. Last season, CBS finished first in primetime viewers (ages 2+) for its 14th-straight year (and 19 of the past 20), according to Nielsen; the network is currently on pace to make it 15 in a row.

CBS, like many networks these days, is leaning more on straight-to-series orders and multiple-season orders to keep the costly development process under control.

Alison Brie and Dave Franco guest on “The Late Late Show with James Corden” - Credit: Terence Patrick/CBS

Terence Patrick/CBS

After the Primetime Party It’s the Afterparty, and…

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

A show like “@midnight” costs about half, maybe $30 million or so per year, what a traditional late-night talk show like “Late Late” costs. It’s time to lose to Seth Meyers for less.

Second-screen experience

Cord-cutting was the trend that got companies like Paramount Global in this streaming pickle. They’re counting on cost-cutting to get them out. One way to cut content spend — on a per-capita basis, at least — is to run series and films across multiple Paramount platforms. So that’s exactly what they’ll do.

They’ll also…

Yellowstone (verb: to continuously spin off) the hits

“By far, our biggest lever to manage spending is to focus on franchises,” Bakish said. “The higher levels of consumer awareness and built-in fanbases associated with this I.P., drive strong subscriber acquisition volume, lower acquisition costs, lower churn, and extend (loan-to-value ratios). Put simply, franchises give the people what they want.”

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

Showtime’s “Billions” has multiple spinoffs in the works, including (but not limited to!) the ridiculously-named “Millions” and “Trillions.” The future Paramount+ with Showtime is doing the same with “Dexter” via prequel “Dexter: Origins” and additional spinoffs focused on other characters from that serial-killer series. (They already followed the original “Dexter” up with “Dexter: New Blood” in 2021.) Even “The Chi” may be expanded soon.

SCREAM, (aka SCREAM 5), Ghostface, 2022. © Paramount Pictures / Courtesy Everett Collection - Credit: ©Paramount/Courtesy Everett Collection

©Paramount/Courtesy Everett Collection

We all “Scream”

It only makes sense then that Paramount Global would want to apply that same logic to the film side of things. So while Paramount Pictures did just fine at the 2022 box office with movies like “The Lost City,” “Smile,” or this month’s “80 for Brady” (but, not “Babylon,” though they’re not getting out of the Damien Chazelle business either), the studio’s 2023 slate is full of franchises.

Paramount won’t have another “Top Gun,” but they do have Tom Cruise with another “Mission: Impossible” movie this year (and another the year after). And a sixth “Scream” film was hustled out for a release next month after last year’s reboot gave a jolt of life to the franchise. A “Paw Patrol” sequel came together quickly as well.

Though the “Transformers” franchise stalled after 2018’s “Bumblebee,” Paramount hopes “Rise of the Beasts” (and an animated project for 2024) and its new human characters (along with some familiar robot ones) could 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. Further down the pike are sequels to “Gladiator,” “A Quiet Place,” “Star Trek,” and “The Smurfs,” and that’s the tip of the mountain (the snowy part).

While all of these films should have healthy theatrical windows, Bakish said they really shine, financially, by creating value on multiple screens.

Consolidate staffs, not just services

Showtime isn’t the only thing (essentially) going away. Earlier this week, 120 Showtime staffers were laid off as part of its realignment with Paramount+ and merger with MTV Entertainment Studios. Among those out are Showtime Co-Presidents Gary Levine and Jana Winograde, and more headcount reduction feels like it’s in the air this year.

Sorry Hollywood, no happy ending to this story. Maybe in 2024.

Additional reporting by Brian Welk.

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