Will Paramount+ and Peacock’s Pivots Be Worth the Pain?

Need more evidence that we’ve entered a treacherous phase of the streaming wars? Look to Paramount+ and Peacock.

The two streamers are in remarkably similar positions as their corporate parents — Paramount Global and Comcast’s NBCUniversal, respectively — seek to optimize expenses, boost revenues and achieve the seemingly industrywide goal of turning a profit in streaming by 2024.

Both Paramount+ and Peacock saw robust subscriber growth last year; the former added 23.1 million global subscribers in 2022, the most of any single SVOD save Disney+, while Peacock more than doubled its paid subs last year, adding 11 million.

Yet both companies’ direct-to-consumer operations continued to post massive losses: Paramount reported a $1.8 billion annual loss on its DTC segment Thursday, while Peacock posted losses of $2.5 billion.

While hardly the biggest spenders in the streaming game — Disney’s DTC expenses soared to nearly $25 billion for the calendar year, with its losses totaling over $4 billion — Paramount and NBCU sit in a much thornier spot. It remains doubtful whether Paramount+ and Peacock can achieve the scale needed to prevail in the streaming wars, and as Wall Street pressures them hard to deliver profits, it’s worth wondering if the struggle will ultimately be worth it.

As it stands, Paramount and NBCU are increasingly looking to improve their balance sheets by any and all means necessary. Paramount is downsizing its onetime premium cable flagship Showtime into little more than a content pipeline and promotional tool for Paramount+, rebranding both its premium streaming tier and the linear network as the ungainly “Paramount+ with Showtime.” The move is expected to reduce annual expenses by about $700 million, CFO Naveen Chopra explained on Thursday’s Q4 earnings call.

The company will also raise prices on Paramount+ this year, and “start to evolve pricing in core international markets from a single tier to a multi-tier offering,” Chopra said, in an attempt to boost the service’s average revenue per user across the globe.

On a similar note, NBCU announced late last month that it has stopped allowing new users to sign up for Peacock’s free tier, which could be read as a sign of confidence after robust Q4 subscriber growth — or as a desperate strategy to boost revenue in light of the streamer’s billion-dollar losses. Executives at both companies, meanwhile, have promised that 2023 will mark peak expenses for their streaming operations, and that the financial picture will steadily improve from there.

There’s reason to be skeptical. Peacock is touting its Q4 sub growth as a sign of serious momentum, but the streamer simply can’t expect that level of sign-ups every quarter. Soccer’s World Cup and the NFL season were major attractions in Q4 that can’t be replicated, even if “Poker Face” and other original series prove to be major hits.

Furthermore, Peacock, Paramount+ and (for now) Showtime consistently post among the highest U.S. churn rates for SVODs, per analytics firm Antenna, standing behind only Apple TV+ and Lionsgate’s Starz in most months.

The upshot of all this is that Paramount and NBCU are playing the streaming game with more and more desperation, when the current market begs the question of whether they should be in the game at all. Contraction is going to be inevitable as the streaming industry continues to mature, as all indications are that the market is currently oversaturated; if their margins don’t improve, Paramount and NBCU are going to face tough questions about their viability in that market.

Not for nothing, both companies are also widely viewed as likely M&A targets in the not-too-distant future. If and when that happens, their new owners are going to face the same tough questions, and would do well to consider what could be gained by returning to the “arms dealer” strategy. After all, even with content spend starting to ebb, one imagines Netflix would shell out a pretty penny to be able to stream “The Office” again.

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