TBI Tech & Analysis: How merging with Showtime will boost Paramount+ profitability

Billions

Omdia analyst Sarah Henschel assesses Paramount Global’s plan to merge Showtime and Paramount+ and how it will drive rising subscription fees and profitability.

Last month, Paramount Global announced plans to integrate its Showtime brand into the Paramount+ platform.

The move will see Showtime being rebranded as Paramount+ with Showtime in a move that CEO Bob Bakish said would drive “stronger alignment across our domestic and international Paramount+ offerings” and “unlock operational efficiencies and financial benefits across our broader portfolio.”

Paramount believes this will allow it to put more resources into building out the Showtime brand and turning its shows into global hit franchises, with the company quickly acting on this by dropping titles such as horror series Let The Right One In and crime drama American Gigolo, while putting spin-offs into development around popular titles Dexter and Billions.

Through this integration, which has led to a leadership merger and staff lay-offs, Showtime will be included in the Premium tier of Paramount+, and the lower tier of Paramount+ will not include Showtime content. The Premium plan will increase from $9.99 today to $12.99 after the integration. The Essential tier will increase from $4.99 to $5.99 per month in the US. The integration will occur in the third quarter of 2023.

Paramount’s free ad-support streaming TV (FAST) service, Pluto TV, does not have plans to integrate with Paramount+ and announced a new milestone of 78.5 million monthly active users (MAU) worldwide. Pluto TV also expanded into Canada in 4Q22.

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Impact assessment and outlook

Omdia estimates suggest that Showtime has struggled to maintain the fast-paced growth that Paramount+ and Pluto TV have experienced. Showtime does have a decent subscription base at about 8 million US subscribers; however, the OTT service thrives on key television IP.

Integrating Showtime into Paramount+ will bolster the content offering of Paramount+ and likely allow the service to reach profitability more easily.

Showtime continues to have significantly more (about 2.5× more) linear channel subscriptions than over-the-top (OTT) subscriptions. The company will therefore need to work on transitioning this base to OTT over time.

The Premium tier of Paramount+ currently has no advertising. As streaming services continue to push for profitability, the price of this tier will likely continue to increase over time until profits can be reached.

This assessment was taken from Omdia’s TV & Video Industry Developments Impact Brief – February 2023, which is available to read in full here.