How Do You Solve a Problem Like Paramount+?

As the long M&A saga of Paramount Global continues to twist and turn toward (maybe?) a resolution, it remains uncertain how the media conglomerate’s assets will fare under its ultimate buyer. 

The proposed deal with Skydance Media would keep the company whole, at least in the short term. But upon taking control of Paramount, Skydance CEO David Ellison would still be faced with difficult choices about how best to steer the beleaguered media giant into the future.

And one of the more pressing choices would be what to do with the company’s flagship streamer, Paramount+. 

The platform formerly known as CBS All Access has always occupied a peculiar space in the SVOD landscape. Paramount+ has perpetually seemed almost on the verge of true success, frequently ranking first among the major SVODs in quarterly gross U.S. subscriber additions, according to Antenna data.  

Yet the service has remained subscale; despite that growth and its multinational reach, Paramount+ still has about 25% fewer subscribers than Max, its closest competitor and comparison point. Paramount’s 2023 direct-to-consumer revenues, meanwhile, totaled $6.7 billion against a full-year loss of $1.7 billion — which, though obviously substantial, was at least narrowed nearly 10% from the previous year’s loss. 

In other words: Not bad but not good enough for the cutthroat streaming market. And with Paramount+ capturing only 1% of U.S. TV viewing time in a typical month, per Nielsen, the service is ill-equipped to achieve the scale it needs. 

It is still conceivable the SVOD could hold out. The company expects “to reach domestic Paramount+ profitability in 2025,” now ousted CEO Bob Bakish said on an earnings call back in February. But in light of all this, it’s hard to argue with the oft-repeated strategy suggested by analysts that Paramount should exit the SVOD space completely, shutter Paramount+ and commit to an “arms dealer” strategy supplying content to the biggest platforms. 

This is almost certain to transpire if the Mountain’s other potential buyer wins out. Private equity firm Apollo Global Management has partnered with Sony Pictures on a $26 billion cash offer to take Paramount private, a deal that would likely result in a merger of the two Hollywood studios. 

Sony, of course, is the sole legacy Hollywood studio to keep out of the streaming war fray and would therefore likely scrap Paramount+ upon taking control of its rival. The SVOD-free model has been working quite well for the Japanese conglomerate — its shares currently trade at many times the value of legacy players such as Paramount and Warner Bros. Discovery — and it’s doubtful Sony would see a need to get into the streaming business now, even with Paramount IP added to its stable. 

But there’s something any prospective buyer should keep in mind: No matter what offer ultimately prevails, Paramount cannot afford to abandon the streaming space completely.  

To be more precise, whoever ends up with the CBS network cannot afford to do so. Not only have consumers grown accustomed to having live sporting events including the Super Bowl available digitally, but the advertising revenue offered by cord-cutters is a stream no owner of a broadcast network can sacrifice. 

Case in point: Bolstered by this year’s Super Bowl broadcast, overall ad revenues at Paramount grew nearly 17% year-over-year last quarter, while streaming ad revenue grew by more than 30%. Linear TV advertising, meanwhile, grew 14% YoY for the quarter but has been steadily eroding in the long term; linear ad revenues for full-year 2023 were down 12%, or more than $1 billion, from 2022. 

The more prudent move, therefore, may be not to scrap Paramount+ entirely but to strip it down to bare essentials, which would need to include serving as a digital access hub for at least some linear CBS content.  

Such a platform could theoretically be entirely ad supported — and potentially folded into Paramount’s FAST platform Pluto — though there’s likely some segment of the population that would pay for the service. Original content could also conceivably still play a role in the platform’s value proposition, perhaps on a non-exclusive basis to allow for secondary revenue streams (and with budgets pared far down from current levels). 

Indeed, it’s worth pondering whether the proposed Peacock-Paramount+ bundle, or some form of joint venture between Paramount and Comcast, would be the best route forward, especially if Paramount ends up declining both the Skydance and Apollo deals — no longer a remote possibility, according to reports.

Such a product — for which there is significant consumer interest — could offer linear TV feeds of both CBS and NBC, combined with live sports coverage (neither company is involved with the forthcoming “Spulu” bundle, for what it’s worth) and some original scripted content alongside library titles, while presenting greater value than either service offers on its own. 

Does that sound familiar? Yes, this is basically proposing a new version of the original iteration of Hulu. It may seem a bit absurd, but if the streaming age has taught us anything, it’s that everything old can be new again.