Last year, the streaming industry underwent a significant transformation, shifting away from the frantic growth of previous years towards a more restrained financial approach. These dynamics have led to endless consolidation talks and further shake-ups among the largest media companies.
Since the beginning of the year, FilmTake has explored the challenges and opportunities facing the leading streamers.
Paramount’s Days Are Numbered as Merger Madness Grips Hollywood
Paramount Global and Comcast have engaged in discussions to explore collaborating, including potentially merging their respective streaming services – Paramount+ and Peacock. This potential partnership could resemble SkyShowtime, a streaming service featuring Peacock, Showtime, Paramount+, and Nickelodeon, currently available in 22 European markets.
A combined streaming app between Paramount+ and Peacock could yield substantial cost savings for both companies. It would also broaden customer choices, particularly in live sports offerings.
However, it’s becoming clear that Paramount Global and its disastrous leadership team want to cash out rather than rebuild through a partnership.
Apple and Paramount were in talks late last year to bundle their respective streaming services. With its relatively small content library but technologically solid foundation, Apple finds a strategic advantage in aligning with Paramount’s more extensive content offerings. This partnership could redefine the competitive landscape in the streaming market and continue to shift Apple towards an aggregator.
Warner Bros. Discovery (WBD) initially expressed interest in Paramount, followed by Allen Media. Subsequently, reports emerged of Comcast, the owner of Peacock, potentially considering a merger with Paramount. Adding to the flurry of developments, Paramount’s longstanding partner Skydance Media is reportedly contemplating acquiring the 110-year-old studio. Paramount purportedly declined an all-cash bid from private equity giant Apollo, opting instead for discussions with Skydance Media.
Last week, Paramount started clearing room on its wasteful board of directors to appeal to potential suitors. Whoever the buyer is, they will acquire the studio at a deep discount after its management has run it into the ground over the last decade, but not before siphoning off billions from shareholders.
The traditional media giants (Disney, Warner Bros. Discovery, Paramount, Universal) want to reconstruct cable television and return to making outsized profits instead of losing money hand over fist on siloed streaming services.
Add real-world pricing context to this film and television market analysis.
FilmTake’s Global Rights Suite combines both the Film Licensing Index and Film Advance Index into one rights-pricing package for film and television executives evaluating licensing and streaming values, Pay-1 economics, minimum guarantees, presales, and international advance structures.
Peacock Fails to End “Peak Losses”
NBCUniversal claims it has finally surpassed its peak losses in streaming, albeit trailing behind industry leader Netflix. Despite boasting a 50 percent surge in Peacock subscribers to 31 million by the end of 2023, this growth is overshadowed by the fact that it stemmed from a relatively small user base.
While NBCUniversal celebrates a slow turn towards profitability, Peacock still stands as the streaming industry’s biggest financial sinkhole among entertainment giants. Despite their bold declaration that 2023 would mark the end of “peak losses,” the platform suffered a staggering $2.7 billion loss, up from the previous year’s $2.5 billion loss.
Although Peacock’s revenue improved in the latest fiscal year, the platform continues to hemorrhage funds. Despite this improvement, the fourth-quarter loss, while showing some progress, remained alarmingly high at $825 million, indicating a rocky road ahead. Comcast’s optimistic projections for 2024 fail to mask the platform’s financial woes despite attempts to highlight individual successes that serve as a fleeting bright spot in an otherwise grim landscape.
Peacock’s average revenue per user (ARPU) is in the bottom tier of streaming services, hovering around $10. Comparatively, Netflix expects its ARPU for its new AVOD service in the U.S. and Canada to generate $17.50 per month, compared to SVOD’s $16.75 ARPU.
Paramount Pleads with Disgruntled Investors for More Time to Turn Profitable
Paramount Global pleads with investors for patience and extended timeframes regarding streaming profitability, underscoring their ongoing struggles in the streaming space. Despite being the subject of considerable acquisition rumors, the company grapples with the harsh reality of prioritizing profit generation, including within its streaming division, where it claims that streaming investment peaked ahead of plan.
Nevertheless, streaming user numbers continued to rise throughout the previous year. Paramount+ closed out 2023 with 67.5 million subscribers, marking an increase of 11.6 million over the year. Additionally, the ad-supported streaming platform Pluto TV experienced growth in its monthly active users during 2023, although the company did not disclose user figures.
Like Peacock’s claims, Paramount is using the same playbook by stating that the steaming division hit “peak losses” in 2022 and expects the unit to become profitable in 2025.
Additionally, there are expectations that the company will reduce original content expenditures, particularly in local programming for international markets, in favor of prioritizing major hits, which could potentially impact future streaming growth.
Subscribers to Paramount+ outside the United States predominantly allocate nearly 90 percent of their viewing time to our globally recognized Hollywood content. However, sustaining engagement among these subscribers has significant financial implications, given the escalating production costs.
Paramount presents a compelling acquisition opportunity for a competent management team due to its extensive portfolio of original and library content, and premium offerings of films, series content, and sports programming.
FilmTake Away: To Merge or Bundle – That is the Question
With streaming bundling tie-ups becoming increasingly prevalent, the likelihood of Paramount Global being acquired rather than forming strategic partnerships looms larger.
Despite concerted efforts from both Paramount+ and Peacock to attract subscribers and establish themselves as enduring contenders in the streaming market, the uncertainty surrounding Paramount’s future casts a long shadow.
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