Paramount Global chief Bob Bakish made it clear Wednesday that Showtime Networks’ days as a standalone unit within the conglomerate are numbered.
Comments during the company’s third-quarter earnings call with Wall Street analysts indicated strongly that the operations of Showtime and Paramount Plus will be more fully blended in the coming months. The Showtime brand is likely to endure as a programming label but staff cuts and further consolidation of Paramount Global’s high-end scripted development and production activity is coming. This comes as Showtime Networks’ longtime leader, David Nevins, is preparing to exit Paramount Global by year’s end.
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Bakish and Paramount Global chief financial officer Naveen Chopra mentioned cost-cutting and a focus on “efficiencies” multiple times during the 65-minute call. They noted that the gathering storm on the macroeconomic front – stresses that were evidence in Paramount Global’s Q3 advertising slowdown – has forced them to accelerate the transition plan. Paramount Global shares took a beating in early trading after its Q3 results reflected a perfect storm of advertising pullbacks amid recession concerns, currency fluctuations outside the U.S., the heavy investment in original content for Paramount+ and the continued decline of linear viewership.
“We’re always mindful of cost management as a company,” Bakish said. The company is moving on the opportunity “to reorganize Showtime Networks, Showtime OTT and Paramount Television Studios into other parts of the company.” Bakish added that this effort will lead to the benefit of “significant cost reductions and advance our strategic agenda.”
Chopra added that the changes around Showtime will allow the company “to further align and apply a more global mindset to our content and platforms.”
Showtime, which fielded a sleeper hit this year with the ensemble drama “Yellowjackets,” has a big content slate planned for 2023 and Bakish flagged for analysts that Showtime’s content mix will “evolve.” One one hand, Bakish said, “the Showtime brand stands more than ever for thought-provoking, distinctive, edgy content,” and on the other, the network “needs to extract more from core franchises. We know franchises really work.”
Pressed by analysts, Chopra acknowledged that a restructuring charge is likely coming in the fourth quarter. He would not field a dollar estimate but said the savings realized would be “meaningful and sizable” and would involve “both labor and non-labor expenses.” There’s greater urgency to address this restructuring “particularly in light of some of the macroeconomic challenges,” he said.
Among other highlights from the call:
** Paramount+ generated subscriber growth of 4.6 million for the quarter, taking the streamer to 46 million total subscribers. That makes it by far Paramount Global’s largest streaming platform. A number of those new subs came from partnerships and international distribution deals as Paramount+ expanded in Western Europe and other territories. Paramount Global struck a deal with Walmart to offer Paramount+ as part of the free basic package for the Walmart+ streaming platform. Bakish added that this digital deal will have brick-and-mortar benefits for Paramount properties through “in-store presence for the more than 100 million retail customers that pass through Walmart every week.”
** Chopra told analysts that Paramount+’s “domestic churn improved sequentially and year-over-year,” as did its Average Revenue Per User metric for the quarter. The company had 100% subscriber revenue growth and total direct-to-consumer advertising growth of 4% across Paramount+ and Pluto TV.
** Paramount Pictures enjoyed a 48% increase in segment revenue thanks to the juggernaut that is “Top Gun: Maverick.” Bakish noted that it’s the only movie ever to rank as No. 1 at the summer box office on the bookend holidays of Memorial Day and Labor Day. The studio overall has lobbed six No. 1 movies at the turnstiles this year, most recently the modestly budgeted horror pic “Smile.”
** A price hike may be in the cards for Paramount+, which at present is offered for $9.99 without ads or $4.99 with ads. “It’s fair to say pricing is moving higher across the industry. That means we have room to increase price, ultimately drive ARPU (while) preserving our value position. We’ll be smart about how and when we raise the price,” Chopra said.
** Bakish acknowledged the sluggishness in the TV and digital ad market but predicted that a spark will come eventually in the automotive category when manufacturers catch up with the backlog in new car production because of the global microchip shortage. “once those chips show up zillions of cars out there are going to have to move,” he said. “When it does it’s going to be good for the ad market.”
(Pictured: Showtime drama “Yellowjackets”)
