Peacock Curiosity, Paramount’s Future, & the Great Streaming Rebundling

Shari Redstone
Shari Redstone. Photo: Drew Angerer/Getty Images
Julia Alexander
October 11, 2022

So many conversations I have with Hollywood executives eventually touch on a single question: Will our multi-streaming platform universe one day evolve into a cable-style bundle that features multiple services? And will this future arrive sooner or later? This question has bubbled of late thanks to general bear market industry anxieties, and reporting from CNBC and the Wall Street Journal, among others, suggesting that media executives have engaged in talks about potential partnerships. 

We are indeed entering a great rebundling period, but the transition will be slow and steady and incremental. It will likely encompass M&A, ecosystem building, and cross-industry leveraging. Each of these avenues create bundles to satiate different needs. And taken as a whole, they will determine the winners and losers in the space.

Apple, for instance, bundles Apple TV+ within its Apple One services package to theoretically create a more valuable product that ties customers to its hardware platform. This type of ecosystem bundling is seen prominently within Amazon Prime, too. Paramount, meanwhile, is bringing Showtime into Paramount+ as part of a new bundle as a scale play. It will theoretically grow the company’s main DTC platform rather than trying to build two revenue streams with two different audiences. The company is also partnering with Walmart to reach a retail audience that can potentially help scale Paramount+. This is the most likely form of bundling that we’ll see play out over the next few years—the streaming equivalent of airlines partnering with credit card companies, or Spotify working with Hulu. Reaching new audiences by becoming part of a necessity (shopping) or daily habit can help encourage usage and discovery from consumers who wouldn’t subscribe otherwise. (Though if you ask me, Walmart got the better end of that deal.)

We’ll see more bundling because the financials seem to dictate it. The profit margins on streaming are much smaller compared to broadcast and cable. Scaling in both domestic and global markets isn’t happening as quickly as many would like (save for perhaps Disney). So finding ways to reach new audiences through partnerships, even with potential downsides like revenue sharing and non-exclusive customer data, may help the biggest players hit the numbers that Wall Street desires, at least in the short term. Herewith, some of the biggest questions facing the industry, and at least some of the assumptions about what the answers might be. 

The Tao of Paramount

Nothing is inevitable, but it certainly feels like Paramount Global isn’t long for the world as an independent entity. The stock is down 44 percent year-to-date, despite continued positive performance on the direct-to-consumer side and a stellar theatrical year (Top Gun: Maverick, Sonic the Hedgehog 2, Scream, and current hit Smile). Shari Redstone seems to relish being in demand at Sun Valley, but when Warren Buffett’s Berkshire Hathaway revealed a $2.6 billion stake in the company in May, many analysts and industry insiders assumed it signaled the specter of a future premium-with-a-cherry-on-top acquisition. 

Paramount, despite a complex narrative owing to its recent history and governance, has a lot to be proud of. Paramount+ maintains a 5.1 percent demand market share of streamers in the U.S., according to Parrot Analytics, where I work as director of strategy. And Paramount, as a whole, holds 12.4 percent of all demand across streaming and linear, putting it just behind Disney and Warner Bros. Discovery. Paramount series across CBS, Nickelodeon, The CW, and Showtime have consistently tracked on Nielsen’s weekly Top 10 list, including procedurals like NCIS and Criminal Minds. Paramount has generated meaningful revenue from licensing its series and films, exclusively and non-exclusively, to competitors like Netflix and Hulu, but Paramount C.F.O Naveen Chopra has spoken about pulling back on that strategy to drive growth on Paramount+, following the strategy Bob Iger set at Disney. 

This is all impressive and suggests that Paramount, which has a market capitalization of just $12 billion, may have undervalued content—extremely undervalued content—trapped in a hard-to-parse company strategy. But Paramount+ has 43 million global subscribers. That’s 1.5 million less than Disney+ has domestically. It’s a tough race to compete in as both distributor and supplier. 

Finally, while Paramount’s free ad-supported television player (FAST), Pluto TV, is seeing continued growth in usage each quarter, there are concerns that the space is vulnerable long term because so much of the content is non-exclusive and doesn’t encourage stickiness among consumers, which can negatively affect usage and ad revenue. I wouldn’t count out Pluto TV just yet, and would argue it isn’t respected enough as a key player in Paramount Global’s streaming strategy. But murmurs about whether FAST is a reliable bet are beginning to spring up.

Paramount may demonstrate that an extraordinary library doesn’t equate to instant scale. But that may be a problem that Redstone lets the next owners figure out for themselves. 

To Peacock or Not to Peacock

Earlier this month, NBCU C.E.O. Jeff Shell raised eyebrows when he noted on CNBC that his company’s Peacock streaming service had added 2 million subscribers, passing the 15 million threshold. For many in the industry, Peacock is one of the bigger streaming anomalies, partly because its own parent can’t quite figure out its identity. Is it a true AVOD? Is it a true SVOD? Does it want to be home to prestigious dramas, like Bel-Air? Or does it want to lean into sub-demographic “taste clusters” that aren’t necessarily competing with bigger, I.P.-heavy productions? The difficulty with Peacock is that its brand is impossible to define, and if a consumer can’t define the value proposition, the product always suffers. 

Peacock continues to find itself in the murky middle. Sports fans will subscribe to Peacock for exclusive games, and cord-cutters may like that Peacock can serve many of their needs alongside Paramount+, Apple TV+, ESPN+, and Amazon Prime Video. But sports rights are getting more expensive, and it will require a meaningful investment from Comcast for Peacock to continue competing in that space—investment that may come from other programming pockets. Peacock also has a fantastic library offering, but it’s not enough to get subscribers in, at scale, and take them away from Netflix or Hulu. (NBCU executives will argue that a tipping point will occur when extant company I.P. is returned to the platform after franchising deals end and cannibalization decreases.) 

At the center of every conversation about streaming, whether it’s Peacock or any other app, is why someone should have a service. There is so much to choose from, it’s so easy to cancel, and there are so many apps fighting for attention outside of traditional entertainment. Companies looking to survive the next few years in these streaming races need to step back and ask, “What exactly do people get from us, and what aren’t people getting that we may have an opportunity to dominate in?”

Where Peacock can really thrive is with networks like Bravo. Low cost, highly in-demand unscripted content that has obsessive audiences across younger and older generations. Real Housewives, Summer House, Vanderpump Rules, Below Deck… the list goes on. There’s an opportunity to create a streaming platform that is exactly what cord-cutters are looking for—sports, unscripted “snackable” programming like the Dick Wolf universe, some new original series, all beloved by advertisers—without having to spend top dollar and compete against HBO, Apple, Amazon, and FX. 

Disney’s Cluster Bomb

There has been some unease in TV following Bob Chapek’s decision to move Dancing with the Stars, which had a 30-season run on ABC, exclusively to Disney+. At the heart of the issue, of course, is the anxiety surrounding ABC’s role inside a company that is increasingly reorienting itself around streaming, and what that might mean for the network’s programming decisions. ABC, after all, is still a critical distribution network for Disney, and the company will continue to experiment with opportunities to engage linear audiences (like simulcasting some Monday Night Football games with ESPN, as well as carrying shows like Abbott Elementary), plus all the usual news and non-fiction programming. But the writing is plainly on the wall: Chapek will find every opportunity possible to build Disney+ and engage with advertisers in new ways. 

And the opportunity is massive: Dancing with the Stars was pulling an average of 18-20 million viewers over the course of each season between 2006 and 2011, according to Nielsen. Sure, the overall audience has dropped over time: The 2021/2022 season had just under 5 million average viewers, a remarkable 75 percent decline (roughly) in the span of a decade. But the audience, itself, is still eminently valuable in a world where the streamers are fighting to build library value for particular demos, such as people over 60, which Disney+ lacked and Dancing with the Stars had locked down.

This sort of audience targeting can indeed have immense strategic value. When Hamilton hit Disney+ in July 2020, for example, Chapek boasted that the musical didn’t just bring in new subscribers (Hamilton increased Disney+ signups by 641 percent, according to an Antenna note from October 2020), but also new demos that Chapek referred to as “an audience we don’t really get that often on Disney+,” according to leaked audio from a Disney town hall meeting, as reported by The Verge. That’s great! Expanding the total addressable market by finding new audiences is key to scaling an otherwise general-interest DTC product. 

The trick, of course, is retention. A large number of people (about half of those customers who signed up for Disney+ to watch Hamilton) canceled their plans within six months, according to Antenna. There was nothing else for them to watch if they weren’t interested in Star Wars, Marvel, or princesses. Dancing with the Stars shouldn’t have that same problem, given that it airs weekly, and especially now that Disney is pushing its streaming bundle, which includes Hulu and ESPN+, giving older audiences more of a reason to hang around.