It’s like ViacomCBS chair Shari Redstone and C.E.O. Bob Bakish whipped out the Big Media ‘22 handbook, flipped to the “Netflix for Beginnerz” section, and started checking the boxes that analysts and investors all want checked these days:
1. Steer your content to streaming to juice subscribers. Check! Paramount+, flush with NFL games, first-run kids movies and the Yellowstone prequel, added more than 7 million subs last quarter to reach 32.8 million, or 56 million across all its services.
2. Make a bold projection for your subscriber numbers. Done! Bakish told investors Tuesday that the company is on track for 100 million subs by 2024, up from the previous 70 million prediction.
3. Consolidate your offering on one digital interface. Yep, Showtime will soon be available on the Paramount+ platform for $12 total ($15 without ads). Showtime will still exist as a standalone service, but for how long?
4. Throw out your lucrative “pay one” home video revenue. Not a problem! Paramount movies will go directly to Par+ after theaters, starting in 2024.
5. Expand the service overseas, and do it fast. Gotcha. Par+ will be in 60 markets this year, thanks to a new deal with France’s Canal+ Group.
6. Most important, unleash an unholy machine-gun spray of new content, preferably spinoffs and sequels of existing franchises, and then spinoffs and sequels of those spinoffs and sequels, and so on. Yessir! The Tuesday presentation was overwhelming, with everything from Sonic and SpongeBob “universes” to yet more Taylor Sheridan shows, to taking over South Park worldwide, to launching a global version of my favorite show, The Challenge, to the promise of a new Star Trek movie before the cast has even entered negotiations. (An agent texted me “$$$$$” over that news.)
7. And finally, if they’re still not convinced you’re serious about streaming, change the name of the whole goddamn company to match the service. After all, the parent of Netflix is just Netflix. Same with Disney+. So now, we have Paramount Global, home of the Paramount+ service and, oh yeah, a 110-year old movie studio that also happens to use that name. R.I.P. Viacom, which was synonymous with Shari’s father, Sumner Redstone, who took ownership of the cable TV company in the mid-80s, outdueled Barry Diller for Paramount Pictures, bought CBS in 1999, then split the two companies in 2006, and declined mentally and physically until Shari took control and reunited them as ViacomCBS just before Sumner’s death in 2020. I’m omitting his many scandals, blood feuds, abrupt firings and much-younger girlfriends along the way—not to mention the iPad that said “yes,” no,” and “fuck you”—but suffice to say it’s the end of a quite eventful era.
Redstone and Bakish played the game, so all good, right? Ha. Investors and analysts responded to the Tuesday announcements by urinating all over New Paramount, sending the share price down about 20 percent in a day. Bank of America’s Jessica Reif Ehrlich downgraded the stock. Analyst Michael Nathanson lowered his price target. The drumbeat to simply give up and sell the company grew louder. You can almost hear Shari, in her Boston Brahmin accent: But we did everything you asked of us!
It’s striking how the narrative on streaming has changed so dramatically in the past few months. For years, Netflix and others would rise and fall solely by the subscriber numbers. Now, terrifyingly, the market is paying a lot more attention to the business fundamentals, and—I hope you’re sitting down for this news—the streaming wars are really f-ing expensive.
Paramount says it will spend $6 billion on content in 2024, but that’s apparently not enough—or it’s too much—or, maddeningly, it’s both. The market has created an awful Catch-22 for Redstone. Her core cable TV business is dying, so she needs to shift to streaming. But streaming expenses drain the company’s coffers, and it’s clear that investors don’t believe Paramount can ultimately compete for a seat at the adults table with Disney, Netflix, Amazon and Warner Bros. Discovery. When Disney invests more in streaming, for instance, investors believe that’s smart because Disney can be a winner. But Viacom? “People think it’s throwing good money down a dark hole,” analyst Rich Greenfield told me today. Nathanson warned his clients he doesn’t see how Paramount’s streaming push can “become big enough to return the total company on a path to growth within the next five years.” That’s stark. What is Shari supposed to do now?
She controls the company, so she can stay the course. And if you talk to people at Paramount, they say that’s the strategy: Keep spending to grow, hope to survive this crazy period of transition in one piece, and keep an eye out for a potential sale opportunity.
But the problem is, a sale to who? Netflix could do a lot with the Paramount content and its ad-driven PlutoTV service, especially as Netflix growth lags and competitors rise. But so far the company hasn’t undertaken major M&A (this open job notwithstanding). And nobody else has seemed to want to pay a decent price for all of Paramount, especially those linear assets, which would weigh any buyer down like a steel anchor. Plus, the regulatory environment is such that potential Big Tech acquirers might be scared off, especially if Biden’s antitrust bulldog Lina Khan shuts down Amazon’s proposed deal for MGM, which is still pending.
The scary reality is that the market is no longer convinced that streaming is a good model for anyone, even Netflix and Disney. Yes, the entertainment business is transforming, it just might be a smaller, less profitable business than the cable TV cash cow of the past 30 years. And there might be far fewer players that can withstand those new economics. The challenge for Shari Redstone, Bob Bakish and every top executive in entertainment over the next couple years will be to convince the market that a compelling streaming service can be profitable and sustainable long-term. Of the current products, which one would you bet on? Paramount+?