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Paramount Global said it saw its streaming business grow during the fourth quarter, and announced plans to increase prices for Paramount+ this year.
Despite adding more streaming customers, Paramount reported its fourth-quarter revenue declined 7%, compared with last year, to roughly $5.9 billion as the weak advertising market weighed on the company.
Paramount’s stock was down nearly 3% early Thursday.
The company previously warned of the soft advertising market, and on Thursday said ad revenue fell 5% as growth in political advertising was partially offset by the international market. Cord-cutting also played a role, with affiliate and subscription revenue dropping 4%.
Company executives on Thursday estimated the advertising market will bounce back in the second half of 2023.
Meanwhile, the company’s direct-to-consumer streaming business, which also includes free ad-supported streamer Pluto, saw an increase of 4%.
On a call with investors Thursday, Paramount management said 2023 will be its peak investment year for its marquee streaming service. Like its peers, Paramount has been focused on getting its streaming business to profitability in the near-future.
“Paramount+ remains an incredible value proposition for consumers,” CFO Naveen Chopra said Thursday.
The price increases will take effect when Paramount+ and Showtime combine later this year. CFO Naveen Chopra said Thursday the Paramount+ premium tier, which will include Showtime, will increase to $11.99 from $9.99, while its lower-priced tier, without Showtime content, will increase by $1 to $5.99.
The price increases and combination with Showtime will take place in the third quarter.
Paramount+ added 9.9 million subscribers during the fourth quarter, a record since the streamer was rebranded from CBS All Access in 2021. In total, Paramount+ reached nearly 56 million customers during the fourth quarter.
Pluto saw monthly active users grow by 6.5 million during the quarter, and global total viewing hours were up “strong double digits quarter-over-quarter.” Free streaming platforms like Pluto and Fox Corp‘s Tubi have been bright spots for media companies.
The jump in Paramount+ subscribers was attributed to the airing of NFL Sunday games, which are simulcast with the company’s CBS broadcast network, as well as the addition of the box office winner “Top Gun: Maverick” in late December. Original programming that stemmed from the “Yellowstone” and “Criminal Minds” franchises also boosted subscriber growth.
CEO Bob Bakish on Thursday looked ahead to more franchise content debuting this year, particularly in theaters, such as the upcoming installments of “Scream,” “Transformers,” and “Mission: Impossible.”
Combining the Showtime and Paramount+ platforms will also help condense content spending, which has become a particular focus for media companies. Warner Bros. Discovery slashed content costs soon after its merger was completed.
Last week Disney said it would cut $5.5 billion in costs, including $3 billion on the content side. Disney’s returning CEO Bob Iger said on CNBC’s “Squawk on the Street” last week that he didn’t view general entertainment as a “differentiator,” particularly on pay-TV and streaming, and the company would lean on its franchise strength.
While Paramount has long talked about its reliance on franchises across both TV and film, Bakish said Thursday the company’s general entertainment assets — the company also owns a portfolio of cable-TV networks like Comedy Central and MTV — were part of its strengths.
“The general entertainment space may not make sense for everyone but it clearly makes sense for us when we look at our asset combination,” Bakish said, noting the company believed in its sports and general entertainment strategy when it first went to market with Paramount+.
Bakish said Thursday the company has long been doing what others in the media space are focusing on at the moment, such as a cheaper tier with commercials of Paramount+, the free ad-supported platform Pluto, and relying on its intellectual property.