Paramount is defending its stake in the streaming wars – because skepticism is swirling.
Warner Bros. Discovery reportedly halted talks this week to merge with Paramount over the latter’s shares trading near a 52-week low, caused in part by double-digit drops in linear ad revenue. Comcast is demurring, too: speculation that Peacock and Paramount+ might merge hasn’t amounted to much.
But during its Q4 earnings call on Wednesday, Paramount touted its tailwinds, including a new partnership with Walmart that gives it access to the retailer’s shopper data.
“Regardless of current market sentiment, we’re convinced our [company] represents a significant value creation opportunity,” CEO Bob Bakish told shareholders.
To Paramount’s credit, its streaming ad revenue is up 14% YOY, while revenue attributable to just Paramount+ grew 69% over the same time frame.
Paramount+ also gained 4.1 million subscribers last quarter, bringing its total to 67.5 million. The company credits subscriber growth combined with ad revenue for raising the average revenue per Paramount+ user by 31% YOY.
Now, Bakish said, Paramount remains “laser-focused” on ad monetization to make Paramount+ profitable in the US by 2025.
Wanted: Walmart
Paramount spent a lot of time on its earnings call highlighting the new partnership with Walmart, and for good reason. Connected TV advertisers are clamoring for proof of performance.
Bakish said Paramount is now partnering with Walmart’s ads business, Walmart Connect, to combine shopper data with its own audience data already available for ad targeting through EyeQ, Paramount’s CTV ad buying platform that consolidates Paramount+ and Pluto TV inventory.
The early results of this partnership demonstrate that combining viewing data with retailer data “significantly enhances ad effectiveness,” Bakish said.
Paramount expects that adding more retail data to its ad offering will help attract performance advertisers who expect attribution from their digital ad buys. Unlike linear, Bakish said, CTV is more than simply an “awareness generator.”
It’s possible that Walmart will soon have even more data to offer Paramount about the impact of CTV ads on store purchases if its planned acquisition of Vizio makes it past regulators.
And this isn’t Paramount’s first collab with Walmart. The two partnered in 2022 to offer ad-supported Paramount+ subscriptions to Walmart+ members.
This preexisting deal has also been contributing to Paramount’s subscriber growth, as have its other distribution-oriented partnerships, including making Paramount+ available to Delta fliers who sign up to use the airline’s Wi-Fi.
But this expanded relationship with Walmart should help Paramount grow streaming ad revenue, which, in its view, is a “more important metric” than subs, said Paramount CFO Naveen Chopra.
Brandishing the bundle
Walmart aside, Paramount says its own content bundling is also helping generate sign-ups and, in turn, more advertisers.
Consumers like content bundles because they can find more of the titles they like in one place, which lowers subscriber churn.
Paramount+ with Showtime, the rebrand of Paramount’s ad-free tier announced last year that includes content from the Showtime network, is one contributor to Paramount’s overall higher viewer engagement and retention.
Subscribers spent 40% more hours streaming Paramount content last year compared to 2022, Bakish said.
The ability to increase viewing hours while reducing churn is a draw for advertisers.
Bakish also mentioned Paramount’s inclusion in Spectrum TV cable bundles as another contributor to subscriber growth. And it’s possible Paramount will continue to strike bundle deals with other pay TV providers, a plan it alluded to during its Q3 earnings call.
“We’re big believers in bundling,” Bakish told investors on Wednesday. “It’s a tried-and-true method of value creation in media.”
Defensive blitz
But wait, what about sports?
Paramount also expects sports to boost retention and bring in new advertisers because it has a long-tail effect on viewer engagement. Fans who sign up for Paramount+ to access sports content actually spend 90% of their viewing time watching content other than sports, Bakish said.
Combining sports and non-sports programming within a single platform is one reason why Paramount claims it’ll be able to compete for sports fans against the new joint venture formed by its competitors earlier this month: WBD, Disney and FOX.
Ultimately, Chopra said, Paramount’s “path to profitability” will be in its ability to raise ARPU by increasing engagement.
So, are investors buying into Paramount’s defense play?
Possibly. Shares dropped roughly 2% leading up to the earnings call, but rose again during after-hours trading on Wednesday, returning to the day’s high of $11.35 by the time the call wrapped.
