Why Paramount+ With Showtime Won’t Change Streaming Game Much

Paramount is looking slimmer these days. With the company in the midst of offloading all the assets it can, Paramount+ With Showtime officially launches Tuesday as a single service combining Paramount Globals two flagship SVOD offerings, just over a month after the debut of Warner Bros. Discoverys newly consolidated Max.

While Paramount+ and Showtime have already been integrated in one app for those who chose to bundle the services, the companys new branding strategy completely absorbs Showtime into Paramount+, with the standalone Showtime app to sunset by the end of the year. (The linear network will be rebranded as Paramount+ With Showtime as well, and start to feature the streamers original content.)

The merger, combined with reduced content spending between the two brands, is expected to eventually save about $700 million in annual expenses.

Shari Redstone co. certainly need it. Paramounts share price is down more than 35 percent year-over-year, following a stock plunge in May after the company reported a Q1 net loss of $1.12 billion and slashed its dividend to 5 cents per share.

Meanwhile, as we alluded to above, the media conglomerate has all but declared a fire sale on its assets, currently looking to sell off BET, Simon Schuster and New Yorks CBS Broadcast Center (having already unloaded most of its CBS real estate).

And with open speculation already rampant about whether Paramount+ can survive the streaming wars and whether Paramount itself will become an MA target for Netflix or some other company leadership is clearly hoping the new bundled offering, and accompanying price increase, can help buy time by boosting streaming revenues, reducing churn and making the service more valuable to consumers.

Maybe it would if there were a better strategy at play here.

Frankly, the Showtime merger doesnt fundamentally change what Paramount+ is offering; the move simply shifts Paramounts streaming portfolio away from the soft bundle strategy that is, separate apps offered as a discounted package deal, a la the Disney Bundle and toward hard bundling, in which content is bundled into a single platform.

This is the new wisdom of the streaming age: The crowded SVOD field must shrink in the name of efficiency and limited demand. (Indeed, Disney seems to be moving toward a hard bundle for Disney+ and Hulu as well.) Consolidating services into hard bundles reduces the number of separate apps and subscriptions on the market, streamlining the possible options for consumers.

As such, the Paramount+ With Showtime bundle now becomes the Premium tier of Paramount+, which will now be priced at $11.99 per month the old price of the soft bundle forcing a $2 price hike onto Premium-tier Paramount+ subs who might not want the bundle anyway.

Of course, at least theyre getting more content in exchange for the higher cost, but Paramount is also downsizing Showtime, pulling titles off the platform and concentrating its programming strategy on an aggressive lineup of spinoffs from its biggest recent hits (Dexter, Billions). And with the linear channel being refashioned as a promotional tool for the streaming service, thereby reducing the volume of original content exclusive to the network, a Showtime bundle simply isnt the value proposition it used to be.

Paramount+ has showed some promising momentum over the past year it has consistently posted the largest subscriber growth of the major SVODs in the last few quarters but the streamer still doesnt seem likely to build the necessary scale fast enough to satisfy Wall Streets demands for profitability.

Despite those gains, Paramounts direct-to-consumer expenses grew more than 30% year-over-year in Q1, widening its streaming losses in the past year to nearly $1.9 billion. While hardly the biggest spender in the streaming game, Paramount had one of the worst gross profit margins on its DTC operations for Q1: -34% versus Disneys -12% and WBDs positive 2%.

In the end, the legacy of Paramount+ With Showtime will likely be its role in helping usher in the age of the hard bundle and SVOD consolidation, more so than reshaping the fate of its parent company. Wherever the tides are carrying Paramount at this point, this new bundle probably isnt going to be able to redirect the ship.