Paramount Global recently made waves in the streaming market by revealing plans to raise subscription prices for most Paramount+ plans. The ad-free Paramount+ With Showtime tier will see a $1 hike to $12.99 per month, while the Paramount+ Essential plan with ads will jump $2 to $7.99 per month for new subscribers. These adjustments will take effect on Aug 20 for all new customers.
For existing Paramount+ With Showtime subscribers, the new pricing will apply on their next billing date on or after Sep 20. Subscribers of the Paramount+ Essential monthly plan will maintain the current rate of $5.99, with annual subscription prices unaffected. Customers on the legacy Paramount+ Limited Commercial plan will face a $1 increase, bringing their monthly rate to $7.99.
The first quarter saw a 22% rise in subscription revenues, fueled by subscriber growth and recent price hikes for Paramount+. The platform has garnered approximately 71 million subscribers, with 3.7 million new additions in the quarter.
This upward trajectory is poised to continue in the short term. However, fierce competition in the streaming arena poses a long-term threat to the company’s prospects.
Paramount Global’s Price Adjustment and Market Position
Paramount Global Price and Consensus
Navigating the Streaming Battlefield
In recent years, the streaming industry has evolved into a cutthroat battleground, with companies pouring billions into developing their own platforms and content libraries to compete with the likes of Netflix. This fierce competition has resulted in a surge in subscription prices for services like Netflix, Disney’s Disney+, Hulu, Warner Bros. Discovery’s Max, ESPN Plus, and Paramount+.
Having prioritized subscriber growth over profitability for a decade, streaming services are now compelled to focus on generating sustainable profits to survive. Measures such as price hikes, clampdowns on password sharing, content cancellations for tax advantages, and content licensing to other platforms are being undertaken to bolster their bottom lines.
Remarkably, even with the updates to its pricing structure, Paramount+’s offering with Showtime remains more affordable than the ad-free versions of Netflix, Disney+, and Max.
Recently, Warner Bros. Discovery increased the prices for Max’s ad-free plans in the US, and NBCUniversal’s Peacock tiers witnessed hikes for new subscribers in July, strategically timed ahead of the Paris Summer Olympic Games.
Final Thoughts
Paramount shares have taken a hit, declining by 31.4% year to date, lagging significantly behind the Consumer Discretionary sector’s 0.3% growth, according to Zacks data.
Comparatively, Paramount falls short of Netflix, which has surged by 37.4%, Disney’s growth of 12.9%, and Warner Bros. Discovery’s decline of 30.8% over the same timeframe.
While Paramount Global’s recent price adjustments and expanding subscriber base offer promise, intense competition looms as a formidable challenge for this Hold-rated company.
The high debt burden of PARA adds to investor concerns, with total debt as of Mar 31, 2024, standing at $14.6 billion against cash and cash equivalents of $2.38 billion. A leveraged balance sheet and low liquidity levels do not inspire confidence among investors.
The Zacks Consensus Estimate for PARA’s Q2 2024 earnings per share is projected at 14 cents, showing a one-cent decline in the last 60 days. Forecast for Q3 2024 earnings sits at 32 cents per share, reflecting a three-cent decrease in the past 30 days.