Next month will see an Oscars ceremony dominated by Netflix releases, with the streaming giant holding 16 nominations across six titles, compared with three for Hollywood mainstay Paramount Pictures; a glitzy reflection of the new competitive environment for the 100-year-old film studio.
But Paramount is on the cusp of change, as production company Skydance Media prepares to take control of the business. And incoming CEO David Ellison has said the way to meet the challenge that tech firms pose to media companies, is to evolve the media company into more of a tech firm.
“We believe it is essential for Paramount to be able to expand its technology prowess, to be both a media and technology enterprise,” Ellison said after the announcement of the deal, which is expected to close in the next few months. And while he has largely avoided specifics, the incoming CEO appears to be exploring several pathways for the company’s tech transition.
Resistance is futile
A key component to competing with SVOD giants is of course the streaming product, which Ellison made a cornerstone of his merger proposal; where other bidders reportedly wanted to shutter Paramount+, the Skydance chief said the streaming service would be “enhanced and powered by best-in-class technology.”
This includes improving the streaming service’s algorithmic recommendation engine in order to drive usage and reduce churn, as well as upgrading the platform’s ad tech – something Netflix has also been working on, announcing clean room partnerships with Snowflake, LiveRamp and InfoSum last year, alongside building its own ad tech in-house.
Hunter Terry, Head of CTV at ad tech firm Lotame, suggests that Paramount could pursue similar partnerships – especially given the involvement of investment firm Redbird in the merger, and its strategy of teaming up with other investors in media and sports deals.
“I think partnerships are going to be a prominent component going forward,” comments Terry. “Whether they choose to partner with someone on data and advertising, or they develop it themselves – like Netflix building out their own ad tech stack in lieu of their current partnership with Microsoft – there are a lot of options available to Skydance.”
The Skydance boss also has close ties to the tech world through his father, Oracle co-founder Larry Ellison, and the Ellison family are providing $6 billion of the $8 billion investment behind the acquisition. Oracle and Skydance previously partnered to create the production company’s cloud-based animation studio, and Ellison said he intends “to scale that business across all of our production workflows and animation”, as well as deploying AI to help cut production costs.
And cost-cutting appears to be an important piece of the picture for anyone looking to run Paramount; the current management has targeted $500 million in cost savings, and shuttered its Paramount Television Studios division last year. And while Ellison has restated his commitment to the flagship CBS network, reports from Bloomberg suggest he is open to selling other TV subsidiaries.
“No one would be surprised if non-essential assets such as BET, Showtime, VH1 and MTV were sold off,” says Brandon Katz, Senior Entertainment Industry Strategist at Parrot Analytics. “I’d expect further winnowing from the company to become more fluid and dynamic before building itself back up again.”
A mission impossible?
A major factor in that rebuilding strategy will be leveraging Paramount’s intellectual property, including Star Trek and Mission: Impossible – which are also produced by Skydance. Combining that IP with Skydance’s production capabilities, including its gaming studio, is core to Ellison’s mission. Lotame’s Hunter Terry expects the new CEO to take a leaf out of the Disney playbook.
“Paramount will look at building up franchises on par with Marvel,” he says. “It’s not enough to produce another big hit, even if it’s Star Trek. But if you dovetail Star Trek into gaming, that can help. It’s about doubling down on what you already have, as opposed to trying to invent something new.”
But the strategy of doubling down on IP was an important variable during the bidding process, when suitors toyed with the prospect of closing the SVOD division to focus on making Paramount an IP arms dealer for other streaming services. Paramount already produces content for Amazon Prime Video (Reacher) and Netflix (The Haunting anthology series) – and according to Parrot Analytics, Paramount titles were responsible for around 8 percent of demand for TV content on Netflix last year. And considering Netflix’s subscriber base is more than four times the size that of Paramount+, content licensing could be a lucrative route for the new Paramount.
On the other hand, Paramount+ is in relatively good shape from a profitability perspective; the D2C business has turned a profit in two consecutive quarters, and grew its subscriber base in 14 out of the last 15 quarters. Keeping Paramount properties on its own platforms could help drive subscriptions to Paramount+, on the strength of franchises like South Park and Yellowstone. In the UK for example, where Yellowstone is exclusively available on Paramount+, research from Kantar suggests the show was responsible for 18 percent of sign-ups to the streaming service in Q4 2023.
Meanwhile giving Skydance access to Paramount’s sports properties could further strengthen its content proposition, given CBS Sports is one the NFL’s domestic media partners. As analysis firm Omdia explains in a research note shared with VideoWeek: “The advantage of having access to a company such as Skydance is the ability to create storytelling around sports leagues and athletes that appear on CBS Sports,” says Omdia. “This strategy has worked well for Netflix with sports documentaries such as Drive to Survive, which has grown the interest in Formula 1.”
Ellison has also suggested integrating Pluto TV, Paramount’s free ad-supported streaming TV (FAST) service, into Paramount+, in order to drive Pluto’s free users towards Paramount’s paid content. And bundling partnerships present further opportunities to grow the streaming service. The company already offers Paramount+ to Walmart+ members in the US, and is part of the SkyShowtime joint venture with Comcast in Europe. Hunter Terry says these partnerships put Paramount on the “right trajectory” to strengthening their offering in the streaming market.
But Brandon Katz questions whether these strategies will be enough to meaningfully shift the company away from its reliance on a declining TV business. “It remains a complete unknown if Paramount Global, which generates roughly 80 percent of its revenue from linear TV at a time when the medium is racing towards a cliff’s edge, can actually be turned around and restored to its powerhouse perch of yesteryear.”
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