Paramount Global recently made public its decision to up the prices for the majority of Paramount+ subscription plans. The ad-free Paramount+ With Showtime plan is set to see an increase of $1, raising the monthly fee to $12.99. Meanwhile, the price for the Paramount+ Essential plan with ads will also surge by $2, reaching $7.99 per month for new subscribers. These revised rates are slated to take effect starting August 20 for all new customers.
For existing subscribers of Paramount+ With Showtime, the new price will reflect on their subsequent billing date on or after September 20. On the other hand, Paramount+ Essential monthly plan users will continue paying the current rate of $5.99, while the prices for annual subscriptions for both tiers will remain unchanged. Customers on the legacy Paramount+ Limited Commercial plan will witness an increase of $1, bringing their monthly fee to $7.99.
In the first quarter, subscription revenues soared by 22%, buoyed by a surge in subscribers and price elevations for Paramount+. The total tally of Paramount+ subscribers hit around 71 million, with an addition of 3.7 million in the quarter.
This trajectory of growth is forecasted to persist in the short run. Nevertheless, stiff competition in the streaming industry presents a cloud over the long-term outlook for the company.
Paramount Global’s Pricing and Market Sentiment
Presently, the streaming TV and movie landscape is densely packed with competition, with companies pouring billions into constructing their platforms and content libraries to rival the leader, Netflix. This ongoing arms race has significantly elevated the costs associated with participating in the streaming domain.
Over the years, subscription prices for services like Netflix, Disney’s Disney+, Hulu, Warner Bros. Discovery’s Max, ESPN Plus, and Paramount+ have steadily climbed. After a decade marked by prioritizing subscriber growth over profitability, streaming entities are now compelled to generate tangible profits to endure. To beef up their financial standings, these companies are resorting to tactics such as price hikes, intensifying crackdowns on password sharing, axing content for tax advantages, and offloading content to other platforms.
Notwithstanding, the recalibrated price for Paramount+ with Showtime remains lower than the ad-free editions of Netflix, Disney+, and Max. Recently, Warner Bros. Discovery also elevated the price of Max’s no-ads plans in the U.S., while NBCUniversal’s Peacock tiers are scheduled to undergo price revisions for new sign-ups just ahead of the Paris Summer Olympic Games.
Key Takeaways and Insights
Shares of Paramount have experienced a steep drop of 31.4% year to date, significantly underperforming the Consumer Discretionary sector’s paltry growth of 0.3% as per Zacks statistics. The stock has lagged behind the surge of Netflix by 37.4%, Disney’s gain of 12.9%, and Warner Bros. Discovery’s decline of 30.8% during the same time frame.
The recent surge in prices by Paramount Global combined with the expansion of its subscriber base serves as a catalyst for the corporation. However, robust competition looms large as a foremost concern for this Zacks Rank #3 (Hold) entity. Paramount’s towering debt levels are also a cause for worry, with total debt as of March 31, 2024, clocking in at $14.6 billion, while cash and cash equivalents stood at $2.38 billion. An overleveraged balance sheet alongside a low liquidity level does not augur well for prospective investors.
The Zacks Consensus Estimate for PARA’s second-quarter 2024 earnings per share stands at 14 cents, having dropped by a cent over the past 60 days. Meanwhile, the consensus projection for third-quarter 2024 earnings is at 32 cents per share, reflecting a decline of 3 cents over the last 30 days.
