CLOSING OF POWERFUL BRAND | LAYOFFS | BUSINESS STREAMING
Chris McCarthy, the head of Paramount Media Networks, sent a memo announcing that a quarter of employees across Showtime, MTV Entertainment Studios, and Paramount Media Networks will lose their jobs.
“It’s clear that gains in streaming are just not enough to offset linear losses”
This follows February layoffs at Showtime as the parent company, Paramount Global, combines its Showtime and MTV Entertainment Studios offerings, as well as merging its Paramount+ and Showtime streaming services into one product.
The move comes after the media company cut its dividend and revealed below-expected quarterly earnings last week, as part of its larger strategy to compete with larger streaming services amid cord-cutting trends. A few thoughts and comments from Stefanos Metaxas, CSO at Bliss Point Media (part of Tinuiti):
“I’m honestly not very surprised by MTV News shutting down as they already had layoffs before, but laying off 25% of employees at Paramount is a big deal. This is partly due to the economics of streaming TV being harder for publishers than cable, but we also cannot ignore today’s macroeconomic challenges and the role those are playing in these decisions. Paramount’s Q1 2023 earnings are pretty telling:
- Paramount+ saw a 7% gain in subscribers QoQ, reaching 60M. It also saw a 15% increase in advertising revenue YoY.
- However, TV saw an 11% decrease in advertising revenue YoY. When you compare the relative sizes of this revenue stream to streaming advertising ($2.3B vs $0.4B in 1Q23), it’s clear that gains in streaming are just not enough to offset linear losses.
- To combat this, we expect continued upward pressure on subscription pricing, together with a greater focus on ad-supported streaming media. We have already seen that the per-viewer economics are more lucrative for ad-supported viewers across multiple publishers, so increasing ad-free subscription costs both improve that equation for those viewers and provides an incentive for people to switch to the ad-supported version.
- It’s also worth noting that their revenue from licensing has decreased, due to “a lower volume of licensed content.” This is in line with the tactic of hoarding popular content on owned and operated streaming platforms in order to attract subscribers, but I wouldn’t be surprised if they change course here. Warner Bros Discovery already signed deals with Tubi and Roku to make library content available through FAST platforms. The pressure on earnings will push others, including Paramount, in the same direction.