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Paramount Plus’ Big Unveil: 8 Crucial Questions That Need Answers

Paramount Plus
(Image credit: ViacomCBS)

On Wednesday, eight days before ViacomCBS launches subscription video service Paramount Plus, the company promises to explain its “free, pay and premiere” strategy for investors. 

Better late than never. 

That’s because there are still a lot of questions swirling around Paramount Plus, a beefed-up, rebranded version of a seven-year-old service that never quite caught on with consumers. CBS All Access launched back when CBS was a standalone company, whose entrenched leadership wasn’t particularly interested in streaming, or undercutting the cash cow they had built and ridden to riches. 

Under new-ish CEO Bob Bakish, that’s no longer the case. 

Audiences for both broadcast and traditional pay-TV continue to erode like beach sand in a winter storm. Streaming is the future for entertainment, period. And broadcast-centric CBS is now merged with cable power Viacom, bringing together, as the company puts it, “a mountain” of terrific assets that are still working out how to work together. 

Paramount Plus will arrive after just about every major competitor has launched an imposing challenger. So, ViacomCBS is late to the party, showing up after a year of pandemic and recession that gave those early birds the chance to lock in locked-down viewers and figure out crucial operational issues. 

Paramount Plus certainly has plenty of prime brands to sift through for programming beyond CBS: iconic cable networks such as BET, Nickelodeon, Comedy Central and MTV; film studio Paramount; and premium cable power Showtime. ViacomCBS also owns Pluto TV, the big free, ad-supported service that becomes another way to generate revenue and capture audiences. 

Making sense of all that will keep Bakish busy the rest of his time atop ViacomCBS. In the meantime, here are some big questions Bakish and his lieutenants need to answer: 

1) How much will ViacomCBS spend on original programming for streaming? Is that enough?

This is the multi-billion-dollar question for every major SVOD service. Netflix is spending somewhere between $17 billion and $19 billion on its firehose of global content. Disney just said it will double spending to $8 billion a year, 80% of it streaming-first. Apple and Amazon have loosened the strings on their extremely large purses, spending billions more on high-profile material. 

ViacomCBS, with a market capitalization around $40 billion, isn’t a small company. But it is compared to Apple, Amazon, AT&T, Disney, et al. For comparison, it’s worth noting that Apple’s Services sector, which includes TV+ subscriptions, generated nearly $16 billion in revenues last quarter. 

And this race isn’t just for a piece of the U.S. market. It’s a global battle, and scaling up is way expensive, with no guarantee of success at the end. 

As analysts at LightShed Partners put it in a recent research note, Netflix needed 200 million subscribers to get to positive free cash flow, and the programming to attract and keep all those subscribers around. 

Dave Heger, a senior equities analyst at Edward Jones, agreed that ViacomCBS can’t afford a spending battle.  

“You’re not going to be able to afford (program spending) at the level of a Disney or Netflix,” Heger said. “Net-net, the bottom line is the other competitors are part of a bigger organization of one kind or another, whereas if you’re ViacomCBS, there's going to be a limit to how much content you can invest in. I just don't think they'll be able to make the same type of investment that others are making.” 

2) How much will ViacomCBS spend for original programming for CBS, basic cable and Paramount? 

If programming costs are a challenge for ViacomCBS’ streaming future, how will it  handle that spending to preserve what it can of its legacy past? 

Discovery executives said in their Monday quarterly earnings call that their company would end share buybacks and invest in programming for both Discovery Plus and its several basic-cable networks. Maintaining value in the legacy platforms may make Discovery popular with cable providers and their shrinking audience base, but it’s a difficult balance to sustain

Other companies, notably Disney and WarnerMedia, are basically pushing their legacy operations out on the ice floe to survive as best they can. Which approach will ViacomCBS take? 

3) What’s the price? And how many tiers? 

As Heger says, “The pricing could be tricky, in terms of where it will perk people's interest, especially as the field gets more crowded … and especially if initially it doesn't look cheap. 

People are willing, for $5 or $7 a month, to give something a try. But as that price point creeps up, it becomes less interesting.”

Disney Plus launched with a purposely low price point, because of a dearth of launch originals. Now, with a huge launch and lots of originals on the way, Disney Plus prices will creep up beginning in March. 

Apple is still basically giving away Apple TV Plus through June while it builds out a menu of shows, and looks for a library of older programming. Even Netflix’s base subscription is only $8.99. All that doesn’t leave a lot of maneuvering room for Paramount Plus pricing. 

4) Where can we watch? 

You can have the best streaming service the universe has ever known, at an amazing price, and if people can’t get it onto their screens, none of that matters. 

Lots of things conspired to hobble the launches last spring and summer of HBO Max and Peacock, but one factor surely was carriage fights with both Roku and Amazon. 

And though Apple’s All Access-Showtime bundle suggests a warm relationship with Cupertino, that won’t prevent older-generation Apple TV’s from losing access to ViacomCBS’ new streaming service because limitations in the third-generation devices. Users can still stream the service from other Apple devices onto an older Apple TV or Airplay 2-compatible connected TV. 

Elsewhere, it could be be more of a user issue than a technical obsolescence that impedes access.

CBS All Access subscribers will quasi-automatically become Paramount Plus subscribers. But they’ll have to download an app to take advantage and, as HBO has found since its launch, that can flummox millions of eligible, paying subscribers. 

Paramount Plus will reportedly be available on most platforms, so perhaps ViacomCBS, like Discovery Plus before it, can avoid the fights that hamstrung competitors last year. 

5) What happens to Showtime OTT? 

Showtime OTT has been joined at the hip, at least in subscriber reporting, to CBS All Access for years. That presumably will end.

Will all of Showtime’s programming also be on Paramount Plus, as HBO shows are (eventually) on HBO Max? HBO’s OTT apps, HBO Go and HBO Now, lived on for awhile after Max’s mangled launch, but in recent months, as carriage fights with Roku and Amazon Fire were resolved, they’ve been killed off to reduce consumer confusion.

Will Showtime OTT remain mostly a real-estate play on some streaming platforms or older devices that can’t add a new service? Or does it have a standalone future?   

6) How will live sports and news fit into the mix? 

Live news and sports have been some of the last refuges for traditional TV, but increasingly, you’ll find both online, from Amazon streams of NFL games to Tubi’s expanded news offerings. But will they be as valuable online?  

“In the traditional pay ecosystem, those (24-hour) news channels are some of the more popular content, right after ESPN,” Heger said. “But does the value of content shift over to online as the eyeballs go? Disney is trying to figure what to do with ESPN. How do we make a transition as cord-cutting continues?”

Negotiations are underway now for NFL TV rights renewals, and reports from the front suggest the league wants to roughly double previous deals, but include streaming rights.  

Expect similar demands for other premiere sports content such as the NCAA’s March Madness college basketball tournaments, major golf tournaments, Major League Baseball and more. 

But can traditional sports draw big audiences online, especially among younger viewers who have tuned out in increasing numbers for alternatives such as videogaming?  

One interesting counter is to create more niche approaches to premium sports programming, as we saw in the Nickelodeon-produced alternate broadcasts of some late-season NFL games.

7) Where does Pluto fit? 

The $340 million acquisition of Pluto TV two years ago was a smart one, though it was largely obscured by all the succession, #MeToo and merger drama of the era at Viacom and CBS. 

Some premium content from Viacom has been seeping into dedicated Pluto channels, as happens at the other big FAST services with their sibling companies’ shows. 

But what’s the ViacomCBS ladder of distribution windows look like going forward? How will the company decide what ends up on Pluto, and when? Will licensing some of that content to competing FASTs continue? And how will the ad side integrate with broadcast, cable and any ad-light tier on Paramount Plus?

8) How much marketing will it take?

One of the many disadvantages ViacomCBS faces with such a tardy entry into the premium SVOD race is that tens of millions of potential customers spent the past year settling in with Netflix, Disney Plus, HBO Max and everyone else. 

Persuading those potential customers to add yet another subscription may be a difficult and expensive ask. A few celeb-studded Super Bowl commercials won’t be enough. 

“It's going to take a fair amount of marketing for people to understand why they need it,” Heger said. “Disney Plus, everyone knows what that stands for. Paramount Plus is going to have a challenge creating that kind of recognition of ‘What are you getting?’ I don't see it as being one that can take off quickly. I see it more in the HBO Max (launch trajectory).”