Paramount Global Initiates Price Hike for Paramount+ Plans
Paramount Global (PARA) has declared an impending surge in prices for the majority of Paramount+ subscription plans. The ad-free Paramount+ With Showtime package is set to elevate by $1, settling at $12.99 per month, whereas the Paramount+ Essential plan with advertisements will see a $2 increment, reaching $7.99 per month for new subscribers. These adjusted rates will come into effect starting August 20 for all new customers.
Current subscribers to Paramount+ With Showtime will witness the updated price on their subsequent billing date on or after September 20. Meanwhile, Paramount+ Essential monthly plan users will maintain the existing rate of $5.99. The prices for annual subscriptions for both tiers will remain unaltered, with those on the legacy Paramount+ Limited Commercial plan facing a $1 increase to a monthly rate of $7.99.
Subscription revenues soared by 22% in the first quarter, propelled by subscriber expansion and price modifications for Paramount+. The platform’s subscriber count hit around 71 million, including an additional 3.7 million in the quarter.
Facing the Storm: Paramount+ Grapples with Fierce Streaming Market Competition
The streaming TV and movie landscape has undergone a surge in competitiveness over the years, with companies pouring billions into constructing their own platforms and libraries to rival the industry titan Netflix. Engaging in the streaming epoch has become more financially demanding as a result.
Subscription rates of various services, including Netflix, Disney’s Disney+, Hulu, Warner Bros. Discovery’s Max, ESPN Plus, and Paramount+, have all witnessed an upward trajectory. Following a decade of prioritizing subscriber growth over profits, streaming entities are now confronted with the imperative of generating tangible earnings to sustain themselves.
While Paramount+ has adjusted its pricing strategy, the revised price for Paramount+ With Showtime remains lower than the ad-free offerings of competitors Netflix, Disney+, and Max. Recent updates also show Warner Bros. Discovery raising the cost of Max’s no-ads plans in the U.S., and NBCUniversal’s Peacock witnessing price hikes for new subscribers just before the Paris Summer Olympic Games.
Proceed with Caution: Paramount Global’s Outlook and Concerns
Paramount Global’s shares have plummeted by 31.4% year to date, falling short of the Consumer Discretionary sector’s meager 0.3% growth. The company’s performance has also lagged behind Netflix, with a notable 37.4% surge, Disney’s growth of 12.9%, and Warner Bros. Discovery’s decline of 30.8% during the same period.
The recent price hikes and burgeoning subscriber base of Paramount Global offer some optimism for the company. Nonetheless, intense competition looms as a substantial concern for this Zacks Rank #3 (Hold) business. Furthermore, the high debt level of PARA, with total debt as of March 31, 2024, standing at $14.6 billion and cash equivalents at $2.38 billion, as well as a leveraged balance sheet and low liquidity level, do not augur well for investors.
The Zacks Consensus Estimate for PARA’s second-quarter 2024 earnings per share sits at 14 cents, having declined by a cent in the past 60 days. The forecast for third-quarter 2024 earnings stands at 32 cents per share, marking a decrease of 3 cents over the last 30 days.