ViacomCBS Inc. can reach its streaming subscriber and revenue goals, analysts say, but several wondered how the company will manage its content spending and achieve profitability for its various services.
ViacomCBS expects to count 65 million to 75 million global streaming subscribers by the end of 2024, with the vast majority from Paramount+, a rebranded and expanded version of the CBS All Access brand familiar to domestic subscribers. Paramount+ will bow March 4 in the U.S., Canada and several Latin American countries, followed by the Nordics and Australia on March 25 and midyear, respectively.
The company also projects its ad-supported video on demand service Pluto TV will have 100 million to 120 million global monthly active users in 2024. Executives recently told investors that the company expects total streaming revenues north of $7 billion by the end of 2024.
RBC analyst Kutgun Maral in a note indicated that ViacomCBS' targets are achievable given "management's holistic approach to the evolving streaming video ecosystem."
CFO Naveen Chopra during the company's Feb. 24 investor day presentation did not break down the subscriber projections by service, other than to say that Paramount+ would account for the vast majority in the U.S. and abroad, or detail the revenue source ratios. In addition to Paramount+ and Pluto TV, the company will continue to operate Showtime OTT as a standalone service in the U.S., though its content will be included in Paramount+ internationally. ViacomCBS also operates BET+.
Wells Fargo analyst Steven Cahall estimated the company projections would cover a 50-50 split for Paramount+ subscribers in the U.S. and abroad, and an even divide between subscription and advertising revenue, when Pluto TV is factored into the equation.
Macquarie Capital analyst Tim Nollen projects that Paramount+ will register 42.7 million subscribers and $2.18 billion in revenue in 2024, while Showtime OTT will generate $2.67 billion via 26.8 million subs. The aggregate and premium streaming services would have 69.5 million combined customers, just under the mid-point of ViacomCBS' projected range.
Nollen pegs Pluto's monthly active users around the globe at 113.2 million with $2.34 billion in revenue in 2024.
At those levels, the three-service revenue tally would be just under $7.20 billion, in line with the content company's call of more than $7 billion in 2024.
The media conglomerate will look to reach its goals through a major jump in streaming content spend: Chopra said its $1 billion outlay in 2020 would grow to $5 billion in 2024.
Analysts said the figure merits more scrutiny. Nollen wrote that "some of this may be reallocated from linear, where the total content budget was $15 billion, including sports in 2020." He noted any renewed NFL deal would be priced higher. NFL games will be included in the base tier and ad-free Paramount+ premium offering, which retail for $4.99 and $9.99 per month, respectively.
Reports indicate the NFL is seeking to double its rights fees from existing partners, which in the case of CBS (US) could result in a new contract, starting with the 2023 season, carrying an average annual value of $2 billion.
MoffettNathanson analyst Robert Fishman wrote in a report that the higher spending level likely includes internal licensing.
"Given the company's plans to self-license, it remains unclear what impact this will have to third-party licensing revenues," Fishman said, noting that it's also uncertain how much ViacomCBS is willing to risk its existing high-margin licensing business, especially with its current Showtime and key CBS programs already sold around the world.
Content licensing accounted for nearly $6 billion of ViacomCBS' total revenue base of just under $27 billion in 2020.
RBC's Maral, pointing to ViacomCBS' success in monetizing its IP within the legacy media landscape, said the bar for its pivot to direct-to-consumer success is much greater than peers such as Discovery Inc. or AMC Networks Inc.
Given the increasingly crowded streaming arena, Maral wrote that competitive pressures for the top streamers are only intensifying, leaving an unclear path to profitability in the market for ViacomCBS' services.
Wells Fargo's Cahall said ViacomCBS' streaming content strategy indicated a "play it safe" approach mostly focused on a competitively priced Paramount+ offering but with room left for its other services already on the market.
"Going for the green" with one exclusive service would be risky and potentially stretch the company's balance sheet, said Cahall, who does not believe direct-to-consumer services will "become a new positive catalyst unless the content really hits or the subscriber ramp exceeds expectations."
