Jun 7, 2022 Streaming Strategy
The Strategy Behind Paramount’s Streaming Leadership
Paramount CFO Naveen Chopra on creating a streaming business that drives value for consumers and shareholders.
As a relative newcomer to the streaming space, Paramount Global quickly became a leader thanks to a diversified strategy and ongoing investment in content, according to CFO Naveen Chopra.
Chopra took the job in 2020 in part because of the company’s plans to invest big in streaming. He feels that Paramount’s brands and global business give it an advantage in the space.
“We're doing extremely well in Direct-to-Consumer (DTC)—we've blown away most people's expectations,” says Chopra. “If you look at the top five or six streamers, we're certainly one of the fastest-growing in terms of the major players moving. It’s a huge advance from where we were a year ago before we launched Paramount+.”
In an interview from the Paramount video series Streaming On, Chopra discusses Paramount’s investment in streaming content, the company’s most recent earnings reporting, and how we’re poised for international streaming success. Below is a condensed version of his chat with Streaming On host Dometi Pongo.
Dometi Pongo: Explain your role at Paramount.
Naveen Chopra: I’m the CFO of the company. I oversee the finance and accounting teams, treasury teams, corporate development strategy teams, and investor relations teams. I actually think of the most important part of the job as being a strategic partner to all of our business leaders. And that's what I think I can do to help maximize value for our shareholders, which is ultimately how CFOs are judged.
DP: Tell us about Paramount’s streaming strategy and why it’s unique as compared to everything else in the marketplace?
NC: The fundamental way to think about our strategy is using a traditional media company and the full expanse of a traditional media company to build a large-scale leading streaming business. And we are uniquely positioned to be able to do that.
We're really one of the only companies that have a scaled theatrical business, a broadcast television business, a cable television business, a free streaming service, and a pay streaming service, which allows us to maximize the value of our content across a lot of different distribution channels—and to access and serve all sorts of different types of consumers. It takes a lot of money to produce the content that we have and we need to think about how do these different distribution channels affect the return of that investment that we make for the content we produce. The way I like to think about it is that for every dollar that we spend on content, we can extract more in return than anyone else because we have this unique portfolio of businesses or distribution channels.
For example, take Paw Patrol or even a movie like Scream. So in one case, we released a day and date between theatrical and Paramount+ with the Paw Patrol movie. Scream had an exclusive theatrical window and then came to Paramount+ after 45 days. In both of those cases, we were able to capture a lot of the return out of the box office that you would in a traditional theatrical movie and then put them on Paramount+, where they were significant drivers of both acquiring new subscribers and engaging our existing subs. It’s really having that full portfolio that allows us to extract so much of that value.
"For every dollar that we spend on content, we can extract more in return than anyone else because we have this unique portfolio of businesses or distribution channels."
DP: What are some of the biggest challenges facing Paramount right now?
NC: There's a broad challenge in the industry as a whole around making streaming an economically attractive business. People understand that consumer behavior is fundamentally changing and obviously people are watching more and more content through a variety of streaming services, but it's a very expensive endeavor. And so the industry as a whole is trying to figure out how we rationalize that. How do we figure out what is the right level of investment versus the level of growth and ultimately profitability that we can generate? That in some ways is an opportunity for us because we've been somewhat late to the streaming party.
Obviously, there were other players who built large streaming services before we even launched Paramount+ and we are able to learn from them. From the beginning of Paramount+, we've been thinking about it differently, and we've been thinking about it on the basis that we do have to figure out a way to invest in streaming, to grow streaming, but to do it in a way that's financially sound and ultimately can create real value for our shareholders. In some cases, that means doing things differently than what many of our competitors have done.
DP: How would you characterize our growth in the Direct-to-Consumer (DTC) business?
NC: Short answer is we're doing extremely well in DTC—we've blown away most people's expectations. We just reported Q1 earnings and we reported that we added 6.3M new DTC subscribers, which really puts us in the top tier of subscriber growth for the first quarter of 2022. That's on top of the 9.4M subscribers we added in Q4 in the DTC segment. So the sub growth is beyond most people's expectations. From a revenue perspective, we've grown DTC revenue 82% in Q1, which came after 83% growth in Q4. We're on a very good trajectory in terms of revenue growth and subscriber growth in DTC.
If you look at the top five or six streamers, we're certainly one of the fastest-growing in terms of the major players moving. It’s a huge advance from where we were a year ago before we launched Paramount+.
DP: Let's talk a bit about how Paramount is fueling that linear to streaming pipeline. What is that strategy and what are some of the learnings there?
NC: I think that strategy is the perfect example of the kinds of things that we have the unique ability to do. You take a show like Yellowstone, one of the biggest shows on television today, which we have on linear, but we don't have it on streaming (and there's a whole backstory as to why that's the case, which mostly has to do with the fact that we didn't have Paramount+ at the time that the decision was being made about where those streaming rights). Even without having those streaming rights, we found a way to use this piece of content on linear that is turning into a very powerful franchise IP that people have absolutely fallen in love with. What President & CEO, MTV Entertainment Group / Chief Content Officer, Unscripted Entertainment & Adult Animation, Paramount+, Chris McCarthy, and his team did was say, “Why don't we build a whole world around that?”
Taylor Sheridan created a new show, 1883, for us, because we already had this built-in audience. Rather than having to go spend millions of dollars to create a new show and then try to explain to people why they should watch it, the simple knowledge that this was part of the Yellowstone franchise meant that people would come… and we were right about that.
It was one of the biggest shows on Paramount+ in Q1 and now we're going to make it even bigger. We recently announced that the next installment in that universe is going to be 1932. It's got an incredible cast with Harrison Ford and Helen Mirren. It just keeps going. And that's all made possible by this linear show that was created many years ago and now has an even bigger vision around it.
"The inclusion of advertising in our streaming services is one of the things that has helped differentiate our strategy."
DP: When we think about the company strategy internationally, how big a role does that play as far as what we're offering in global markets?
NC: It's extremely important, particularly in the streaming domain. The reason for that is what I previously said: streaming is not cheap. It's a very capital-intensive business because it does require broad diversity of content.
When you think about addressing all the different audiences out there, you need lots of different types of content and when you have a capital-intensive business, you need a very large market in order to generate a return on that investment. That is why both we and most other players in the streaming universe are focused on having a global streaming footprint because you've got to be able to access hundreds of millions of customers as opposed to just being limited to the United States as an example.
It’s a necessity. Now, it just so happens that I think we are extremely well-positioned to be able to do that because we have been a global international company for many decades, and not just distributing content, but we have an actual presence in many of these markets. We've got broadcast stations in Europe and Latin America, in Australia. We've got production studios on multiple continents. We are one of the largest producers of Spanish-language content on the planet. We're very well-positioned to be able to do that and we're also able to leverage the existing businesses that we have in order to create an international launchpad for our streaming services.
To give you a couple of examples of that, we've had a long relationship with Sky, which many years ago was largely based on the distribution of linear television. Now we've evolved that relationship. So they are going to be one of the key partners helping us launch Paramount+ in the UK, which is obviously a very important market. We'll also be working closely with them in some other markets like Italy, Austria, and Germany.
We just announced a deal in India where we've had an ownership position in Viacom 18, which has been very successful. Started out really about linear television distribution, launched an ad-supported on-demand service a few years ago, and is now expanding to include distribution of Paramount+ and is in the process of raising a significant amount of additional capital to go after an even bigger streaming opportunity in the Indian market.
DP: Can you tell us a little bit about our strength in ad revenue in streaming advertising?
NC: The reality is that the inclusion of advertising in our streaming services is one of the things that has helped differentiate our strategy and actually makes it significantly more powerful than what a lot of legacy streaming companies have done.
It allows us to access a much bigger audience because we can offer a range of different price points. Right. So something like Pluto, which is entirely ad-supported, it's free and very easy for people to access and use. At the other end of the spectrum, we have the premium tier of Paramount+, which is ad-free and has premium content. In the middle, we have the Paramount+ essential tier, which is a lower price point with ads, but all the same, very high-quality premium content.
That allows us to access a very broad audience and it allows us to provide a really compelling offering to our advertising customers because we can combine it with all the things that we have traditionally sold.
