ViacomCBS faces changing MVPD relationships on eve of Paramount+

ViacomCBS this week takes a much deeper step into streaming with Paramount+ and the shift it signals will certainly affect how the programmer does business with traditional MVPDs.

At a Morgan Stanley investor conference today, media analyst Ben Swinburne asked if ViacomCBS anticipates any tension with its traditional distribution partners as they keep paying for ViacomCBS linear content and ViacomCBS increasingly directs capital toward streaming.

ViacomCBS CEO Bob Bakish said his company already has multi-faceted agreements with most of its distributor partners, which he said is due to a course of action implemented at legacy Viacom about four years ago. He said Viacom decided it didn’t just want to license linear feeds; it wanted to participate in advanced advertising along with the broader set-top box and broadband advertising business through Pluto TV.

“The business is broader than it used to be and our ability to create value for our partners is broader than it used to be. We did that because we knew the landscape was changing and having a one-dimensional business was probably not in our best interest or their best interest,” Bakish said.

He said that ViacomCBS is still one of the “most important content suppliers in the world, full stop” and that it knows how to get deals done while transitioning businesses.

“I’m quite confident that we’ll continue to be in business, and probably in a broader business, with these folks for years and years to come,” Bakish said.

ViacomCBS already has a large subscription streaming audience and it’s projected to grow significantly. The company currently has 30 million paid streaming subscribers – 19 million domestic (including 1.5 million for BET+) and 11 million international – and it expects the number will grow to between 65 million to 75 million by 2024.

Paramount+, which will replace CBS All Access beginning Thursday, is going to be the primary driver of that growth. The service will be priced at $9.99 per month for a premium tier without ads. Premium subscribers will get content not available in the ad-supported tier including more live sports, the CBS Network News, live local stations and a live CBS channel. The $4.99 per month ad-supported tier with no live CBS will launch in June.

Paramount+ subscribers will get access to a live news and sports, a big library of series and films, and more than 50 exclusive original series across scripted dramas, kids and family, reality, comedy, music, sports, news and documentaries that are set to premiere on the service in the next two years. The company is planning to release 36 original titles in 2021. They can also expect earlier streaming access to some big upcoming films.

Splitting the difference on theatrical windows

Paramount+ had several options available for plotting the path for its new movies from theaters to streaming. It could have tried a hybrid model with straight to streaming and premium releases like Disney+. It could have left new studio films mostly out of the equation until the network window opens like Peacock. It could have copied HBO Max and just sent its entire release slate straight to streaming.

In the end, ViacomCBS split the difference and said that Paramount’s 2021 films – including “The Quiet Place Part 2” and “Mission Impossible 7” – will show up exclusively on Paramount+ 45 days after their theatrical releases.

“We believe in the value of theatrical particularly for pictures like Mission: Impossible or Top Gun, really big screen experiences. But we also believe the consumer is interested in titles earlier on streaming and we believe that's important proposition for us to supply,” said ViacomCBS CEO Bob Bakish, according to a Motley Fool transcript.

Media analyst firm MoffettNathanson said this theatrical window shift was possible because ViacomCBS reworked its Pay 1 deal with Epix, allowing it to bring Paramount movies in earlier to Paramount+ and sub-license more movies from the premium channel. It’s a deal that will work well for Paramount+ as long as theater owners go along with it.

“…It is still unclear whether exhibitors will try to push back on this earlier window without a formal deal in place to improve their economics (e.g., lower film rents) or somehow share in the PVOD revenue stream, which might be difficult here if the movies aren’t monetized in a separate rental window aside from Paramount+,” wrote MoffettNathanson’s Robert Fishman in a research note.

Dissecting CBS All Access

ViacomCBS isn’t just replacing CBS All Access with Paramount+; it’s ripping the service apart and moving its key features into different service tiers. Current All Access subscribers get access to live CBS in the lowest priced tier. Within Paramount+, that live feed will be sent up to the premium tier.

ViacomCBS CFO Naveen Chopra said his company is making the change within Paramount+ to gain flexibility to bundle and package Paramount+ for a variety of distribution partners.

“We're looking forward to sharing more details about our partner distribution strategy when the new tier launches,” he said. When that happens, the $5.99 per month CBS All Access ad-supported plan will be retired.