Disney & Paramount Consider Further Consolidation Under Flagship Streaming Apps

Executives from Disney and Paramount Global last week said their companies might consolidate streaming services within their respective portfolios—Hulu with Disney+ and Showtime with Paramount+—to streamline their offering as the streaming TV landscape grows more crowded. Across the industry, media companies, from Amazon to Warner Bros. Discovery, are strengthening and repositioning their offering to advertisers, investors, and viewers in light of evolving viewership trends and in anticipation of the arrival of competing ad-supported video-on-demand (AVOD) subscription models by industry titans Disney+ and Netflix, both expected later this year. 

Both Disney and Paramount Global are in talks to consolidate their disparate streaming services under their respective flagship streaming TV platforms: Hulu within Disney+ and Showtime as a part of Paramount+.

Streaming TV is only growing more popular, with Nielsen recently reporting streaming TV watch time officially surpassed traditional broadcast and cable TV viewing for the second month in a row.

Media companies are vying for ad dollars and subscribers as competition ramps up and more details come to light ahead of the Disney+ and Netflix AVOD subscription launches in the coming months. 

Paramount Global is considering discontinuing Showtime, the premium streaming platform that’s home to Billions and Yellowjackets, and shifting its content to Paramount+, the company’s flagship streaming service. Already, Paramount Global has brought the two streaming platforms closer together while maintaining separate content ecosystems by offering a packaged bundle at discounted prices ($7.99/month with ads and $12.99/month without ads). 

Last quarter, Paramount Global had more than 43 million subscribers signed up for Paramount+, with 3.7 million subscribers added that quarter, totaling 64 million viewers across streaming services. Showtime subscription figures were not disclosed. Ad spending across Paramount’s streaming platforms, which include Showtime and BET+, generated $363 million for the company last quarter. The Wall Street Journal reported that combining Showtime with Paramount+ may require “complex negotiations with cable and satellite TV providers who carry the Showtime TV channel,” though Paramount has “broached the idea” of shuttering Showtime in conversations with at least one major pay-TV partner. 

At the Goldman Sachs investor conference last week, Disney CEO Bob Chapek floated a similar idea, sharing insight into plans for eventually combining all the company’s streaming products under the Disney+ app. Chapek told attendees there’s “a little bit of consumer friction” for viewers who want to switch between family-focused and franchise content on Disney+ and the entertainment and sports content made available on Hulu and the ESPN+ app. Toggling between various apps across devices to watch content on separate services is cumbersome, and placing all three services under the Disney+ flagship app would reduce friction. In Europe, Disney has already experimented with a similar model where the Star streaming service, which features many shows that are also available on Hulu, is a part of the Disney+ app experience. Chapek called this packaging a “hard bundle,” which differs from other streaming bundles that offer a discounted price at signup, yet the viewing experience remains in separate app environments. 

However, to fully integrate Hulu into Disney+, Disney would need to take full ownership of the service, which is partially owned by Comcast’s NBCUniversal. Bloomberg reports the two companies have an “agreement for Disney to acquire Comcast’s stake in 2024, under terms that value the whole business at a minimum of $27.5 billion.” At the investor conference last week, Chapek clarified that he’d like to acquire full ownership of Hulu much sooner than 2024. Later at the same conference, Comcast CEO Brian Roberts said the company remains interested in acquiring full ownership of Hulu if it was for sale, suggesting that Comcast may get a higher price for its stake in Hulu if the company was auctioned off. Whether Hulu will be owned by Comcast or Disney remains to be determined, with the largest hurdle for any deal being a “fair market valuation” of the streaming service, according to The Wall Street Journal. 

Competing media companies are acting on similar plans, like Warner Bros. Discovery, which plans to combine Discovery+ with HBO Max by next summer. The Washington Post determined last week that streaming TV is “going through an existential crisis” as the industry wrestles with heightened competition due to more AVOD models bursting onto the scene—after years of staving off advertising—rising subscription prices, and budget cuts at production studios and media companies amid economic uncertainty. Programming remains fragmented by an overwhelming amount of options, and as prices keep creeping up, streaming TV bundles are starting to look a lot like cable TV packages. Despite these challenges, viewers remain resilient as streaming’s popularity only continues to grow. The latest report from Nielsen recorded streaming usage represented “35 percent of overall TV consumption last month, marking another record-high share for the format and its second month as the top TV viewing category.” 

Source: Nielsen

As launch dates draw near, Disney and Netflix are teasing out more details surrounding their respective AVOD subscription plans. This week, The Wall Street Journal reported that Netflix estimates its AVOD plan would reach roughly 40 million viewers globally by the third quarter of 2023. In preliminary projections, the company anticipates 4.4 million unique viewers worldwide by the end of 2022, with 1.1 million originating from the U.S. At the same time, Disney+ is said to be launching its AVOD plan in December 2022. A light ad load differentiated by content type is to be expected, with frequency caps, and advertisers are encouraged to provide varied creative, according to a leaked pitch deck obtained by Business Insider. 

“We predicted that 2022 would see more mergers and acquisitions, and here we are, with further consolidation on the horizon,” said Natalee Geldert, head of brand media at PMG. “As streaming giants evolve their platforms with the latest technology and content, the streaming landscape continues to grow more nuanced, requiring advertisers to maintain agility across their investments to better engage audiences across platforms and content types. PMG continues to encourage brands to be willing to learn and test trends and new opportunities as they arise, allowing for a first-mover advantage in the ever-evolving streaming TV landscape.”