Yahoo Finance Paramount Global (PARA) to Raise Paramount+ Subscription Prices
Paramount Global PARA recently announced that it is set to increase prices for most Paramount+ plans. The ad-free Paramount+ With Showtime plan will increase $1 to $12.99 per month, while the Paramount+ Essential plan with ads will increase $2, reaching $7.99 per month for new subscribers. These new rates will be effective starting Aug 20 for all new customers.
Existing subscribers to Paramount+ With Showtime will see the new price on their next billing date on or after Sep 20. Paramount+ Essential monthly plan subscribers will continue paying the current rate of $5.99 and the prices for annual subscriptions for both tiers will remain unchanged. Subscribers on the legacy Paramount+ Limited Commercial plan will experience an increase of $1, bringing their monthly rate to $7.99.
In the first quarter, Subscription revenues climbed 22%, driven by subscriber growth and price increases for Paramount+. Paramount+ subscribers reached approximately 71 million, with 3.7 million additions in the quarter.
This trend is expected to continue in the near term. However, tough competition in the streaming market does not bode well for the long-term prospects of the company.
Paramount Global Price and Consensus
Paramount Global price-consensus-chart | Paramount Global Quote
Paramount+ Faces Tough Competition in the Streaming Market
In recent years, the streaming TV and movie business has become increasingly competitive, with companies investing billions into building their own platforms and libraries to compete with the market leader Netflix NFLX. As a result, participating in the streaming era has become more expensive.
Subscription prices of services, including Netflix, Disney’s DIS Disney+, Hulu, Warner Bros. Discovery's WBD Max, ESPN Plus, Paramount+, have all increased over the years.
After a decade of prioritizing subscriber growth over profitability, streaming companies now face the necessity of generating actual profits to stay afloat. To improve their bottom line, companies are implementing measures like increasing prices, cracking down on password sharing, cancelling shows for tax benefits and selling content to other platforms.
However, the updated price for Paramount+ with Showtime remains lower than the ad-free versions of Netflix, Disney+ and Max.
Recently, Warner Bros. Discovery raised the price of Max's no-ads plans in the United States. NBCUniversal’s Peacock tiers will see price increases for new subscribers in July, just before the Paris Summer Olympic Games.
Conclusion
Paramount shares have plunged 31.4% year to date, underperforming the Zacks Consumer Discretionary sector’s growth of 0.3%.
The stock has also underperformed NFLX, which has gained 37.4%, followed by DIS’s growth of 12.9% and WBD’s decline of 30.8% in the same time frame.
Paramount Global’s recent price hikes and expanding subscriber base act as a catalyst for the company. However, strong competition remains a major concern for this Zacks Rank #3 (Hold) company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
PARA’s high debt level is also a concern. Total debt as of Mar 31, 2024, was $14.6 billion and cash and cash equivalents were $2.38 billion. A leveraged balance sheet and low liquidity level do not bode well for investors.
The Zacks Consensus Estimate for PARA’ second-quarter 2024 earnings per share is pegged at 14 cents, which has declined by a cent in the past 60 days. The consensus mark for third-quarter 2024 earnings is pegged at 32 cents per share, which has decreased by 3 cents in the past 30 days.
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