“Hard-Bundle” Carriage Deals Resembling The Recent Charter-Disney Pact Appear To Be In Paramount’s U.S. Future, CEO Bob Bakish Says

Paramount CEO Bob Bakish has long touted “hard bundles,” the hybrid carriage agreements found in Europe and other international markets that weave streaming into conventional pay-TV packages.

The new Disney-Charter pact, reached in September after a 10-day blackout of ESPN, ABC stations and multiple other Disney networks, could provide a domestic template for Paramount, according to Bakish.

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Recent dealmaking raises questions about “whether the hard bundling of streaming and pay-TV will become the norm in the U.S., and what that could mean for companies like ours,” Bakish told Wall Street analysts on the company’s third quarter earnings call. “The reality is, operators have different priorities. But we’ve shown that we can adapt our partnerships to adapt common objectives.”

In its international hard-bundling, Bakish said, Paramount has experienced “dramatically lower” costs to acquire customers along with lower rates of churn. Imported to the U.S., they could be “additive,” he said, widening opportunities for advertising and enabling the “upselling” of customers from Paramount+ to Paramount+ With Showtime. Prior to becoming CEO in 2015, Bakish spent a significant chunk of his career at Viacom (which merged with CBS in 2019 to form Paramount) as an international executive based outside the U.S.

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Paramount+ increased to 63 million global subscribers by the September 30 end of the quarter as Paramount topped Street estimates.

With pay-TV subscriber levels dropping by millions each year, many operators are bristling at the notion of paying ever-increasing carriage fees and then charging customers more, thus accelerating the pace of cord-cutting. The ultimate Disney-Charter deal incorporates Disney+ into many of Charter’s most popular packages. Some recent distribution agreements reached by Paramount in the U.S. for Paramount+ With Showtime, as the top-end streaming service and premium linear network are now both called, provide log-in streaming credentials to linear subscribers, Bakish noted.

During the Q&A period on the call, however, Bakish was asked about another dimension of the Disney-Charter deal, which unsettled a lot of longtime constituents of the pay-TV bundle. While it secured valuable real estate in several of the No. 2 U.S. cable operator’s packages, Disney also lost carriage on Charter for several of its networks, including Freeform and other onetime fixtures of the traditional dial.

“There’s been a lot of conversation about this topic,” Bakish acknowledged, though “it’s not clear that all partners want to go this direction.” In cases where distribution partners are open to hard bundles, though, it will be “an accretive development” for Paramount. On the streaming side, lower unit revenue can be one downside given the wholesale nature of many setups.

There are “puts and takes,” Bakish reasoned, but “the aggregate value that we’ve seen is clearly positive.”

Expanding the scope to include linear, and given Paramount’s stable includes CBS, Nickelodeon, BET and more than a dozen other networks, Bakish said major carriage deals encompass a number of elements. In addition to a cut of subscriber revenue, there are advertising and marketing partnerships, as well as provisions for film output and other aspects.

Internationally, in Paramount’s experience, “importantly, no linear channels were dropped” in these carriage pacts, Bakish said. Overall, he said, “that’s a positive outcome.”

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