For ViacomCBS, another Paramount Plus challenge: How to hold on to old money while pursuing the new

“This is one of the quintessential challenges in this space,” said Stephen Beck, the founder of management consultancy cg42 who closely follows the streaming world. “How do you find that balance between today and tomorrow?”

Paramount Plus will launch next Thursday as a dramatic expansion of the existing CBS All Access service. The new product will cost $4.99 per month for an ad-centric basic tier and $9.99 for a premium version, slightly less than Hulu, Netflix, Disney Plus or HBO Max, a price point the company hopes will attract large numbers of customers.

The cost of that basic tier, in fact, is $1 per month less than Viacom charges for All Access despite the clearly higher investment it is making, underscoring just how much of a loss it might take.

With the service’s debut, it completes a process that began when Viacom and CBS reunited in 2019 with the aim of achieving greater scale and a bigger streaming bundle.

Paramount Plus will offer 36 new original shows in 2021 and 30,000 total hours of television from CBS, MTV, Showtime, BET and other networks, including news and NFL content. It will also make available about 2,500 existing movies — double that of competitor HBO Max. New scripted shows from Tyler Perry, tie-in series to Paramount movies “Fatal Attraction” and “Grease,” an animated movie featuring “Beavis and Butt-head,” a revival of “Frasier,” and nonscripted shows from Amy Schumer and Trevor Noah are all planned.

But experts warn that while all of that content will serve as a lure to the service, it could slow ViacomCBS’s flow of revenue elsewhere. It might, for instance, deter consumers from keeping their basic cable or Showtime subscriptions. Those consumers could also be dissuaded from watching shows on CBS, where large numbers of eyeballs translate to high ad revenue.

ViacomCBS still has a healthy and lucrative legacy business. The company revealed in its earnings report this week that it made $4.1 billion in profit in fiscal 2020, a number constant with the previous year, thanks largely to its traditional television and film operations.

Revenue at its cable networks jumped 11 percent in the fourth quarter compared to the previous year.

And despite the pandemic, fourth-quarter advertising revenue at its TV division, powered by the highly rated CBS, was also constant, at $1.7 billion.

The company’s viewers on CBS, at least, do tend to be older, and the hope is that they will keep tuning in while Paramount Plus attracts younger people who don’t watch the network.

The company also must keep affiliates — the roughly 230 independently owned stations in markets such as Atlanta and Phoenix that air its programming — placated despite the fact that their content isn’t in its service, preventing them from sharing in revenues.

That could jeopardize relationships with the companies CBS needs to broadcast its shows. ViacomCBS “may have just cut the affiliates out of the base tier of Paramount Plus. Will the affiliates be okay with this?” analyst Rich Greenfield of LightShed noted shortly after the presentation.

Going directly to consumers is the only real play for media conglomerates, Wall Street analysts say. They have pushed companies like ViacomCBS to move into streaming as consumers “cut the cord” —— that is, cancel traditional satellite and or service — with the idea that even though the services won’t be profitable for some time, future consumer behavior makes them a necessity.

Research from Variety Intelligence Platform this week showed that 21 percent of cable or satellite subscribers have left a traditional package since the start of 2017.

That does, however, still leave 67 million people receiving their television via cable or satellite. And those 67 million customers continue to pour money into the coffers of ViacomCBS — which includes not just broadcast network CBS but many cable channels, among them MTV, VH1, Comedy Central, Nickelodeon, CMT and BET.

The company must also strike a balance between the poles of maintaining profits and growing subscribers as it considers what to do with its film distribution. While most big-budget movies are designed for the theatrical box office — Paramount Pictures’ most recent “Mission: Impossible” film took in nearly $800 million worldwide — a streaming service demands its own high-end original content, putting ViacomCBS in a bind.

The company seems eager to try to walk the line between those requirements, saying Wednesday that 2021 releases “Mission: Impossible 7” and “A Quiet Place Part 2” will debut on Paramount Plus after they’ve been shown in theaters for 45 days. That is a shorter time frame than the traditional 75- to 90-day window for theatrical movies but far longer than Warner Media’s plan to release its 2021 movies on HBO Max simultaneously with their appearance in theaters.

Showtime remains a conundrum, too. ViacomCBS collects a portion of monthly subscriber fees that can be as high as $15 for the network. But on Wednesday, ViacomCBS executives said the company would put its anticipated “Halo” adaptation on Paramount Plus, moving it off of Showtime, which had developed it — and potentially upsetting pay-cable customers who were expecting the show.

To offset the loss of revenue in other places, Paramount Plus must reach a huge audience, something that could be tricky without the brand identification of Disney, Netflix or HBO.

ViacomCBS executives said that, combined, All Access and Showtime’s digital product, Showtime Anytime, have a total of 19 million subscribers now. Geetha Ranganathan, a media analyst for Bloomberg Intelligence, estimates that Paramount Plus will need to more than double that total to 40 million to 50 million to be successful.

“That seems like a tall order,” Ranganathan concluded.

Executives acknowledged that there’s tension between old and new business models but said they believe they can be harmonized.

“Some people will tell you that a company like ours has to choose—that we’re either all-in on linear or all-in on streaming,” said ViacomCBS chairman Shari Redstone at Wednesday’s presentation, using the industry term for legacy TV platforms. “We think that’s a false choice. We’re not about only linear or only streaming. We’re about both.”

Whether Paramount Plus can one day be a business juggernaut on the order of the company’s businesses that rely on outside distribution remains to be seen. to be seen.

Beck, the consultant, said he is skeptical.

“I don’t think many of the companies that have launched big streaming bundles have the institutional knowledge of the direct-to-consumer business,” he said. “And I think many of them are underestimating the difficulty of making the transition.”