Paramount Streaming CEO Tom Ryan on Pluto TV Turning 10, What’s Next for Paramount+ and More: Streaming Biz Is ‘Underestimated by the Market’

Tom Ryan co-founded the free, ad-supported streaming service Pluto TV, which launched 10 years ago with a linear TV-like grid and a cluster of “live” channels stocked with online videos. Viacom, one of Paramount Global’s two predecessor companies, acquired Pluto TV for $340 million in cash in January 2019. Ryan stayed on board as chief exec of Pluto, and in October 2020 he assumed leadership for the parent company’s entire streaming operations, including CBS All Access, which relaunched as Paramount+ in early 2021.

Ryan, CEO of Paramount Streaming, says Pluto’s first decade — during which it soared to 80 million monthly active users as of last year — is just the beginning.

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“I think we’re still scratching the surface,” he said in an interview with Variety. Pluto TV has major potential to expand internationally with its integrated distribution model, he said: “It’s really a universally appealing product around the world.”

As for the Paramount+ side of the house, which has soaked up billions of dollars of investment and remains unprofitable, Ryan disputes Wall Street naysayers who believe the subscription play is a lost cause. Does it make sense to shut down Paramount+ and cede victory to Netflix, Disney and Amazon? “I fundamentally disagree with that analysis,” he said. (Ryan, by the way, declined to discuss the M&A talk swirling around Paramount Global.)

Here’s a transcript of Variety’s interview with Ryan, edited for length and clarity:

Take us back to the beginning of when you were part of the founding team at Pluto TV. What was the original vision for the service?

Yeah, I mean, the original concept was that there’s a lot of great online video out there on the internet, but it’s hard to find the good stuff. So what if we were to make watching online video — you know, YouTube-style video — as easy as watching television? So that was the original concept that we talked about and ultimately launched later on April Fools’ Day in 2014. And so we built this product with the YouTube API and we launched it on web and mobile, and we validated the thesis that if you can curate content into thematic channels that people enjoy watching that allow them to simply channel-surf, you can get them to watch for longer periods of time. Back at that time, it was difficult to find stuff on YouTube. Their recommendations were not as good as they are today. And so this concept was the original sort of Version 1.0 of Pluto.

At what point did the light bulb go off and you were like, “Hey, we can bring premium TV [content] to this thing?”

So we launched this, again, April Fools’ Day 2014 and we were excited by the progress. The viewership was better than it was on other similar services serving up that type of content. However, we couldn’t monetize through the YouTube API. So we started to license similar content directly from [multichannel networks]. The MCNs were looking for additional distribution channels. They didn’t want to be just on YouTube and beholden to YouTube alone. So a lot of them were willing to license their content to us even though we didn’t have a big user base or any real revenue.

There’s some things from back then that still work well today on Pluto, things like FailArmy, and we still have our Cats 24/7 channel, for example. But by and large, we couldn’t build a sustainable business on web and mobile with short-form curated channels, and we needed to get into longer-form, more traditional TV programming. Even when we did that, we found that on web and mobile it was much more difficult to monetize because you couldn’t get people to truly lean back and watch in the way in which we hoped people would watch to allow for sufficient monetization.

Ten years ago, the model for free, ad-supported TV was already well established, with broadcast TV Why was there skepticism in the early days that Pluto could become a viable outlet for premium content that was totally free?

I think a few reasons. As all startups do, you sort of launch a product with a thesis and some of that thesis turns out to be right. Some of it turns out to be wrong, and you learn and iterate, and hopefully you can find a way to a sustainable business. But you know, with Pluto, I think we were partly a victim of our initial [minimum viable product feature set] in that we didn’t become known as a true [free, ad-supported streaming TV] player really for another couple of years, because that’s when we moved to the living room and really had a broader array of channels that were traditional long-form TV programming that viewers could lean back and enjoy.

But I’d say probably the biggest thing was just the general conventional wisdom, back in the day, that everyone believed the future of streaming would look like Netflix, where it would be subscription, no advertising and on-demand. And here we were, as this company where we were linear in the age of on-demand. We were ad-supported at a time when people thought ads would not exist on streaming.

So at some point you caught the attention of Viacom and [CEO] Bob Bakish. How did that all come together?

Yeah, we were growing pretty rapidly at that point. We really started to find our footing once we put Pluto on Roku with these long-form, more premium channels and a variety of other platforms that we helped launch as well in the FAST category. In terms of Bob and Viacom, I approached them really just as looking for a content deal, because we were working with a bunch of the cable networks at media companies. And Viacom, while we had a deal with Paramount Pictures for some of their movies, we didn’t have any of the content from their cable nets. But you know, they were looking to looking to get into streaming. I think I started speaking to them in ’16 or ’17. But the conversations at the higher level started took about a year, from like the end of ’17 to the end of ’18, when they went more from, “Are we going to be a content partner to this company or going to compete with this company?” to, you know, “Should we acquire this company and make them the central part of our streaming strategy?” And ultimately that’s what happened.

You could have cashed out [after Viacom bought Pluto TV] and done something else. Why did you stay?

Because first of all, Pluto’s my baby. I love seeing it grow. And you know, we grew the business significantly in that time… Taking it to over a billion-dollar business in just a few short years was for me, very gratifying. Our last reported [monthly active user] number, which was about nine months ago, was 80 million. So scaling a service to that level for me was particularly attractive. So No. 1 was, I wanted to continue to grow what I had started. Two was, I had stood up and sold my team on why this was the right partner. And I still believe that was absolutely the right partner for us to work with. And I wasn’t going to just, you know, jump ship immediately after the deal closed. And then lastly, I really appreciated Bob’s approach as an executive in the media business and someone who really wanted to partner with me to turn Viacom into a streaming player and then ultimately Paramount into a streaming player.

How has Pluto changed in the past decade?

It’s vastly larger, it’s global, it is really a force to be reckoned with in streaming. We’re the only FAST player that’s announced profitability. The only one that’s announced, to my knowledge, that we crossed a billion in revenue. We scaled this business really quickly, and it’s now a central part of our overall Paramount streaming business, which as we reported recently delivered $6.7 billion revenue in 2023. We use both Paramount+ and Pluto TV symbiotically to feed off of each other and to help build each other. And so it’s become a really big, global business that I’m very proud of, and I’m so grateful for the team that I’ve got around me that has helped me bring it to that point.

What are the synergies between Pluto and Paramount+? How are you trying to optimize those?

Yeah, we continue to optimize those. Pluto is a huge funnel for brand awareness and ultimately subscription consideration for Paramount+ because we promote Paramount+ not just with advertising on Pluto but also with dedicated channels that include Paramount+ content. We also have brought Pluto-style channels into Paramount+. Being able to bring Paramount+ original programming in front of the pay window on Pluto has been great for Pluto audiences, and being able to promote back for subscription consideration from Pluto to Paramount+ has proven to be very effective. And we’re taking the learnings of the best of each product and trying to apply it to the other. So there’s a bunch of things that we’re doing on the data side between the platforms, there’s a bunch of things that we’re doing just in terms of technology and feature sets.

How do you decide what content goes on which service?

Essentially, Pluto is primarily a third-party content platform. So Paramount is an extremely important content partner to Pluto, but Pluto has 400 content partners, including all of the major media companies. The type of content that works on FAST is big-franchise, high-volume stuff that’s not necessarily serialized — and you can watch episode 7 before you watch episode 1, and it’s fine. So think things like, sort of in the procedural space like “CSI” and “NCIS,” Westerns like “Gunsmoke” and “Rawhide,” game shows like “Wheel of Fortune” and “Jeopardy!”, and sitcoms. With Paramount+, of course, we’re investing billions of dollars in original programming in order to bring people to it and subscribe. So it’s a very different business model on the content.

The company has said Paramount+ is expected to be profitable in the U.S. by the end of 2025. What are the key factors to achieve that?

Listen, we’re only three years in the market with Paramount+. It’s kind of hard to believe. It feels it feels like longer. But you know, we’ve been in the market for three years, we’ve achieved 67.5 million subscribers [as of the end of 2023]. In such a short period of time, you know, it’s been quite staggering. So it’s really driving subscribers, driving ARPU [average revenue per subscriber] and being able to leverage our cost base more effectively. When you just zoom out a little bit in our streaming segment, direct-to-consumer revenue in 2020 was $1.8 billion. As I mentioned, we closed out ’23 at $6.7 billion and we hit our peak investment year ahead of expectations. So we are very rapidly bridging the gap here to deliver a very successful streaming business that I feel is underestimated by the market.

[Paramount Global CFO] Naveen [Chopra] suggested on the Q4 call that there’s going to be an $800 million content write-down in the first quarter, out of a $1 billion total one-time charge. How is that going to affect Paramount+ and Pluto?

I mean, I feel we’re very well positioned given the content offering that we have on both services to compete. We wouldn’t be announcing things like we announced at earnings if I didn’t feel that way.

Some analysts have said, “You know, Paramount Global should shut down Paramount+” and become an arms dealer [selling content] to other platforms. You’ve heard this. The theory is that you simply can’t get the scale to compete globally with Netflix or Disney+. Why is that wrong?

I think I just explained why. We just grew from $1.8 billion to $6.7 billion in three years. Pluto’s a key part of that segment; it has been profitable for a few years. Paramount+ is going to be domestically profitable next year, and we’re going to get this segment profitable [overall] after that. And so I fundamentally disagree with that analysis.

What’s next for the business? Where is the growth going to come from?

On the global side [with Pluto] — and this is one of the things when I look back at what’s changed so much — we’re in over 35 markets. And when you think about FAST, it’s free television. As I look out into the future, it’s really a universally appealing product around the world. There’s huge headroom here in the U.S. for FAST. I think we’re still scratching the surface. But globally, we already see a third of our viewership coming from outside of the U.S., and we’re just getting started there. We’ve got really strong partnerships where we’re able to go in with the best-of-breed local partner. They bring local content, local ad sales and local marketing ability and we bring our global technology and product platform with Pluto, all of our Paramount Global content and together we’re able to really accelerate FAST in a particular market.

A perfect example is either Viaplay in the Nordics or Corus in Canada. We just launched in Canada a little over a year ago, and Pluto’s already sort of on fire in that market and taking that market by storm. We’re seeing viewership that rivals our U.S. watch time already after just 14 months in market. It’s an example of how we can take advantage of the global FAST opportunity, but it’s not just limited to North America, to U.S.-like markets. We’re even taking that a step further with our own in-house broadcasters around the world, and the first one is My5, which is connected to Channel 5 in the U.K. We’re going to be launching a combined Pluto TV and My5 product later this year, which brings the best of their free-to-air [programming] with Pluto’s FAST and super-sizes the offering.

You’ve touted Pluto’s integrated distribution strategy. What does that look like, how did it come about?

We basically knew when we were building Pluto that this was going to be a highly competitive market and that there were going to be a lot of different players who would want to get into it. Most notably, with the connected TV platforms like Roku, Samsung, Vizio, LG, etcetera, we decided it was better to join them in order to grow Pluto than to try to just build our business independently. And so Pluto really started focusing on helping these platforms launch their own their own FAST platforms from very early on. Getting a large portion of Pluto into every major connected TV platform… that’s not picked up by things like Nielsen’s Gauge [viewer measurement report for the U.S.]. So I feel we’re underrepresented there. If you look at our total viewing hours, about a third of our total viewing hours are coming from this integrated distribution strategy that we pioneered and which continues to be a growing, important part of our business today.

Over the long term, does Pluto have better margins than a subscription VOD service like Paramount+?

Well, FAST is a more capital-efficient business. We pioneered the 50-50 rev-share model that everyone generally uses now in the category. And so it’s no coincidence that a little start-up was the company that was able to actually pioneer and popularize this whole new category of streaming because it is much more capital efficient. Whereas yeah, a paid streaming service needs to invest, you know, billions of dollars in original programming if you’re going to be at a mainstream-scale offering from the get-go before you have any subscribers. That’s really much more of a fixed-cost approach than a variable-cost approach. FAST is much more of a variable-cost approach, which is why we were able to build it as a little start-up and then scale to what it is today. [With SVOD] it’s basically getting enough subscribers paying you enough money to more than offset your content and marketing and of course team costs, but it’s really content and those content costs are pretty fixed and you only start really getting leverage over those once you hit a certain subscriber number, which is why we’re so excited that we’ve already gotten to 68 million subscribers in three years.

You guys have done a couple of bundle deals with Paramount+. Are the subscriber dynamics different? Is that strategy going to continue?

Yeah, we’ve got hard bundle deals with the likes of Sky and Canal+ in Europe, we’ve got the Walmart+ deal here in the U.S. Bundling has been a big part of how we’ve grown Paramount+ over the years. So we’re absolutely going to continue bundling. The advantages of each bundle are different, and it depends on the dynamics of how the customer accesses the app, or the content, who the partner is, etcetera. So there’s too many variables to just give a one-size-fits-all response except to say that in many cases the advantages that you can get from having a bundled partnership are that your customer-acquisition costs can approach, or even be, zero — because the partner is acquiring the customer for you, and those bundled customers can be quite sticky because they’re part of a larger bundle.

As you know, Netflix released a massive batch of viewing data [at the end of 2023] representing 99% of all time spent viewing, and they say they’re going to release it biannually. Is Paramount Streaming going to do something similar? Why or why not?

We don’t have any plans to announce right now regarding that.

Why do you think Netflix did that?

You’d have to ask Netflix.

OK, fair enough. Well, Tom, thanks again. And I guess you’re going to stick around for another 10 years, at least?

[Laughs] I’m enjoying what I’m doing, so I hope to continue building Pluto TV and Paramount+ long into the future.

SEE ALSO: What’s Next for Paramount? Shari Redstone Has a Preferred M&A Path

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