Paramount+ may have finally reached its peak—peak losses, that is.

The streaming service added a record 9.9 million subscribers in the fourth quarter of 2022 to climb to nearly 56 million total. Still, the company is expecting to take a hit in its direct-to-consumer business in 2023 as it realigns its content strategy.

As Paramount prepares to blend Showtime into Paramount+, the company is bracing for a $1.3 to $1.5 billion impairment charge related to content, CFO Naveen Chopra said during the company’s earnings call on Thursday.

“We’re going to be at peak losses for DTC in 2023,” said the CFO, expecting negative cash flow for the year. However, both Chopra and CEO Bob Bakish repeatedly emphasized that in 2023, Paramount will reach the summit of its spending on streaming.

“As we move into 2023, we see a year of continued content and platform momentum ahead of us, a year of further scaling streaming as we hit the peak investment point,” Bakish said.

DTC revenue rose 30% year-over-year to hit $1.396 billion, but operating losses expanded to $575 million.

While Paramount expects to save $700 million long-term by combining Paramount+ and Showtime, price hikes are coming to the streaming service.

The company will raise the monthly price of the essential tier of Paramount+ to $5.99, a $1 jump. That tier will not include Showtime content.

Paramount+ with Showtime will jump from $9.99 to $11.99. Both of those changes will occur at some point later this year when the combined service launches.

After the company announced the content merger, it quickly implemented several operational changes.

As Showtime looks to integrate with Paramount+, the premium cable network is merging with MTV Entertainment’s studio team. Several execs, including Jana Winograde, co-president of entertainment, are exiting the company, and her co-president Gary Levine is shifting to an advisory role. On Monday, Showtime also laid off around 120 employees.

The company didn’t discuss the layoffs during the earnings call.

All about franchises

As we exit the age of Peak TV, Paramount is realigning its strategy to “efficiently manage” content spend across its platforms, according to Bakish.

That will include a further focus on franchises, which Bakish pointed to as part of the reason for the company’s largest per-quarter subscriber growth to date.

Top Gun: Maverick and the Yellowstone franchise were two of the biggest acquisition drivers for the service in the quarter, and the launch of new franchises such as Tulsa King and Smile also helped grow subscriber numbers.

Looking ahead, the company expects an upcoming film slate from franchises including Scream, Mission: Impossible, Paw Patrol and Transformers to continue to accelerate growth and reduce costs.

“By far, our biggest lever to manage spending is to focus on franchises,” said Bakish. “The higher levels of consumer awareness and built-in fan bases associated with this IP drive strong subscriber acquisition volume, lower acquisition costs, lower churn and extend LTVs (loan-to-value).”

That focus on franchises is already revealing itself in the Showtime universe, with the company previously having announced two spinoffs of Dexter—even though the first one, Dexter: New Blood, was canceled after a single season—and four off-shoots in the Billions world.

“Our analysis revealed that an overwhelming majority of Showtime engagement is driven by key franchises, which comprise less than half of the services content amortization expense,” Chopra said.