#SkyShowtime CEO on “Megahit” ‘Yellowstone,’ Ad Plan and How the Rules of TV “Still Apply”

European streamer SkyShowtime just unveiled the addition of an advertising tier in late April. The Standard with Ads plan will roll out across all of the more than 20 markets served by the joint venture of Comcast and Paramount Global.

The news of the ad tier comes around a year after the streamer finished its launches across its European markets at the end of February 2023.

SkyShowtime CEO Monty Sarhan said the cheaper ad-supported service will ensure that the streamer provides consumers with “an even more affordable entertainment choice for the entire family.”

In a conversation with The Hollywood Reporter, Sarhan discussed SkyShowtime’s first full year, its original content strategy, recent distribution deals and, of course, the decision to debut an ad tier and what it means for the streamer.

SkyShowtime just unveiled that it will launch an advertising tier, a cheaper ad-supported service plan in April. How does that fit into your business strategy and mix?

It is a new exciting chapter for SkyShowtime. We’re going to be launching a new ad-supported plan on April 23. So SkyShowtime will offer two plans to consumers, one that has ads, and we will continue offering our current plan without ads. For us, it’s a big moment, because when we first launched 18 months ago, we did so with a focus on the consumer. We wanted to make sure that SkyShowtime stood for value, and we still stand for value. That’s really what this new ad plan is all about. Our vision is to provide great entertainment at a great price. That’s our value proposition.

In the early days of streaming, there was a belief that advertising would put off consumers because they were too much like traditional TV. Now, many streamers have launched ad tiers. What do you see in terms of consumers’ appetite for ad tiers in your European markets?

Fundamentally, we believe in providing consumers choice, options and flexibility. If you look at streaming, and how it’s evolved, all of the same business models and rules of television still apply. There are consumers who want a subscription service without ads – that’s existed in television for the past 50 years. There are people who want a subscription service with ads – that’s also existed for over 50 years. There are people who want a completely free experience and are okay with ads. And that’s also existed for a long time. So for us, this is a natural evolution to give consumers what they want. Anytime you’re providing more choice, more options to consumers, it’s a good thing. It’s a win-win for consumers. The world is not one-size-fits-all. People want different things, different experiences at different price points. We want to serve everybody, we want to serve all segments of the market and make sure that SkyShowtime meets their needs.

We talk a lot about value. I don’t hear other streamers talking a lot about value. And our launch of the ad tier is a commitment to that. We’re doing something that no one else has done: we’re launching an ad plan across all of our 22 markets. That’s something that neither Max, Netflix or Disney+ are doing. We’re doing something that’s not been done and something that our competitors are not doing.

You mentioned value and the competition. With the ad tier launch, the price for your plan without ads will go up. Is the ad tier offering a way to reduce the impact that has on subscribers? And how do you feel about SkyShowtime’s pricing in the broader market?

We launched 18 months ago at a price that was cheaper than Netflix, cheaper than Max, cheaper than Disney+. So we were priced below all of the other major streaming services. We did that intentionally. And when we thought about the rising content costs, the investment that we’re making in local originals, which is only increasing, clearly, there was a need to look at the pricing for our standard plan. But we also want to continue leading on value. So we wanted to give consumers an option that was at a lower cost.

Our ad plan has a lower entry-level price point than Max and Netflix in nearly all major markets. That’s significant. So we’re still providing the most value of any major streaming service. Consumers of SkyShowtime can keep the experience they have which is ad-free, or they can choose to subscribe to the ad plan. The ad plan will be priced either at the same price point as our current standard plan or below our current standard plan. So this is really almost a price cut for new consumers. They’re going to be able to access all of the same great content that we have on SkyShowtime at a great headline price. And that’s all of the same great content – there is no difference between the content catalog on our ad plan versus our non-ad-supported plan.

Do you have any forecasts for what percentage of people will have the ad tier versus the non-ad tier a year from now?

We’re excited to see what the consumer response is going to be. There are going to be consumers in the marketplace who want to come and experience ads and pay a lower price. And there are going to be consumers that are going to still want that premium experience. We haven’t shared any projections for how that breakdown is going to be, but we’re very excited about giving consumers more choice. And we believe that there’s going to be great demand for both plans.

We have a really strong content proposition. We’re the proud and exclusive home for the Yellowstone universe. In our markets, we are the only place to watch all five seasons of this megahit. And we’re the only home for [Yellowstone spin-offs] 1883 and 1923. So at Sky Showtime, we’ve dubbed 2024 to be the year of Yellowstone. [We also have] all these big global shows like Halo and Pokerface, both of which are returning for season 2, Yellowjackets is coming back, we have The Tattooist of Auschwitz that’s very moving. So it’s a lot of great content for consumers for a great headline price.

That’s just on the series side. We’ve spoken about this in the past, but we have nearly 50 percent of Hollywood box office. That’s more box office than any streaming service in our markets. And we superserve fans. If you look at Star Trek, we have so much of this amazing franchise from Paramount. We have Star Trek: Strange New Worlds and Voyager, Deep Space Nine, Star Trek: The Next Generation, Star Trek The Original Series, we have Enterprise – all of that, and we have almost all the movies. So if you’re a Star Trek fan, SkyShowtime is the place for you.

You have never broken out subscriber figures. Any insight you can share on that? And do I understand you right that the ad tier is also a way for SkyShowtime to expand its addressable market?

Absolutely. We believe in reaching all segments of the market, especially because many of our markets are price-sensitive. Even in markets that aren’t price-sensitive, consumers feel that the cost of streaming has gone up. And so at a time when people may be hesitant to subscribe to new services or feel that streamers keep increasing prices, we’re sending a message that we hear you, we care, and here’s an amazing service at an amazing price – here’s great content, great entertainment at a great price. We do think it increases the total addressable market for us in our markets, that we are bringing more people to SkyShowtime by giving them more options.

We don’t release subscriber numbers, but 2023 was a big year for us. It was still a launch year, we launched in some of our biggest markets, including Poland and Spain. We’re live and operational across all of our markets. We saw such a great response to our launch and have just continued to grow. We are still very much in growth mode. We’re continuing to scale in our markets. And these are markets where streaming is only growing.

We’re continuing to add new subscribers, we’re continuing to hire, and we’re continuing to invest in content. So 2024 for us is a year where we truly, really scale this business even more. We’re extremely happy with how the business is doing, how the business has performed, and our shareholders are really happy with it.

SkyShowtime is also serving up local content, including original programming, offering 10 originals last year, in addition to all the Hollywood titles. What can you tell us about your local and original content strategy and how much of an opportunity that is?

Local content is incredibly important. It’s part of our value proposition. We are a European streaming service.

In September, we had Kai Finke join us from Netflix as our chief content officer. He’s been ramping up both acquisitions and putting things into development. Original programming is an important part of our overall content strategy, and we will continue to invest in local content, both catalog content as well as originals in our key markets.

We’ve already announced some originals for 2024. There are more on the way. We have announced Veronika, which is coming in March and is a Nordics original [starring Alexandra Rapaport as a police officer and mother of two in a small town who struggles with her complicated family life and a secret pill addiction]. We also have Los Enviados (The Envoys) season 2, a Spanish-language original, which just premiered that’s doing exceptionally well. And there’s more on the way.

SkyShowtime has in recent months struck several partnerships with distributors, increasing its reach. What’s your distribution strategy now that your direct-to-consumer service has been available in all your markets for at least a year?

It’s always been important for us to be wherever consumers want us to be. And business-to-business partnerships are incredibly important. As you’re scaling a service, you’re going onto platforms that are subscriber-rich platforms, where people want to consume video. We landed a landmark deal with Ziggo in the Netherlands, with MEO Portugal. And then right at the end of the year, we launched with Movistar Plus+ in Spain. In fact, with Movistar, we’re part of their Ficción miMovistar package. Those partnerships are great because we’re building a business together.

You’ve seen other streamers adjust their strategy, but partnerships were part of our strategy from day one. We’ve always said we want to be the best streaming partner in the b2b space. And we’ve delivered on that. Our partners are really happy with our content. And there’s more on tap, we are in advanced negotiations with several distributors in multiple territories right now.

A lot of other streamers have been reducing spending and become more selective about originals. Why are things different for SkyShowtime?

In an age where other streamers are cutting back on content, we benefit from being a joint venture, we have the combined content pipeline of two of the biggest entertainment companies in the world. And that positions us well for success, it positions us well versus our competitors. And it’s why we continue to provide great value to consumers. That’s why we’re able to say that we have nearly 50 percent of Hollywood box office, we have Oppenheimer coming just in a few weeks, we have Dungeons & Dragons: Honor Among Thieves, Mission: Impossible – Dead Reckoning, The Super Mario Bros. Movie all of those big global shows that come to us. So being a joint venture is a huge advantage. It’s one of our superpowers.

The second thing I will say is that the U.S. narrative is not our narrative. We are in markets, where streaming is still growing. It is still early days. So the addressable market and the number of people who are coming into streaming is only growing, and that provides us with a unique opportunity that doesn’t exist in other parts of the world.

There has been all this chatter about whether Paramount Global, one of the joint venture partners behind SkyShowtime, could be sold or do some kind of other deal, possibly even with Comcast. Does that in any way affect the work of SkyShowtime at this stage?

I can’t comment on anything going on with our shareholders. All I’ll say is this: we remain focused on super-serving consumers in our markets. We’re focused on that every single day. How can we provide more value at a great price to our consumers? How can we deliver more great content to all of our existing members.

We’ve got this great combined content pipeline that’s coming to us for years to come, and we’re making big investments in local programming. So that’s what we’re focused on. We feel really good about the future.

Anything that has happened or popped in recent months that has particularly surprised you and your team?

Yellowstone, Yellowstone, Yellowstone. That is a mega-hit. It has surprised us and surpassed all of our expectations. We started seeing it really overperform starting late last year. We’ve invested more money to market SkyShowtime to expand the audience, to bring more people in to watch Yellowstone and to experience the Yellowstone universe because this is exclusive to us. All five seasons are only on SkyShowtime, and we’re the home for [spin-offs] 1883 and 1923 with Harrison Ford and Helen Mirren.

We have the biggest show in the world today on Sky Showtime. It’s really unique. It’s really special. And it has been a very pleasant surprise for us and for viewers who come in and experience the show. They’re really drawn to it. There’s independent research from Parrot Analytics that shows that the demand for this show is off the charts. It’s got 15 times greater demand than the average television series in markets like Spain, Poland and Sweden. We’re extremely proud to be the home of that show and we’re happy that our members are loving it so much.