Viacom’s Next Growth Drivers?
Damon is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Viacom (NASDAQ: VIAB) has nearly always had catalysts in the works, be it in the cable television or film arena, which surpassed expectations and gave a jumpstart to its profitability. Namely, MTV’s Jersey Shore and the numerous Paramount / DreamWorks Animation collaborations, such as the Transformers films, have provided support to earnings. Last year ended on a soft note as Nickelodeon continued an ongoing slump and film receipts were unimpressive. Still, the company appears to have a strong pipeline of newly created content, including some that could help reinvigorate Viacom’s bottom line.
Cable Programming Rollouts
MTV is adhering to its youth-oriented reality shows, the most prominent being Catfish, a TV Show that debuted in 2012. This program seems the most likely candidate to replace Jersey Shore as MTV’s ratings star. Others like Teen Mom 2 are also seeing healthy viewership. Both of those hits, as well as Viacom’s VH1 content are significantly more popular among the 18 to 49 aged demographic coveted by advertisers. Along with bulking up its primetime offerings, MTV is benefiting from weekend marathons of previously-aired episodes.
Additionally, Nickelodeon is spending record amounts on building a new slate of shows, primarily animated programs. Notably, the Monsters vs. Aliens series will be one of six to launch between now and September. Moreover, Comedy Central is introducing six of its own shows, while Spike and BET are also producing new programming.
The goal is to continue to draw audiences amid a growing landscape of media available to consumers. Viacom now has to contend with the rise of Scripps Networks (NYSE: SNI) and Discovery Communications (NASDAQ: DISCA), along with heightened Internet traffic. Scripps is the owner of such networks as The Food Network, HGTV, Travel Channel, DIY, and others. Its investments in programming are bearing fruit, spurring profit gains as it takes share from major media conglomerates. SNI shares are a worthwhile selection at this time. As for Discovery, it too is gaining earnings momentum, partly by way of higher subscriber counts. DISCA shares are trending upward, but long-term investors might want to wait for a better entry point.
Viacom’s advantage resides in its ownership of proven characters, like SpongeBob, its creative talent, and its resources as a global entertainment consortium. Accordingly, it will likely remain a top-notch broadcaster of youth cable programming.
Paramount’s Slate Improves
For 2013, Viacom’s film unit will probably post better results given the schedule of upcoming releases. Last year its top two box office films were Flight and Jack Reacher, disregarding the DWA productions. In March, it will offer up a G.I. Joe sequel, followed up by a Star Trek film later in the year, in addition to a production by Transformers director Michael Bay and World War Z starring Brad Pitt.
The likelihood is strong that these films will support increased DVD sales, as well, allowing for a turnaround in the important December quarter. Print and advertising costs, if kept down, ought to not be a hindrance to improved profitability. Plus, the sale of children’s consumer merchandise might well climb behind these films.
Incidentally, Viacom is on track to launch its animated filmm division with a SpongeBob film in 2014. The new unit should help it compete directly with the likes of DWA and Disney.
Summing it Up
An outlook for better viewership ratings is the basis behind forecasts for increased share earnings for Viacom this year. A favorable advertising environment, as Viacom is currently seeing, would help also. In fact, pricing in the scatter (spot) market is trending up double digit percentages year over year. Accordingly, factoring in also the accretive effect of share repurchases, Viacom may surprise on the upside. Thus, the shares should be considered at this juncture.
dctotal has no position in any stocks mentioned. The Motley Fool recommends Scripps Networks Interactive. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!
