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Tuesday, October 21, 2014

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  • Viacom is Bullish on Digital Distribution Opportunities

    Add Viacom to the list of established media companies benefiting from digital distribution. In its fiscal Q3 earnings call today, Viacom wouldn't break out specific digital distribution revenue but noted that it is "significant" and will contribute to "high single to low double-digit revenue growth per year for the foreseeable future." BTIG's Rich Greenfield estimated digital revenue in the quarter was $70 million, which Viacom executives didn't comment on. Viacom sees multiple drivers for digital growth: an increasing number of digital distributors, international expansion and strong demand for Viacom's content in particular, which skews younger and is geared to digital users.

    Asked by an analyst whether Viacom would consider a traditional affiliate deal with YouTube, for linear distribution, company CEO Philippe Dauman said he was open to new deals, explaining that their approach has been to work with each successive type of distributor, first cable, then satellite, then telco. The key however is that any new deal must be "incremental both short and long term." In other words, if a hypothetical YouTube deal posed the risk of simply cannibalizing existing pay-TV subscribers, it likely wouldn't be very attractive.

    Meanwhile, Viacom executives said that their digital deal terms tend to be around 2 years, and are still mostly for library content. They also said that revenue recognition in these deals is lumpier, so quarterly growth may not be quite as linear as traditional affiliate deals. Overall Viacom executives conveyed a strong sense of optimism about digital's upside. For the quarter the company reported $3.77 billion in revenue (up 15% from last year) and net income of $583 million (up 39% from last year).
     
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