) primarily competes with other media conglomerates like Disney (
), Time Warner (
), Viacom (
) and News Corp (
) in the broadcasting and cable networks business. Like its
counterparts, CBS also relies significantly on advertising revenues
that are a function of both advertisement pricing and
Our price estimate for CBS' stock stands at
, which is slightly below the current market price.
Radio is one of the CBS' larger profit drivers. CBS Radio
operates 130 radio stations in the U.S. and offers its audience
several formats through the combination of on-air, online and new
media platforms. CBS Radio, in conjunction with CBS-owned TV
stations, constitutes about 27% of the company's stock value, by
our estimates. Thus staying competitive in this field is critical
for CBS. We recently wrote an article wherein we discussed how
Pandora is pushing more into radio market and threatening
traditional radio services (see Trefis article
Impact on CBS if Pandora Becomes the Biggest Threat
A closer look at Internet radio market suggests that while
Pandora is gaining fast, traditional broadcasters are holding their
ground at the moment with their own internet offerings. A study
conducted by SNL Kagan estimates that CBS Interactive had around
226 million unique visitors while Clear Channel 110 million. This
compares to Pandora's 50 million or so uniques. CBS earned close to
$75 million revenues in 2009 from its online radio properties as
per SNL Kagan estimates, Clear Channel Radio's online radio
revenues earned around $175 million and Pandora earned close to $50
million. As far as revenues and traffic, the traditional players
like CBS and Clear Channel are ahead of Pandora as per 2009
Distribution is the key
We note that all three of them have extended their distribution
to mobile phones and iPad via development of apps. In fact CBS
recently launched a new app for iPhone with which its Radio.com
platform will be available for free on iPhone device.
Distribution is going to be one of the keys to success of internet
radio especially with so many connected devices flooding the
market. We have seen the power of distribution for services like
Netflix (NFLX) that are available across wide range of devices and
gaining traction. It looks like all 3 players are competing neck to
neck in this area.
What could be done more?
Traditional radio players like CBS and Clear Channel have stuck
largely to traditional monetization models in the internet arena
and have not pushed for individual subscription based services. CBS
has a personalized music service called last.fm, but this is a
small portion of its online traffic. However personalized radio
subscriptions apart from general ones might be attractive to many
users who may be willing to sign up for subscription to access such
services. Pandora has targeted this area and traditional
broadcasters can also adopt it to mitigate Pandora's threat.
Additionally personalized radio stations for users can also help in
better ad targeting.
How do you think
CBS' radio market share
will trend in future? Modify the forecast below to see the impact
on CBS' price estimate.
You can see the complete $19.72 Trefis price estimate for
CBS' stock here.
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