CBS TV Licensing Revenues Could Gain Steam

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CBS ( CBS ) recently released Q1 2011 earnings and based on continued improvement in the ad market and better profit margins, we have upgraded our stock price estimate to $27.49 . Below, we look more specifically at positive developments in CBS' syndication business. CBS competes with companies like Disney ( DIS ), News Corp. (NASDAQ:NWS), Time Warner (NYSE:TWX) and Viacom (NYSE:VIA).

CBS' TV Licensing Business

We estimate that CBS' TV licensing and home entertainment business constitutes about 14% of the company's stock value.

Licensing revenues are generated from syndication of shows produced or acquired by CBS Television Studios, CBS Studios International and CBS Television Distribution - these include hit shows like CSI, for example.

Syndication allows successful series to run on multiple channels after their initial run. International broadcasters, television stations and cable networks are major buyers of shows produced for licensing and syndication. The price paid for such shows is governed by their popularity among viewers, making viewer reception of paramount importance.

Syndication Developments

During its recent earnings announcement, CBS management mentioned that it recently sold Hawaii Five-O TV series to TNT. CBS thinks that this show will grab about $5 million per episode from domestic and international syndication agreements.

In addition to the above, the company's deal with Netflix (NASDAQ:NFLX) is expected to earn incremental licensing revenue. More importantly, the deal is not going to hamper its other syndication revenues since the programming that Netflix is getting access to is already sold to other networks or channels for syndication. This is just the beginning, but similar opportunities going forward could spur new growth to licensing revenues and drive upside to CBS stock value. One could tie CBS' confidence in Netflix to the shifting attitude of the media industry in general, which is beginning to see Netflix as a partner rather than a disruptor of business.

Our price estimate for CBS' stock stands at $27.49, in line with market price.

See our complete analysis for CBS' stock here



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: CBS , DIS

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