) 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
. Below, we look more specifically at positive developments in CBS'
syndication business. CBS competes with companies like Disney (
), News Corp. (NASDAQ:NWS), Time Warner (NYSE:TWX) and Viacom
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.
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
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
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
See our complete analysis for CBS' stock here