Little Impact to CBS From Pulling Two and a Half Men

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Charlie Sheen's antics and Warner Brothers' decision to fire him begs the question - how much of CBS' ( CBS ) value is at stake? CBS ( CBS ) competes with Disney ( DIS ), News Corp. ( NWS ), Time Warner ( TWX ) and Viacom ( VIA ). Our price estimate for CBS' stock stands at $26.34 which is a premium of roughly 12% to the market price.

The actor of CBS' hit show Two And A Half Men has been on a media tirade since he was kicked off the show and Warner Brothers decided to cancel the production of the sitcom that airs on CBS. There have been several stories about how much money is at stake, and when looked at in the context of CBS's overall value and nature of broadcasting, is it really significant?

Below we present our quick take on this.

A Forbes columnist describe Two and Half Men as:

The show is the most-watched comedy in prime time averaging 15.2 million viewers. It pulls $207,000 per ad. Last season, it generated $155.1 million in CBS ad revenue according to Kantar Media. Star Charlie Sheen earned $30 million last year on the back of the show. (( 'Two and a Half Men' Canceled After Charlie Sheen's Latest Rants , Forbes Blog, Feb 25 2011))

If we look at starting dates of each of the seasons of Two and a Half Men, it looks like CBS airs one season a year and so implies annual revenues of more than $150 million. Put this into context of CBS network (not whole of CBS) overall revenues, it seems like this particular series accounts for a little over 4% of its revenues.

We estimate that CBS network constitutes close to 15% of CBS' value. Although its revenue contribution is higher, its lesser value contribution results from lower margins of this division. Even if we assumed that Two and a Half Men would have continued into perpetuity (which seems highly unlikely), we estimate that this would account for less 1% of CBS' value is at stake due to canceling this show. So while Charlie Sheen has grabbed headlines, the stock impact for CBS is minimal.

See the complete analysis for CBS.



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 , NWS , TWX , VIA

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