Paramount Announces New Animation Unit Though Small Impact to Viacom

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Viacom's ( VIA ) film division Paramount Pictures will launch its own animation division according to a recent press release. This division will be responsible for producing high quality animation movies with budgets of up to $100 million. This comes on the heels of its first fully owned computer generated imagery ( CGI ) animated film, Rango , which grossed over $240 million earlier this year. This investment is a necessary step for the company given the success of animated movies recently, especially 3D ones, and is similar to what Disney ( DIS ) has done with Pixar's animation studio.

We estimate that Paramount Pictures constitutes only 14% to Viacom's stock which is primarily dependent on TV channel business.

The success of high budget animation movies is highly uncertain, and we believe that a large portion of film revenues (box office, DVDs and licensing) for Viacom comes from non-animated movies. As the box office sales, DVDs and movie licensing segment accounts for around 14% of Viacom's value and since the company initially plans only 1 animation movie per year at first, we do not see this as a catalyst for the shares in the near-term.


Our price estimate for Viacom's stock stands at $60 , roughly in line with the market price.

See our complete analysis for Viacom's stock.



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: CGI , DIS , NWS , TWC , VIA

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