Season 3
of the Jersey Shore
recently aired its first episode and broke MTV's records for the
most watched show in the company's history. MTV also announced
that it will begin production for a Season 4 based in
Italy. Given the popularity of this show and the fact that MTV
is Viacom's 2nd most valuable channel after Nickelodeon
constituting close to 13% to Viacom's stock, we wanted to see what
the "situation" was for the stock. Viacom (
VIA
) competes with other media and broadcasting companies like Time
Warner (
TWX
), News Corp (
NWS
) and Disney (
DIS
) in the media and entertainment business.
Viacom derives its value primarily from TV channels. We estimate
that about
83% of Viacom's value comes from its TV channels
like Nickelodeon, MTV, Comedy Central, VH1, BET Networks, Spike TV
etc. compared to 9% from film entertainment and 8% from other
businesses like TV show DVDs, video games, consumer products etc.
We have a $52.26 price estimate for Viacom
, which is around 6% above the current market price.
Jersey Shore a Driver to MTV Revenues
Jersey Shore
is MTV's top series of all time among the 12-34 age group. The
program's 3rd season rating currently is around 46% higher than its
ratings for the 2nd season and about 219% higher than the first
season. Viacom also announced that
Jersey Shore
's recent episode that aired on 20th Jan 2011 was MTV's most
watched series telecast in the history with around 8.9 million
viewers. In fact it also beat American Idol telecast on the same
day.
Considering its popularity, the show becomes a material driver
of MTV's success. It's cast members such as Mike "the Situation"
Sorrentino, Nicole "Snooki" Polizzi, Paul "Pauly D" DelVecchio and
Jenni "Jwoww" Farley attract a huge following and many of them have
secured book deals and are paid generously to promote events. The
cast also hosted MTV's New Year's Eve celebration in Time Square
where they led a crowd of viewers in setting a Guinness Book World
Record for fist pumping.
This sort of media attention brings in viewers, strengthens the
shows following and generates advertising potential. MTV can earn
higher ad revenues from better
ad pricing
and grow its viewership - both of which will help the stock.
This shows success also helps Viacom adjust its focus to
include more reality content that has done well recently. MTV has
had success with other reality TV shows like
Teen Mom.
Over time, this trend could lead to improved margins.
Viacom derives its value primarily from TV channels. We estimate
that about 83% of Viacom's value comes from its TV channels like
Nickelodeon, MTV, Comedy Central, VH1, BET Networks, Spike TV etc.
compared to 9% from filmed entertainment and 8% from other
businesses like TV show DVDs, video games, consumer products etc.
Thus it becomes absolutely important for the company to focus on
success of its channels, especially the ones that bring it greatest
value.
You can drag the trend lines in the charts above to see the
impact on Viacom's stock price or scroll through the slide show
below.
See the
complete $52.26 Trefis price estimate for
Viacom's.