The “Situation” for Viacom's Stock From Jersey Shore's Success

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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.



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: DIS , NWS , TWX , VIA

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