) competes with other media and broadcasting companies like Time
), News Corp (
), CBS (
) and Disney (
) in the media and entertainment business.
Our price estimate for Viacom's stock stands at
, which is a roughly 15% premium to market price.
The company recently signed a deal with Hulu to make more of its
TV content available on the subscription/ad-supported portal. In
its press release Viacom stated that:
"Hulu and Viacom Inc. (NYSE: VIA and VIA.B) today announced a
new content partnership that will return "
The Daily Show with Jon Stewart"
The Colbert Report"
to Hulu.com and bring many popular TV shows from Viacom's media
networks, including Comedy Central, MTV, BET, VH1, Spike TV, and
TV Land to the Hulu Plus subscription service."
Thus, new TV show content will be available to Hulu's free ad
supported site as well its subscription service that was launched
last year. So why does it makes sense for Viacom to go with Hulu
for such a deal, rather than Netflix?
Viacom and Hulu Both Emphasize TV Shows
Viacom is a heavily TV content focused company. We estimate that
79% of Viacom's value can be attributed to its TV
like Nickelodeon, MTV, Comedy Central, VH1, BET Networks and Spike
TV, while only 14% of its value comes from its filmed entertainment
business. Hulu, being specialized in offering TV shows, makes an
apt platform for Viacom to get additional revenues.
See our full analysis and $58.36 price estimate
So why not Netflix? One could argue that given the popularity of
Netflix, Viacom might make more money by striking deals with the
movie rental company. However, Viacom could be hesitant to get
tied-up with Netflix. Should additional content companies strike
these kinds of deals with Hulu, the platform should become stronger
and pose a greater threat to Netflix. This scenario would
ultimately prove to be an advantage for content companies like
Viacom that will then have greater negotiating power and better
revenue generation opportunities outside of the traditional pay-TV
Viacom Views this as Complementary to its
Although Viacom's deal has created a sense of discontent in the
pay-TV industry, Viacom maintains that there is incremental
opportunity to earn revenues with platforms like Hulu. According to
the company, such deals are only complementary to its existing
distribution arrangements. Still, some pay-TV executives believe
otherwise and think that such deals hamper their business.
In the fast evolving industry, conflicts between content owners,
pay-TV service providers and alternative distribution platforms
like Netflix and Hulu are arising everyday. Consumer habits are
shifting, technology is evolving and one can not blame companies
like Viacom for adapting to these changes by seeking new revenue