CBS (NYSE:CBS) will soon launch CBS Sports Radio in the U.S. to challenge Disney’s (NYSE:DIS) ESPN’s dominance in the sports radio market.  The company will partner with Cumulus Media to distribute its sports content to radio stations across the nation’s top radio markets. Certainly, given its expertise in the radio business, CBS wants to extend into lucrative sports programming market which has made ESPN a giant network. CBS has divested some of its radio assets in past few years to focus on certain key markets.
We estimate that CBS Radio & CBS’ local TV stations together constitute more than 20% of CBS’ estimated value. About half of the revenues within this division can be attributed to CBS’ radio business, which currently captures close to 8% share of the U.S. radio market. This implies that the radio business accounts for somewhere around 10% of CBS’ value. If this new expansion increases CBS’ radio revenues by 20%, it could result in an upside of less than 5%. Even though an interesting move, the direct value add is not that significant.
However, it will help CBS position its brand more strongly in sports market, which is a big business in the U.S. and attracting plenty of attention from media companies. Sports programming is where the big money is, as evident from ESPN’s success and CBS wants to become a stronger force in this space.
Our price estimate for CBS stands at about $34.75, implying a premium of about 10% to the market price.Notes:
- CBS Creates The Largest Major Market Sports Radio Network In The Nation, PR Newswire, June 21 2012 [↩]