Weekly Media Notes: CBS And Media General Ink Long Term Affiliate Deal

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Last week saw a development in the media industry with CBS renewing all affiliation agreements with Media General. CBS is also benefiting from its Thursday Night Football coverage and scored high ratings in the premiere week. We believe this will aid CBS’ advertising revenues in the second half of 2014.

Media giant Disney has recently announced the arrival of its Frozen attraction at The Walt Disney World Resort. We believe it is a good move as Frozen has been a phenomenal success story for Disney and it can help attract more guests to its theme park. On that note, we discuss below these developments related to CBS and Disney over the last week or so.

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CBS

CBS Corporation (NYSE: CBS) and Media General recently announced a comprehensive deal that renews all of Media General’s existing station affiliation agreements. Media General signed long-term agreements for all of CBS’ stations, covering 12 markets nationwide. [1] Such long-term agreements between content companies and regional affiliates provide prescribed yearly increments and boost affiliate revenues for media companies such as CBS. It must be noted that affiliate fees account for close to 15% of CBS’ overall revenues. Moreover, it ensures that CBS’ content is delivered to a wide population.

Separately, CBS broadcasting is benefiting from its NFL Thursday Night Football coverage. The premiere of Thursday Night Football scored largest primetime Thursday audience since 2007. In its key demographic of 18-49, the primetime ratings were highest since March 2006. [2] We continue to believe that Thursday Night Football will drive CBS’ advertising revenues in the second half of 2014. We maintain our price estimate of $61 for CBS and forecast EPS of $3.2 for 2014.

Disney

Disney (NYSE:DIS) announced that it has started construction of The Frozen attraction that will come up at the Norway Pavilion in Epcot, replacing the Maelstrom at The Walt Disney World Resort. The attraction will include a royal greeting location where movie characters Anna and Elsa can meet the guests. Disney stated that in addition to character appearances, Cinderella Castle will be turned into an ice palace every night starting in early November. [3]

Bringing Frozen to its theme park is a smart move by the company as it will ensure higher visitation at the resort once the attraction is open to guests. It must be noted that Frozen is the most successful animation film in the history with a total box-office grossing of over $1.27 billion. The movie also created a huge demand for merchandise at Disney’s retail stores and can possibly brings its magic to the theme park (Read our full story – Disney To Bring Frozen Attraction To The Walt Disney World Resort).

We estimate revenues of around $48.4 billion for Disney in 2014 and EPS of $4.00. We maintain a $94 price estimate for Disney’s shares, which is close to the current market price of $90.

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Notes:
  1. CBS AND MEDIA GENERAL SIGN DEAL TO RENEW ALL AFFILIATION AGREEMENTS, Media General Press Release, Sep 15, 2014 []
  2. CBS SWEEPS THE PENULTIMATE WEEK OF THE TELEVISION YEAR, CBS’ Press Release, Sep 16, 2014 []
  3. ‘Frozen’ Attraction Coming to Epcot, Disney Parks Blog, Sep 12, 2014 []