Weekly Media Notes: Comcast Gets The Nod, CBS Has a Launch and Fox a New JV

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The media industry saw significant activity last week, with Comcast’s NBCUniversal (NBCU) getting the nod to build a theme park in Beijing, China. In an another development, CBS Corporation announced its video on demand service, which will offer CBS’ programming on the connected devices in 14 markets in the U.S. And in yet another, 21st Century Fox and private-equity firm Apollo Global Management have formed a programming partnership that will combine three television production companies into one. On that note, we discuss below these developments related to the media companies over the last week or so.

Comcast Gets The Nod To Build A Theme Park In Beijing

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Comcast’s (NASDAQ:CMCSA) NBCU along with Beijing Shouhuan Cultural Tourism Investment Co., a consortium of four state-owned companies, will build a $3.3 billion Universal theme park in Beijing. The theme park will be spread over 300 acre site and eventually expand to 1000 acres. The project was approved this week by the Chinese government. Along with the theme park, NBCU will develop an entertainment complex and a Universal themed resort hotel. [1] China plays important role in the success of big Hollywood movies and is also a lucrative market for theme parks. Accordingly, building a theme park in the region makes a lot of sense. On the economic front, China is home to 11 of the top 20 amusement parks in Asia with about 166 million visits and close to $3 billion in revenues in 2013. [2] It is a huge market and it is expected to overtake the U.S. theme park market by 2020.

We estimate revenues of about $68 billion for Comcast in 2014, with Non-GAAP EPS of $3.02, which is in line with the market consensus of $2.86-$3.1, compiled by Thomson Reuters. The company’s stock had declined close to 5% last week. We currently have a $60 price estimate for Comcast, which is about 20% ahead of the current market price.

 

CBS Corporation  Launches Its Streaming Service

CBS Corporation (NYSE:CBS) has announced its new streaming service CBS All Access. The video-on-demand service will offer its subscribers thousands of episodes of various shows such as The Good Wife and Survivor. It will also include current season primetime shows, a day after they air on television. CBS has priced this service at $5.99 a month and subscribers can stream the content in 14 of the largest U.S. markets at launch. [3] This gives CBS another pocket of revenues. However, the service looks expensive as compared to Netflix (NASDAQ:NFLX), which charges $7.99 a month for a wide range of programming and content.

We estimate revenues of about $14.84 billion for CBS Corporation in 2014, with EPS of $3.20, which is in line with the market consensus of $3.04-$3.45, compiled by Thomson Reuters. CBS’ stock price has moved up more than 3% this week. We currently have a $60 price estimate for CBS Corporation, which is more than 15% ahead of the current market price.

FOX and Apollo Group Form A Joint Venture To Create A Global Entertainment Giant

21st Century Fox (NASDAQ:FOX) has created a joint venture with Apollo Global Management to merge three content companies, Core Media, Shine Group and Endemol. [4] The deal is valued at more than $2 billion. All three television production companies create popular unscripted shows such as American Idol, The Biggest Loser, Big Brother and MasterChef series. The new combined entity will operate in more than 30 countries and control a portfolio of more than 600 scripted and unscripted program formats. Fox and Apollo will equally own the new venture and they will jointly manage the group. [5]

We estimate revenues of about $34 billion for 21st Century Fox in 2014, with EPS of $1.59, which is in line with the market consensus of $1.45-$1.64, compiled by Thomson Reuters. The company’s stock has increased close to 2% this week. We currently have a $39 price estimate for 21st Century Fox, which is about 20% ahead of the current market price.

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Notes:
  1. UNIVERSAL THEME PARK AND RESORT PLANNED FOR BEIJING, Comcast’s Press Release, Oct 13, 2014 []
  2. Amusement Parks in China: Market Research Report, IBIS World, Mar 2014 []
  3. CBS Brings Programming Direct To Consumers With New Multi-Platform Digital Subscription Service, CBS Corporation’s Press Release, Oct 16, 2014 []
  4. 21ST CENTURY FOX AND APOLLO ANNOUNCE AGREEMENT TO CREATE A LEADING GLOBAL MULTI-PLATFORM CONTENT PROVIDER, BRINGING TOGETHER ENDEMOL, SHINE GROUP AND CORE MEDIA, 21st Century Fox’s Press Release, Oct 10, 2014 []
  5. 21st Century Fox, Apollo Finalize Pact for TV Venture, The Wall Street Journal, Oct 10, 2014 []