Weekly Media Notes: Rebranding Channel 5, ESPN Threat And News Corp’s Stake In APN

The media industry saw significant activity last week, with Viacom planning to rebrand Channel 5 in U.K. There are rumors of Apple’s subscription service, which may also include Viacom’s cable networks. On a separate note, Sony launched its web-TV service with more than 80 channels but without Disney’s ESPN network. In an another note, News Corp has taken a 14.99% stake in Australia’s APN News & Media. On that note, we discuss below these developments related to the media companies over the last week or so.

Viacom

Viacom (NASDAQ:VIA) is rebranding Channel 5, which it acquired last year. ^[1] Channel 5 is the only broadcaster in the U.K. to post viewership growth in recent years. It features some of the popular shows such as The Gadget Show, The Hotel Inspector and Gibraltar: Britain in the Sun. The network also imports some shows from the U.S. and reaches more than 42 million viewers. It offers an opportunity for Viacom to capitalize on its U.S. programming in the U.K. and a rebranding effort may help it increase viewership in the near term.

On a separate note, Viacom’s cable networks may feature on rumored Apple’s (NASDAQ:AAPL) TV subscription service. The Wall Street Journal recently reported that Apple is in talks with several content owners to launch a Web-based TV service. ^[2] As more content distribution avenues grow, conditions improve for content companies such as Viacom, which will enjoy higher affiliate and licensing revenues.  This in turn will offset some of the declines seen in advertising income  that have resulted from lower viewership on traditional television led by a rise in alternative video platforms.

We estimate revenues of about $14.2 billion for Viacom in 2015, with EPS of $6.03, which is in line with the market consensus of $5.55-$6.70, compiled by Thomson Reuters. We currently have a $80 price estimate for Viacom, which is around 15% ahead of the current market price of $69.

Disney

Sony this week launched its PlayStation Vue TV service, which offers more than 80 channels. However, the bundle does not include Disney’s (NYSE:DIS) ESPN, which was the most watched cable network in 2014. The mere presence of such services without some of the popular networks such as ESPN, showcase the future uncertainties for the media companies, according to a report. ^[3]

We forecast revenues of around $53 billion for Disney in 2015 and EPS of $4.90, which is in line with the market consensus of $4.89, compiled by Thomson Reuters. We currently have a $105 price estimate for Disney’s shares, which is close to the current market price of $104.

News Corp

News Corp (NYSE:TWX) has raised its stake in APN News & Media Limited to 14.99% for $104 million. APN has radio, outdoor media and print assets in Australia and New Zealand. News Corp already owned a 4.9% stake in the company. ^[4] Given a secular decline in the print industry, News Corp had been aggressive in acquiring other assets, including digital real estate. APN’s strength is its radio shows, which likely lured News Corp to increase its stake in the company.

We estimate revenues of about $8.86 billion for News Corp in 2015 with EPS of $0.36, which is below the market consensus of $0.50, compiled by Thomson Reuters. We currently have a $20 price estimate for News Corp, which is around 20% ahead of the current market price of $17.

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1. Viacom to Rebrand UK’s Channel 5, The Hollywood Reporter, March 19, 2015 [↩]
2. Apple TV Plans Unscrambled, The Wall Street Journal, March 17, 2015 [↩]
3. ESPN Threatened By Cable Bundle Disruption, Analyst Says, Following Disney Stock Downgrade, International Business Times, Mar 19, 2015 [↩]
4. News Corp expands stake in Australia’s APN media with $104 million deal, Reuters, Mar 19, 2015 [↩]