Weekly Media Notes: Game of Thrones Ratings, News Corp Amazon Deal And Media Networks Guarantees To Advertisers

April 17th, 2015 by Trefis Team
TWX: Time Warner logo
TWX
Time Warner

The media industry saw significant activity last week, with HBO’s Game of Thrones scoring record viewership. On another note, Time Warner and Viacom are in talks with advertisers to look at measuring options beyond traditional Nielsen ratings. In yet another development, News Corp and Amazon ink a multiyear publishing deal. We discuss below these developments related to the media companies over the last week or so.

Time Warner

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Time Warner‘s (NYSE:TWX) HBO scored record viewership of close to 8 million for season 5 premiere of Game of Thrones. [1] However, four upcoming episodes were leaked and downloaded over 100,000 times on torrents within the first three hours. Time Warner aired the show simultaneously in 170 countries to deal with the piracy issue surrounding the much-demanded show. While the premiere episode has set a viewership record, it will be interesting to see how the viewership trends for the upcoming episodes. Nevertheless, the show continues to boost HBO’s demand worldwide.

We estimate revenues of about $29 billion for Time Warner in 2015 with EPS of $4.48, which is slightly lower than the market consensus of $4.66, compiled by Thomson Reuters. We currently have an $91 price estimate for Time Warner, which is more than 5% ahead of the current market price of $85 per share.

Viacom

Viacom (NASDAQ:VIA) and Time Warner are in talks with advertisers to pay for ads based on how the ads impact consumer behavior instead of payment based on traditional viewership trends as measured by Nielsen. Both media companies have offered guarantees such as lift in brand recognition, failing which they might have to shell out extra ad inventory towards those brands. [2] Nevertheless, this is an interesting move away from traditional advertisement spending based on number of viewers and could find many takers in the coming years. It must be noted that with the rise of more viewing options, it is difficult to estimate the overall viewership as many streaming service providers do not share their viewership trends. However, Nielsen will be measuring viewership on Netflix and Amazon Prime starting this year. With this new setup, guarantees by the media networks will also lure advertisers. It is of key importance for media networks to ensure advertising commitment towards their networks, especially in these times when the budget allocation for ads is shifting from traditional television to digital platforms and social media.

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 10% ahead of the current market price of $71 per share.

News Corp

News Corp’s (NYSE:TWX) book publishing unit, HarperCollins, and retailer Amazon (NASDAQ:AMZN) have inked a multi-year publishing deal. The new deal for print as well as digital titles will allow HarperCollins to set the retail prices for its e-books. This is a positive development for the publisher primarily due to the pricing power that it will have over its titles. The deal was important for HarperCollins as Amazon accounts for 60% of the e-books market and the publishing house is preparing for the launch of Harper Lee’s Go Set A Watchman, the most anticipated title for 2015 (read more – News Corp: HarperCollins And Amazon Ink A Multiyear Publishing Deal).

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 25% ahead of the current market price of $16.

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Notes:
  1. ‘Game Of Thrones’ Logs Series-Best Opener Despite Leak Of First Four Episodes, Deadline, Apr 14, 2015 [↩]
  2. Time Warner, Viacom Back Away From Nielsen Guarantees For Ads (EXCLUSIVE), Variety, Apr 13, 2015 [↩]