Viacom (NASDQ:VIA) which had significant success with its filmed entertainment division last year, is focusing on digitizing its content now. Recently during the Deutsche Bank Media and Telecom Conference, Viacom emphasized that the company will increasingly leverage social media to promote its content and continue to strike digital licensing deals as the streaming business grows.  This is something that other media companies such as Time Warner (NYSE:TWX) have stated as well. As the streaming market grows, fueled by the success of Netflix (NASDAQ:NFLX) and others, there is opportunity for media owners to better monetize their content in the face of declining DVD sales.
Speaking of digital platforms, Viacom’s channel MTV has launched social TV app in Europe which will allow users to watch MTV content on their mobile and share with their friends.  We estimate that MTV constitutes about 11% to Viacom’s stock making it quite an important network. We note that Viacom is heavily dependent on its cable networks, making it less susceptible to advertising market trends.
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On the financing side, Viacom announced that it will raise a new debt of less than $1 billion, which will be a combination of 3-year notes and 30-year bonds.  These notes have been given a rating of BBB+ by ratings agency Fitch.
Our price estimate for Viacom stands at $64.29, implying close to 20% premium to the current market price.Notes:
- Viacom’s Dauman Touts Digital Strategies, Home Media Magazine, Feb 28 2012 [↩]
- MTV Europe Mobile Moves Into Social TV With Digital Agency AKQA, TechCrunch, Feb 28 2012 [↩]
- Viacom Issuing 3-Year, 30-Year Debt In US Credit Markets -Source, The Wall Street Journal, Feb 23 2012 [↩]