Viacom (NASDAQ:VIA) recently signed a licensing agreement with Google (NASDAQ:GOOG) under which the users of Google Play and YouTube will be able to pay for and watch about 500 movies from Paramount Pictures studio.  These movies will be available for $2.99 to $3.99 for standard definition format, and at a higher price for high definition.  Viacom is doing what’s imperative for the company – looking beyond the traditional monetization channels and embracing the online shift. Google is providing a platform similar to what Apple (NASDAQ:AAPL) did with its iTunes.
- How Sensitive Is Viacom’s Share Price To Its International Subscription Revenues?
- Why We Still Believe Viacom Could Be A Good Investment?
- Potential Improvement in Ad Business May Ease Off Investor Concerns Regarding Viacom
- Why Renewal Of Its Contract With DISH Is A Big Win For Viacom?
- What Is The Contribution Of Nickelodeon US To Viacom’s Overall EBITDA?
- Can India Be The Next Growth Market For Viacom ?
We note that Apple is making roughly a little over $320 million per year by selling movies and TV shows on iTunes. Within this, the movie sales account for less than $25 million, although the growth is healthy. 
The essence is that this monetization channel is still very small. However, it is inevitable for content companies like Viacom to adopt it as DVD sales decline. For a long time, TV channels have played a major role in Viacom’s value but last year showcased company’s capability in filmed entertainment business when it topped worldwide box office sales. If Viacom can sustain the momentum it gained last year, its filmed entertainment can become significantly larger than what we currently estimate, making it an attractive investment.
Our price estimate for Viacom stands at $64.29, implying a premium of about 25% to the market price.Notes: