Viacom Taps Asian Pay-TV Market Growth With Comedy Central

Viacom (NASDAQ:VIA) will be launching its Comedy Central channel in Southeast Asian countries including Singapore, Philippines and Combodia early next month. ^[1] International expansion is a key part of the growth strategy for big media companies in the U.S. such as Viacom, Disney (NYSE:DIS), Time Warner (NYSE:TWX) and others. Besides launching channels, the media companies are also exploring how they can modify their existing famous shows to cater to international markets, thus enhancing their licensing revenues (see Disney Has Ample Opportunity In Emerging Markets Expansion). The revenue contribution of international markets (apart from the U.S. and Europe) has been on a gradual rise for Viacom. The Southeast Asian expansion is congruent with the strategy as Viacom looks to replicate the success of Nickelodeon and MTV.

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In the calendar year 2009, about 10% of Viacom’s revenues came from international markets, excluding Europe and the U.S. This figure rose to 12% in the fiscal year 2011. There is a growing appetite for pay-TV services in the emerging markets of Asia and Latin America, and Viacom will look to leverage this growth. The company already operates its biggest channels, Nickelodeon and MTV, in these markets and has had quite a success with them. While MTV reaches close to 600 million subscribers globally across 150 countries, Nickelodeon is present across 330 million households in 110 countries. In comparison, Comedy Central is present only in 200 million households across 70 countries. ^[1]

We estimate that Comedy Central brought more than $600 million in revenues from its U.S. operations for Viacom in 2011. The channel’s average fee per subscriber stood at 23 cents per month in 2011. ^[2] Using this figure and 98 million subscribers in the U.S., we arrive at a subscription revenue figure of $270 million.

We further estimate the ad revenues for Comedy Central to be over $350 million based on a general comparison of ad and subscription revenues of Viacom as a whole. ^[3]. These figures make Comedy Central the third largest network for Viacom behind Nickelodeon and MTV. The value impact of the successful expansion will be notable.

Our price estimate for Viacom Cable stands at $67, implying a premium of about 20% to the market price.

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1. Comedy Central Continues Global Expansion With Southeast Asia Launch, The Hollywood Reporter, Oct 3 2012 [↩] [↩]
2. Affiliate fee growth offsets lower ads for Viacom, IHS Screendigest, Feb 14 2012 [↩]
3. Viacom’s SEC filings [↩]