Media Networks Will Drive Viacom’s Q2 Earnings Higher
Viacom (NASDAQ:VIA) will report its fiscal Q2 2014 earnings on May 1 (Fiscal years end with September). We expect the company to post gains in its media networks business driven by the continued growth in ratings, especially at the Nickelodeon network. Higher ratings should have boosted the advertising revenues for Viacom. The company’s popular music channel MTV also enjoyed higher ratings for its programming in the quarter. Better ratings at media networks led to 20% jump in the operating income for the company in the previous quarter. [1] We expect Viacom to benefit from the improved ratings and see higher advertising revenues in the current quarter. Viacom’s movie arm Paramount will benefit from the theatrical performance of Noah, Jack Ryan: Shadow Recruit and Anchorman 2: The Legend Continues.
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Nickelodeon And MTV Will Lead The Growth
MTV will benefit from Teen Wolf and Teen Mom 2. Teen Wolf ‘s ratings surged in the third season with 2.7 rating in 12-34 demographic and 3.1 million total viewers. [2] Teen Mom 2 also premiered with 3.2 million viewers, ranking as MTV’s highest-rated series premiere in more than a year and has scored good ratings throughout the season so far.
Nickelodeon’s ratings continued to grow in the first quarter driven by a new slate of hits. The network finished first quarter as No. 1 network in total day with kids in 2-11 demographic and total viewers, marking its second straight quarter at the top. While SpongeBob SquarePants remained at the top spot, live-action hit Sam & Cat was kids’ top show on all TV for the quarter. [3] Nickelodeon would have largely benefited from the 27th Annual Kids’ Choice Awards, which was watched by more than 11.4 million total viewers towards the end of the quarter. The show scored record ratings internationally including Netherlands, Poland and Northern Belgium and was rated number-one in its timeslot among kids’ channels in key markets including the United Kingdom, Netherlands, Poland, and Northern Belgium. [3]
Nickelodeon’s continued focus on new and original programming appears to be paying off well for Viacom. While it will be interesting to see if Nickelodeon’s ratings continue to move northward throughout 2014, the network for now continues to drive growth for the company. This could prove meaningful to Viacom as Nickelodeon U.S. alone contributes more than 13% to the company’s value, according to our estimates. The contribution is much more significant if we account for its global operations.
Paramount To Perform Well Over In The Quarter
Paramount should report good results for the March quarter given the strong performance of Noah, Jack Ryan: Shadow Recruit and Anchorman 2: The Legend Continues. Paramount currently accounts for around 10% market share at the U.S. box office. [4] Noah was made with a production budget of $125 million and it has grossed over $320 million at the box-office globally. Similarly, Jack Ryan: Shadow Recruit did well to gross $134 million for a production budget of $60 million. Anchorman 2: The Legend Continues also grossed around $172 million and was made with a production budget of $50 million. We believe Paramount will do better in the coming quarters as well as for the full year, primarily due to a solid slate that includes Transformers: Age of Extinction, which will be released towards the end of June.
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- Viacom’s SEC Filings [↩]
- MTV’s ‘Teen Wolf’ Season Three Finale Takes a Bite Out of the Competition Drawing 2.3 Million Total Viewers, Zap2it, Mar 25, 2014 [↩]
- NICK TOPS BASIC CABLE WITH KIDS AND TOTAL VIEWERS FOR FIRST QUARTER, Nickelodeon’s Press Release, Apr 1, 2014 [↩] [↩]
- Studio Market Share, Box Office Mojo, As of Apr 27th 2014 [↩]