Weekly Media Notes: Amazon Prime, Disney Infinity 3.0 And Game of Thrones Piracy
The media industry remained active last week, with Amazon deciding to drop Viacom’s reality shows. In another development, Disney revealed Infinity 3.0. In yet another, despite the availability of HBO Now, Game of Thrones continues to set piracy records. On that note, we discuss below these developments related to media companies over the last week or so.
Viacom
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Amazon Prime will drop Viacom’s (NASDAQ:VIA) reality shows, including Teen Mom and Mob Wives. Amazon is looking to invest more into original programming. [1] This does not come as a surprise as demand for most reality shows is fading. Even Fox has decided to drop American Idol after its 15th season. It is important for media companies such as Viacom to invest in original programming to attain higher viewership, which will directly aid the company’s advertising revenues. It must be noted that domestic advertising revenues dropped over 5% for Viacom in March quarter amid lower television ratings. We believe original programming can help the company rebound its ratings and 10% viewership growth could lead to a further 10% potential upside to our price estimate for Viacom (see – What Can Move Viacom’s Stock Higher?).
We estimate revenues of about $14.2 billion for Viacom in 2015, with EPS of $5.83, 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 more than 20% ahead of the current market price.
Disney
Disney (NYSE:DIS) recently revealed Infinity 3.0, which will be priced at around $64.99 for starter pack and will include the Twilight of the Republic Play Set (an original chapter of Star Wars), Anakin Skywalker and Ahsoka Tano Figures. [2] The first version of Infinity was released in August 2013 and the game has seen tremendous success since. Disney Infinity is part of the interactive media division, which is involved in developing and distributing video games and related content. The division had struggled in the past due to poor performance of its releases. However, Infinity’s positive trend helped Disney turn around the unit, which was posting losses earlier. Given the success Infinity has seen in the recent past and with the Star Wars themed Play Set, the third generation may well continue the brand’s success story.
We forecast revenues of around $53 billion for Disney in 2015 and EPS of $5.00, which is in line with the market consensus of $5.00, compiled by Thomson Reuters. We currently have a $105 price estimate for Disney’s shares, which is slightly below the current market price of $110.
Time Warner
Time Warner‘s (NYSE:TWX) HBO scored piracy record with downloads of over 3.20 million within 24 hours of the fifth episode airing. An interesting fact is that the U.S. remains at top for Game of Thrones piracy shows despite the availability of HBO Now, which was recently launched at Apple Devices for $15 a month. [3] We are eager to see how customers receive this new service in the near term. It must be noted that if HBO Now manages to attain a subscriber base of 15 million, it could lead to a further 10% potential upside to our price estimate (see – What Can Move Time Warner’s Stock Higher?).
We estimate revenues of about $29 billion for Time Warner in 2015 with EPS of $4.58, which is slightly lower than the market consensus of $4.67, compiled by Thomson Reuters. We currently have an $95 price estimate for Time Warner, which is more than 10% ahead of the current market price of $84 per share.
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- Amazon Said to Drop Viacom Shows as Reality Fatigue Hits, Bloomberg, May 14, 2015 [↩]
- DISNEY INFINITY 3.0 REVEALED, Disney, May 5, 2015 [↩]
- ‘Game of Thrones’ Breaks All-Time TV Piracy Record, Variety, May 11, 2015 [↩]