How Viacom Is Shielding Itself From The Cord-Cutting Trend?

In a recent interview, Viacom‘s (NASDAQ:VIA) Bob Bakish, CEO of Viacom International Media Networks, explained that the company is focused on getting “TV everywhere” right to maximize its presence with viewers.   With “Viacom Play Plex”, it has the flexibility to go to the market in a variety of ways.  “Viacom Play Plex” is a suite of branded video centric apps which includes the network’s most popular channels, including MTV, Nickelodeon and Comedy Central.  The service, moreover, can be used for viewing the content of these channels on smartphones. With Pay-TV penetration around 40% outside the U.S., the company believes that there are significant growth opportunities in international markets. As viewership continues to transition into video on demand, Viacom’s initiatives to make its content available on other media will drive its revenues in future.  Through initiatives such as “Play Plex”, Viacom can better leverage growth in international markets, in out view.

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Adapting Content For Different Distribution Channels

Viacom has been working on initiatives to make its content available for mobile viewing.  Increasingly, the company is gaining traction with this endeavor. Recently it launched a “Super Shore” series and made it available for mobile viewers through MTV Play. The company got 3 million streams for these videos in less than a week, with each stream being 20 minutes long. This duration indicates that the audience watched a whole episode through the app. According to Zenith Optimedia, the number of people watching traditional linear TV will start to decline in 2016, forecasting that the number of  TV viewers will shrink by 1.9% in this year.  On the other hand, viewer time spent on online video consumption will increase by nearly 20% in 2016, driven by consumption of videos on mobile devices.  This consumption is forecast to grow by 35% in 2016.  Viacom’s Play Plex appears to be well poised to capture this trend. As TV audience shifts to mobile devices, making its content available on demand through apps should shield Viacom from the cord-cutting trend.

International Markets Hold Strong Growth Potential

According to ABI research, the Asia Pacific Pay TV market is likely to grow faster than most other regions, given the low penetration and high economic growth in this region. Worldwide Pay-TV penetration is expected to cross 50% by 2017 and is forecast to reach 1.1 billion subscribers by 2020, generating $307.5 billion in service revenue. As Pay-TV penetration is as high as 60-80% in North America and Western Europe, this growth will be boosted by emerging nations. According to our estimates, the “International & Other” division accounts for nearly 70% of Viacom’s valuation.  We expect subscription revenues of this segment to increase steadily and reach around $ 4.6 billion by the end of our forecast period

Viacom has seen phenomenal growth in international markets over the past few years, driven primarily by the success of Nickelodeon and MTV.  We expect the company to penetrate untapped geographies and continue its international expansion.

As Viacom struggles to increase its TV ratings and contract renewals with Pay-TV networks, innovations to make its content available on  alternative distribution channels such as mobile devices should provide a shield to the company from the cord-cutting trend in the U.S. Moreover, international expansion into geographies where Pay-TV penetration is low should continue to drive revenues for the company in this segment in the future as well.

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