Viacom Says Digital Revenue Will Increase Steadily for Years
Viacom is poised for years of steady revenue growth from digital, as its traditional pay-TV distributors and new entrants into digital distribution vie for the rights to its TV programming, executives said in the company’s Q3 earnings call. “We have a lot of confidence in what we see ahead,” CEO Philippe Dauman said. The company said it expects affiliate sales to increase by high single-digit percentage points or more each year for the foreseeable future, driven by growth in digital distribution. “The number of players out there continues to increase,” Dauman said. “And there is great demand for our content for obvious reasons,” he said. Viacom’s shows tend to target younger audiences who are more likely to watch on new platforms, he said.
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Beyond new entrants such as Amazon and Netflix, traditional distributors are increasingly seeking digital rights, Dauman said. “Some of those discussions are going forward as well,” he said. And new online video distributors are seeking access to Viacom programming in the U.S. and abroad, he said. Moreover, the margins Viacom yields on its digital distribution deals exceed 75 percent, Dauman said. The deals have involved Viacom’s library content, he said. Digital distribution deals typically run about two years, while deals with traditional multichannel video programming distributors typically run much longer, Dauman said. As the digital distribution market matures, agreements may be longer in duration as distributors become more established, he said.
Viacom approaches digital rights negotiations differently with each potential distribution because each has their own way of operating online, he said. “The Hulu Plus model is different from the Netflix model which is different from the Amazon model,” he said. “Some of it is more analogous to syndication,” while some of it more closely resembles VOD agreements with traditional MVPDs, he said. “We're open to different models as long as they generate incremental monetization opportunities,” he said. Viacom also takes different approaches to digital rights depending on the content it’s licensing, he said. For the Daily Show and Colbert Report, for instance, Viacom has found that putting shows online the day after they initial telecast can help ratings for the next day’s show, he said. For other programming that is rerun more often on TV, that’s not always the case, he said. “We're getting increasingly sophisticated as we go forward about how our digital distribution strategy should evolve.
Traditional domestic affiliate fees can continue to increase as Viacom has a number of pay-TV networks that aren’t fully distributed, he said. Networks such as Logo, Nicktoons and Teen Nick still have some growth ahead of them, he said. Plus, the overall universe of pay-TV subscribers is still growing, he said. “Based on the data we've seen, there has been overall growth in MVPD subs,” he said. Quarterly sales at Viacom gained 15 percent from a year earlier to $3.77 billion, the company said. Sales at its filmed entertainment division gained 13 percent to $1.4 billion, while sales at its media networks gained 16 percent to $2.39 billion. Profit increased 11.6 percent from a year earlier to $589 million.