According to their critics, Meghan and Harry can be blamed for a lot of things (no doubt someone somewhere is trying to link them to Brexit), but did they really add billions of dollars to the market value of Viacom CBS last week and help make it the world’s most valuable TV company?
After surging 33% in February, shares in ViacomCBS (which owns the Ten Network in Australia) leapt another 27% last week to take the gain in the shares since February 15 to 63%. And what started last week? The Harry and Megs interview with Oprah Winfrey. It was up a further 1.4% on Monday.
The 27% rise last week added more than $US11 billion in value to the company’s market cap alone – it is now worth more than $US53 million – and that’s more than the value of the Murdoch clan’s companies – Fox News ($US24.1 billion) and News Corp $US15 billion.
The driver wasn’t Harry and megs but the market cottoning on to the late February announcement of a new streaming video service called Paramount+, which will include 30,000 TV episodes, 2,500 movies, 1,000 live sporting events, and live news. Importantly, this will replace CBS All Access, which never really took off as a stand-alone streaming service.
You’d be excused for thinking the company is some sort megatech in the making, but it ain’t. Viacom and CBS were one group up till 2006 but split with the idea that the faster growing cable business in Viacom would be held back by the old-fashioned CBS.
That wasn’t the case as Viacom went off the rails with cost and management problems. CBS did well but then long-time boss, Les Moonves was revealed as a sexual predator, was sacked and the controlling Redstone family took advantage of the situation and merged the two in 2019 in a deal worth $US12 billion.
Shari Redstone controls the voting shares (like the Murdochs) and got her way despite legal challenges and market scepticism.
In less than two years the company’s value has risen more than 400%, making fools of analysts and others in the US who doubted Ms Redstone and rationale for the deal. For that you can blame Covid and the surge of interest in streaming video as would be Netflix rivals pursue the sector leader.
Seeing rivals NBC and ABC are owned by larger companies – Comcast and Disney respectively and Fox of course a Murdoch asset, ViacomCBS is now the most valuable linear TV (free to air and cable networks, plus production facilities) company in the world.
Financially it is doing OK – not brilliantly, but the December quarter results showed a 3% increase in revenue to $US6.9 billion and net income of $US810 million. That was more than double the $US230 million the Murdoch’s Fox made in the same time.
The market attraction is that it now has a decent streaming offer that has the potential to rival Netflix and Disney. Paramount + starts with around 30 million subscribers – Netflix has 200 million and Disney close to 100 million.
Viewers to Netflix and free to air TV around the world will notice numerous Paramount movies and CBS-owned TV series (Star Trek, South Park, MASH, Get Smart, The Big Bang Theory, 60 Minutes etc). US analysts say the company gets revenue of $US6 billion a year (more than a quarter of the yearly figure) from licensing. It will take a lot more streaming customers to reach that figure.
Some analysts put the surge in the share price last week down to interest in the Meghan and Harry interview (27 million first time viewers in the US). That was all marketing buzz – it’s all about streaming video and the rush to build market presence.
Disney abandoned its old look as a diversified media, travel, tourism, film and video company last year to save itself by focusing on streaming to the exclusion of other businesses. There are reportedly more than 300 streaming services available in the US and hundreds more globally.
With its strong slate of old programs and movies, ViacomCBS looks better placed to be a contender than smaller rivals at NBC or HBO, ITV, the BBC.
So will viewers of Ten in Australia get a look in?
