Viacom Will Continue to Focus on Advertising in Fiscal 2016
Viacom in international markets
On January 28, 2016, The Hollywood Reporter reported that Viacom’s (VIAB) International Media Networks business segment will launch the Paramount Channel in Italy (EWI) on February 27. According to the report, the company stated that with its launch in Italy, the Paramount Channel is expected to reach 90 million households globally, “making it the most widely distributed global ad-supported movie channel.”
Viacom is expected to announce its 1Q16 results on February 9, 2016. Let’s take a look at Viacom’s international expansion strategy.
Viacom considers international expansion to be an opportunity for long-term growth. Viacom stated at the UBS (UBS) Global Media and Communications Conference held late last year that it’s expanding its brands in international markets, as it’s experiencing rapid growth in “a non-U.S. media environment.”
Viacom in the UK
The company considers the United Kingdom (EWU) to be “the best advanced market to be in outside of the U.S.” Viacom acquired Channel 5 Broadcasting in 2014 for around $643 million. Viacom has a portfolio in the United Kingdom that consists of 30 brands, and it intends to scale up its brand portfolio there.
The company also has a strategic deal with Sky, a pay-TV operator in the United Kingdom. Under the terms of the deal, a subscriber to Sky in the United Kingdom can watch Channel 5 in HD (high definition), while a non-subscriber cannot watch Channel 5 in HD.
Viacom in India
Viacom also considers India (EPI) to be a market where its brands have an opportunity for rapid growth. In India, Viacom has a 50% equity method in Viacom 18, a joint venture with Network18 Media & Investments. In July last year, the company also acquired a 50% stake in Prism TV, which owns and operates RECs (regional entertainment channels) in India, for $149 million.
Viacom has high expectations for its Viacom 18 joint venture. It expects revenue growth of 20% per year, with operating income growth “at a significantly higher rate,” as it expects to continue the launch of its media networks in India. It also expects that its stake in India’s RECs will create long-term value.
21st Century Fox (FOXA) is another company that has expanded rapidly in the Indian market with its Star entertainment network.
Viacom makes up 0.09% of the SPDR S&P 500 (SPY). The same ETF also holds 3.2% of Apple (AAPL). For an investor interested in exposure to the computers sector, SPY has 3.8% exposure to the sector.