ViacomCBS: shift into streaming will be Paramount

ViacomCBS scored a big ratings win this week. Oprah Winfrey’s dramatic interview with Prince Harry and Meghan Markle drew in more than 17m US viewers last weekend, making it one of the most-watched interviews in recent years.

The US media conglomerate reportedly paid as much as $9m for the licensing rights to the two-hour interview. But it has more than recouped the cost, aired in the UK by ITV. In addition to the advertising sold during the interview, ViacomCBS shares have jumped nearly 25 per cent this week, worth some $11bn in market value. Year-to-date the stock has more than doubled.

A revival in value investing that favours beaten down stocks has helped. This is reflected in the group’s forward earnings multiple, which has surged from around 3 times a year ago to 22 times now, even though its earnings outlook has not materially changed according to S&P Global.

Hope that ViacomCBS can leverage some of the buzz around the royal interview into subscribers for its newly overhauled streaming service, now called Paramount Plus, is also giving the stock a boost.

But ViacomCBS is a latecomer to streaming. Sector leader Netflix has 200m subscribers while Disney+, with franchises such as Marvel and Pixar, has 95m. ViacomCBS has about 30m. 

One problem is content. Over the years, to offset falling TV viewership and advertising revenue, the company licensed out some of its crown jewels like South Park and The Big Bang Theory to rival media groups. 

It will be a hard habit to kick. Content licensing generated nearly $6bn in revenue for ViacomCBS last year, more than twice the amount from streaming. 

Heavy spending on new content should help break the habit. Revenue from streaming could triple over the next three years to $7.5bn, think analysts at Citi. However, growing Paramount Plus while making sure viewers maintain cable subscriptions, or tune into CBS shows, which provide so much revenue will not be easy.

It is a delicate balance that will require more than the success of a one-off royal interview to achieve.

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