Morningstar | Viacom Acquires Pluto TV; OTT Platform Could Help Accelerate Viacom’s Online Efforts
On Jan. 22, Viacom announced the purchase of Pluto TV, an ad-supported OTT platform, for $340 million in cash. Pluto offers both linear streaming channels and on-demand content via its platform-agnostic app and in-browser service. While we don't expect Viacom to place its pay television channels on the service, Pluto could offer a platform for monetizing some of the firm’s older library titles while also providing Viacom with a wealth of knowledge about streaming. Viacom’s larger advertising platform could help Pluto increase its advertising revenue. However, due to the relatively small size of Pluto, we don’t expect the acquisition to have any meaningful impact on Viacom’s results over the near to medium term. Thus, we are maintaining our narrow moat rating and $36 fair value estimate for Viacom.Pluto’s linear feed of 100 channels features a number of aggregated free OTT streaming channels like Cheddar, CBS News, and IGN. The sports networks are more niche oriented including a kickboxing channel and one dedicated to the World Poker Tour. Pluto did acquire a sports channels with the rights to certain events from the Big Sky conference which may help with that specific region but lacks mass market appeal. The firm also stream multiple linear feeds that feed off its on-demand content, much of which was acquired via distribution deals with Sony and Discovery.
Over 60% of the firm’s 12 million monthly active users view the service via connected TVs. This number has been boosted by the 2018 deal with Vizio which offers a rebranded version of the service called WatchFree on nearly of all its SmartCast TVs as a specific input. The annual run rate for ad revenue is reportedly $200 million for these 12 million viewers, implying monthly revenue of just under $1.40 per user. While Viacom could help boost ad revenue per user, we would expect the metric to remain well below the mid-single dollar level that we expected OTT pay television distributors to be able to generate.
Viacom provides entertainment through television, film, digital media, live events, merchandise and solutions. The company operates through two segments: Media Networks, which provides entertainment content, services and related branded products for consumers in targeted demographics attractive to advertisers, content distributors and retailers through its media brands including Nickelodeon, MTV, BET, Comedy Central and Paramount Network; and Filmed Entertainment, which develops, produces, finances, acquires and distributes films, television programming and other entertainment content through its Paramount Pictures, Paramount Players, Paramount Animation and Paramount Television divisions.
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