A View of Viacom’s Advertising Business

Viacom's Revenue Falls in Fiscal 2015

(Continued from Prior Part)

Media Networks advertising business

Viacom’s (VIAB) Media Networks segment had record revenues of $10.5 billion in fiscal 2015, a rise of 3% over fiscal 2014. The growth in revenue was mainly driven by affiliate fees of $4.9 billion, which was a rise of 5% over fiscal 2014, and a 1% growth year-over-year in advertising revenues in fiscal 2015.

Viacom’s Media Networks segment had advertising revenues of $5 billion in fiscal 2015, up by 1% over fiscal 2014. Advertising revenues in fiscal 4Q15 were $1.2 billion, a fall of ~1% over fiscal 4Q14. However, as the chart above indicates, advertising revenue grew quarter-over-quarter to 2% in fiscal 4Q15.

Domestic advertising revenue improved slightly from a quarter-over-quarter fall of 9% in fiscal 3Q15 to a quarter-over-quarter fall of 7% in fiscal 4Q15. Viacom stated in its earnings call that it expects the fall in domestic advertising revenue to improve further over fiscal 2016.

Now let us look at the reasons for Viacom’s optimism about its advertising revenues.

Improving ratings from Nielsen

Viacom’s major networks including Nickelodeon, Nick at Night, TV Land, BET, CMT, and VH1 are experiencing an improvement in Nielsen ratings for people across different age groups. Nielsen ratings are important for media companies such as Viacom, as advertising revenues are dependent on these ratings.

Higher ratings are attractive for advertisers as they indicate that more viewers in a particular demographic are watching a show. This means that advertisers can target this audience, and companies such as Viacom can earn advertising revenues in the process.

In 2016, Nielsen is going to change their measurement service and move to an NTX Audience Universe and also do total audience measurements. Viacom expects this change to benefit it.

Vantage

Vantage is Viacom’s data analytics platform, which offers advertisers campaign measurement and enhanced audience targeting. Viacom’s Echo is another data analytics platform that provides advertisers the ability to reach a targeted audience across social media.

Currently, Vantage is used by eleven advertisers, and Viacom intends to triple the number of advertisers using Vantage by next year’s ad upfronts. The reason for Viacom’s focus on monetizing Vantage is because Viacom’s top 100 advertising clients account for 75% of the company’s advertising revenues.

Earlier this month, Viacom entered into an agreement with TiVo (TIVO) that will enable advertisers to access viewership data from the TiVo set-top box and advertise in a more targeted way across Viacom’s cable networks.

Viacom makes up 0.22% of the Guggenheim S&P 500 Equal Weight ETF (RSP). The same ETF also holds 0.26% of both Sandisk (SNDK) and Nvidia (NVDA).

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - Viacom’s Earnings Fall Short of Expectations

• Part 3 - Key Events Affecting Viacom’s Fiscal 2015 Results

• Part 4 - Viacom Focuses on Original Programming