Wall St. Speaks Out on Viacom -RBC Capital Markets

Key points It39s Early Innings But Focus Is Clearly on Transforming Viacom Advertising Monetization Strategyamp8212Viacom Vantage is now out of beta after a year Vantage in combination with other initiatives eg Velocity and Echo is expected to help advertisers to better mine data for insights and offer better measurement across platforms This should enable Viacom to more effectively target and sell audience as much as it sells content While all traditional media operators have this goal in their longterm sights Viacom39s younger skewing target market more susceptible to changing media consumption patterns makes the initiatives more of an imperative This we believe is core to Viacom39s stated strategy to migrate 50 of audience monetization toward nonNielsen measured inventoryRatings Are Bigger Overhang than Ad Market Itselfamp8212Management noted that within the context of 20 ratings declines Domestic advertising revenue only declined 5 While that result isn39t anything to get excited about it demonstrates strong demand for inventory as well as Viacom39s ability to monetize content outside the Nielsen universe Sequentially we are expecting similar Domestic Ad growth but we are expecting very modest improvement as the year progresses bringing new programming and potentially broader cross platform ratings measurementF2Q15 Results Inline Outlook Essentially Unchangedamp82125 Domestic Advertising declines met Street expectation while 3 Domestic affiliate growth was 150bps light SVOD deliveries make this tough to model quarterly In terms of global results at Media Networks FX headwinds on Global revenues were offset in part by the impact of the acquisition of Channel 5 Exrestructuring charges EBIT was slightly ahead of expectations but the bulk of the 010 EPS beat was below the lineContinue To Expect MidSingle Digit Affiliate Growth For FY15 And HighSingle Digits In FY16amp8212As VIAB comps the loss of Suddenlink and Cable One subscribers and likely benefits from new distributors we remain confident that LT highsingle digit affiliate growth is possible We expect more of the targeting products referenced above to contribute to modest sequential improvement in advertising growth in FY16 management has indicated that these new initiatives will be focused on the upfronts which don39t bear fruit till the next broadcast year beginning in October 2015ValuationWe derive a 78 price target for Viacom We average our sumoftheparts F2015E blended PE multiplebased valuation and DCF methodologies We use a 13x PE multiple as this is where publicly traded companies in the largecap media space historically have tradedLink to Required Disclosures and Disclaimer All values in USD unless otherwise notedPriced as of prior trading day39s market close EST unless otherwise statedThe opinions and points of view expressed in this commentary are exclusively the views of the author and do not necessarily represent the views of MediaVillagecom management or associated bloggers

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Wall St. Speaks Out on Viacom -RBC Capital Markets

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David Bank

"About That with Carl Mayer:" Alaina Donnellon (Episode 10: Political Spending) - By Carl Mayer

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Wall St. Speaks Out on Viacom -RBC Capital Markets

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