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Viacom’s Acquisition of Channel 5: Its ‘Stronghold’ in the UK

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Mar. 29 2016, Updated 10:07 a.m. ET

Viacom’s Channel 5 acquisition

When it comes to international territories, Viacom (VIAB) continues to pursue growth, either in terms of expansion of its brands or through strategic acquisitions. The company’s acquisition of the United Kingdom’s (EWU) Channel 5 is working out well for the company.

Viacom stated at a Deutsche Bank (DB) investor conference earlier this month that its Channel 5 acquisition has resulted in the company’s acquisition of 23 important networks in the United Kingdom. Viacom acquired Channel 5 in 2014 for about $644 million.

The acquisition resulted in the company “entering into a long-term strategic relationship with Sky on the advertising front coupled with a very long-term extension of our affiliate relationship there.”

Viacom's Acquisition of Channel 5: Its 'Stronghold' in the UK

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Impact of the Channel 5 acquisition

The Channel 5 acquisition has led to Viacom gaining access to around 100% of the United Kingdom’s (EWU) television audience, particularly for the Nickelodeon brand. As a result, Viacom expects a “strong double-digit growth in revenues” in fiscal 2016 in the United Kingdom. The company stated that its revenues in the United Kingdom have already crossed the $900 million mark. Viacom’s operating income has seen a growth of 20% in that country.

Other US media companies that are trying to grow in the UK market include The Walt Disney Company (DIS) with its launch of DisneyLife, a direct-to-consumer service. Other major US OTT (over-the-top) players such as Netflix (NFLX) and Amazon’s Prime Instant Video service (AMZN) already have a strong presence in the United Kingdom.

Netflix accounts for 0.84% of the PowerShares QQQ Trust Series 1 ETF (QQQ). If you’re interested in exposure to the television sector, note that QQQ has 4.7% exposure to the sector.

Now let’s see how India has become a valuable asset for Viacom in the next part of this series.

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