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Can CBS Boost Affiliate Revenues with Its DIRECTV Now Contract?

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Features of the contract

In a bid to drive its affiliate and subscription fees business as well as to expand its multi-platform service, media mogul CBS (CBS) has inked a deal with DIRECTV Now (T), the video streaming operator. But the financial terms of the deal have not been disclosed.

From the graph above, you can see the relative growth of CBS’s affiliate and subscription fees business over the past four quarters. In 3Q17, it reported a significant YoY (year-over-year) growth of 52% to $1.1 billion, buoyed by the broadcast of the fight between Floyd Mayweather and Conor McGregor on Showtime.

The deal will allow DIRECTV Now users to access popular channels like the CW, CBS Sports, and Pop. Even the premium network Showtime will also be available to DIRECTV Now customers.

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Expanding partnerships with OTT operators

The increased use of smartphones and better Internet facilities have changed the TV watching habits of audiences, and now viewers prefer to binge-watch shows on multiple devices. This change has resulted in lower interest for linear TV viewing, which has further increased the chord-cutting phenomenon.

To tap into chord-cutting audiences, CBS is entering into partnerships with OTT (over-the-top) service providers. In 2017, the company struck a deal with Verizon Communications (VZ), and in 2016, the company had already signed a contract with Hulu and Google (GOOGL) to deliver its content.

CBS has also inked a deal with the video streaming leader Netflix (NFLX) to stream some of the CW’s content.

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