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Viacom’s Telefe Acquisition Remains Key to Its Advertising Growth

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What’s driving Viacom’s ad business?

Viacom’s (VIAB) advertising business under its media networks segment reported revenue of $1.2 billion in fiscal 4Q17, a rise of 6.4% YoY (year-over-year).

The company’s acquisition of Argentine network operator Telefe coupled with the increasing popularity of Viacom-owned channels in Europe remained the key drivers of Viacom’s advertising revenue growth in fiscal 4Q17.

In the graph above, we can see the performance of Viacom’s advertising revenue over the last five quarters. The company’s advertising unit, which contributes nearly 48% of its total media segment revenue and ~37% of its overall revenue, has continued to grow at a CAGR (compound annual growth rate) of 1.6% in the last five quarters.

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Domestic advertisement business

Despite ratings improvements for almost all Viacom-owned channels, the company’s overall advertising revenue growth in fiscal 4Q17 was somewhat offset by that of its domestic ad business, which remained flat at $936 million.

Increased video subscriber losses for cable and satellite TV operators such as Comcast (CMCSA), Charter Communications (CHTR), DIRECTV (T), and DISH Network (DISH), which lost 125,000, 104,000, 251,000, and 129,000 customers, respectively, in 3Q17, have affected Viacom’s domestic advertising revenue. Viacom’s international advertising business witnessed strong growth of 36% to $288 million in fiscal 4Q17 buoyed by the Telefe network acquisition and growth in Europe.

In fiscal 2017, Viacom’s advertising revenue rose 1.1% YoY to $4.9 billion driven by 14% YoY growth in the international advertising business and slightly offset by the unfavorable impact of foreign exchange. Its domestic advertising revenue, however, fell 2% YoY.

For the first time in more than six years, Viacom’s popular channel MTV has secured a double-digit rating improvement buoyed by strong primetime viewership of its new shows. Moreover, Viacom started fiscal 2018 with a multiplatform reboot of TRL, which helped to boost MTV’s total views by 21%, clearly setting the platform up for fiscal 2018 advertising growth.

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