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Viacom’s Ancillary Business Driven by International Growth

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Ancillary revenue under media networks

Viacom’s (VIAB) ancillary division under its media networks segment posted revenue of $181 million in fiscal 4Q17, a rise of 4.6% YoY (year-over-year), due to strong demand for international consumer products.

In fiscal 4Q17, Viacom’s media segment generated the highest level of ancillary revenue in the last 12 quarters driven by the success of its international ancillary revenue, which witnessed a rise of 21% YoY to $105 million. However, this rise was mitigated by softness in domestic ancillary revenue, which fell 12% YoY to $76 million.

In the graph above, we can see the overall performance of the media networks segment’s ancillary revenue over the last five quarters. Ancillary revenue grew at a CAGR (compound annual growth rate) of 1.1%.

In fiscal 2017, the segment’s ancillary business improved 3.3% YoY to $596 million, the highest revenue it’s achieved in the last three years.

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Ancillary business under filmed entertainment

Similarly, ancillary revenue for the filmed entertainment segment rose 32.6% YoY to $61 million in fiscal 4Q17 driven by strong domestic and international growth. Each rose 11% and 110%, respectively, on an annualized basis. In fiscal 2017, the filmed entertainment segment’s ancillary division generated revenue of $317 million, a rise of 82% YoY.

The success of the ancillary business is highly dependent on hit movie releases and popular TV series, which easily drive consumer products. Video game launches and live events also help to boost overall ancillary revenue. Hit TV series such as Game of Thrones from HBO (TWX) and Stranger Things from Netflix (NFLX) continue to drive merchandise products.

From Viacom’s Transformers movie franchise, Transformers: The Ride 3D is already available at Universal Studios (CMCSA) Singapore and Florida, while the Nickelodeon Resort in Punta Cana is also drawing huge crowds. This may boost Viacom’s ancillary business going forward.

 

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