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Why Viacom Is Also Focusing on Its Direct-to-Consumer Strategy

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Jan. 30 2019, Updated 4:20 p.m. ET

Viacom acquires Pluto TV

Viacom (VIAB) is another company that is also increasingly focusing on its direct-to-consumer strategy like The Walt Disney Company (DIS) in the United States (IYW). Earlier this month, the company announced the acquisition of Pluto TV for $340 million in an all-cash transaction. Pluto TV is an ad-supported free content streaming television service that has around 12 million MAU (monthly active users). Around 7.5 million of these users are on connected television including Amazon’s (AMZN) Fire TV, Apple (AAPL) TV, and Alphabet’s (GOOG) Android TV.

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Viacom’s deal rationale

This acquisition will provide Viacom immediate access to Pluto TV’s customers. It will also help the company to acquire new subscribers or retain its existing ones for its SVOD (subscription video on demand) services like Noggin and Comedy Central Now. Viacom will also gain an opportunity to stream content from its vast content library and monetize this content effectively. This is because, for the past two years, Viacom has limited the licensing of its content to SVOD services.

Viacom earns the majority of its revenues through targeted advertising. In fiscal 2018, the company’s Media Networks segment had total advertising revenues of $4.8 billion. Around 76% of these advertising revenues, or $3.6 billion, came from domestic advertising. According to an eMarketer report, digital advertising spending is likely to reach $22.2 billion by 2021. Viacom’s acquisition of Pluto TV could give the company the right opportunity to grow its advertising revenues through targeted digital advertising.

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