While some TV executives are losing sleep about over-the-top and skinny bundles, CBS sees only dollar signs.
Those trends that are promising to disrupt the media ecosystem are two of the reasonswhy CBS is expectingto generate $3.75 billion in incremental revenue by 2010.
Speaking at CBS’ investor day, COO Joe Ianniello explained how the company expects Showtime OTT and CBS All Access each to generate $400 million in the not too distant future.
The basic math is that CBS takes in about $8.25 a month for every Showtime subscription, Ianniello said. For CBS All Access, the company will take in $5 from the subscriber fee plus another $3.50 per sub in ad revenue. And CBS doesn’t think it’s unreasonable to expect both services to attract 4 million subs over the next five years, given the way consumers are signing up for Netflix, Amazon, Hulu and other SVOD services.
That leaves a lot of upside, seeing as Showtime has a 20% share of its current market and CBS All Access will be bringing on an original Star Trek series, Ianniello said.
As for skinny bundles, CBS thinks either a current distributor or a rich tech company will figure out how to succeed at scale with a skinny bundle. And “for a skinny bundle to be successful, it will have to include CBS,” Ianniello says.
And as bundles get smaller, the price for CBS goes up. “We will get paid more than what the traditional guys pay us, but probably not as much as our direct-to-consumer All Access offering,” he said. “Therefore a reasonable assumption would be that we’re paid somewhere in the middle, say somewhere in the neighborhood of $4 per sub per month.”
CBS doesn’t think a good skinny bundle getting 4 million subs is a stretch. And when you do the math, that’s another $200 million in incremental revenue.
CBS believes there’s also additional money in retransmission consent and reverse comp, in broader international program sales and in using dynamic ad insertion technology to monetize viewing outside the current C3 and C7 ratings windows.
The rosy forecast pushed CBS’ stock higher.
“We make no changes to our forecasts at this point, but came away with increased confidence that CBS has substantial structural growth ahead of it,” Omar Sheikh of Credit Suisse said in a research note. He ranks CBS as a top pick in the media business, along with Time Warner.
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