If there was any doubt about how committed ViacomCBS is to developing streaming and what it calls “advanced advertising” as critical revenue streams going forward, the company’s first post-merger earnings call should have put that to rest.
During a week when UBS analyst John C. Hodulik reported that accelerating year-to-date declines in both broadcast and cable network audiences are forcing media companies to boost CPMs to cover shortfalls, ViacomCBS’s distinct emphasis on new opportunities underscored the reality that in many respects, the future is already here.
Obviously, those businesses won’t be supplanting broadcast and cable TV, filmed entertainment, or traditional core revenue streams in the immediate future.
In fact, although ViacomCBS’s fourth-quarter results were more than a bit disappointing, and sent its stock tumbling, growth in traditional revenue sources was key to a 2% total revenue gain for the full year. Affiliate revenue, driven by 20% growth in retrans and reverse comp revenues, was up 3%. And despite lower-than-2018 political advertising, CBS’s Super Bowl and NCAA broadcasts helped drive total ad revenue up 2%.
But the company reported that the ad revenue gain was also driven by strong growth in digital advertising, led by Pluto and CBS All Access; that growth in subscription streaming revenue offset linear pay-TV declines; and that content production for third-party streaming platforms drove a 5% increase in content licensing revenue.
Most notably as far as nontraditional media are concerned, it reported that subscription and advertising revenue generated by domestic streaming and digital video leapt 60% last year, to $1.6 billion.
The ad-supported, free-access streamer Pluto, as well as SVODs CBS All Access and Showtime OTT, all saw revenue growth, according to the company.
As for this year, ViacomCBS is projecting a 35% to 40% in domestic streaming and digital video revenue, based on its assumptions that combined paid subscriptions for All Access and Showtime will grow to 16 million (from 11 million in 2019) and that Pluto’s ad growth will be driven by reaching 30 million domestic monthly active users. (Pluto had 22 million MAUs at the end of 2019, representing 75% YoY growth.)
As I reported in more detail for Digital News Daily, the company expects to accelerate CBS All Access growth by adding large amounts of VOD content from its MTV, Nickelodeon, BET, Comedy Central and the Smithsonian Channel, as well as about 1,000 titles from Paramount Pictures’ library (dubbed its “House of Brands” strategy).
It also appears that it will be pursuing new MVPD deals to expand All Access distribution.
All Access and the other streaming services are clearly linchpins in the company’s overall strategy of optimizing revenue by deploying content from all of its businesses in new ways, across all platforms. (ViacomCBS president/CEO Bob Bakish referred to this as “reaching the largest addressable audience across every platform,” though he was clearly using “addressable” to include all kinds of reach, not the addressable capabilities we generally allude to in this column.)
Of course, much of the outcome will depend on the company’s ability to parcel out content in a way that drives the SVODs’ subscriber growth and optimizes third-party licensing revenue, while continuing to support its revenue-critical cable networks.
“Our going-forward approach to streaming is rooted in the belief that the streaming world will evolve similarly to the linear world,” said Bakish. “That means it will have free, broad pay and premium pay segments, and just like in the linear world, we'll have streaming product for each.”
“By having robust offerings in each segment, we will also have the ability to migrate consumers across them through promotion and bundling, which creates advantages in subscriber acquisition, retention and lifetime value.”
While not getting into advanced advertising in much detail, the executives made several references to its growing importance.
CFO Chris Spade reported that Pluto — “an integral part of our advanced advertising offering” — was instrumental in a notable 9% jump in the cable networks’ ad revenue last year.
He also noted that “scaled” advanced advertising, combined with greater ease of buying across the company’s expanded-reach combined linear and digital portfolio, is expected to help drive low single-digit growth in domestic advertising this year.
Bakish, meanwhile, declared that, “with leading broadcast and entertainment brands and strength in live, local news and sports, [ViacomCBS] is a must-have for any distributor,” and “by working with partners to deepen and extend our relationships through advanced advertising, broadband products and more, we can continue to grow share, a strategy that will drive growth in the face of macro trends within the industry.”
In fact, he said, the company has “already seen the benefit of our combined portfolio with the recent renewal of our carriage agreement with Comcast — which, by the way, brings CBS All Access to set-top boxes for the first time.”