ViacomCBS, Discovery Stock Prices Drift Lower, Streamers Present Growth Issues

After its 5% stock price decline on Monday, Viacom was hit with another 9% drop on Tuesday. This followed the news that Viacom was looking to raise $3 billion to support content spending for its streaming activities, largely for its new Paramount+ service.

ViacomCBS wasn’t alone. Discovery Inc. has been down 7% since Monday’s opening, while Viacom stock closed at $91.25 on Tuesday and Discovery, at $71.68.

A week ago, before this event, Macquarie Research downgraded both ViacomCBS and Discovery’s stocks, concerned that both were trading lower profit-margin businesses (D2C) for high-margin businesses (linear TV).

Another cable-TV network-centric company -- AMC Networks, with new streaming plans of its own -- has been down 22% to $64.74 since March 15.

All this has been a major turnaround for some media companies moving into the streaming space, which have seen a sharp overall stock increase over the last several months, due to projected long-term streaming business.



Discovery launched discovery+ in the U.S. January 4. ViacomCBS launched Paramount+ on March 4.

Now that this expected growth has been “priced into” media stocks' pricing, some analysts are looking to temper their enthusiasm, with concern over slower-moving streamer revenue growth -- and higher costs to support the business.

‘While discovery+ appears off to a strong start, we remain concerned regarding the ultimate scalability of the service in relation to the decline of the linear business and longer term impact on financials,” writes John Hodulik, media analyst at UBS, on Tuesday.

He adds: “We believe Discovery is starting from a better position than its peers as it pivots to DTC. The content library is largely unencumbered by licensing deals, presenting a new opportunity for monetization with lower risk of cannibalizing legacy revenues.”

1 comment about "ViacomCBS, Discovery Stock Prices Drift Lower, Streamers Present Growth Issues".
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  1. Ed Papazian from Media Dynamics Inc, March 25, 2021 at 10:46 a.m.

    Wayne, while CBS stumbled badly when cable arrived, launching a  documentary channel that folded in less than a year at a reported loss of $30 million and then allowed ABC and NBC to make hay with investments in channels like ESPN, Bravo, Sci-Fi, Lifetime, MSNBC, etc. while it more or less stood pat, this is a new team and it's not certain that they will stumble again in their streaming ventures. OK, so they are investing a lot of money mainly in original fare to hook subscribers. So what? Isn't that what Netflix has been doing? And won't these originals also be used by CBS's "linear TV" networks later --at much reduced "rerun" costs--and still later won't they bring in more dollars via syndication? I wonder what the financial analysts would recommend that Viacom CBS do instead of what seems to be the current roll out plan?

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