Saturday, February 13, 2010

Snooks and the 'Sitch, killing it for MTV/Viacom (VIA.B)

And by Snooks I mean Nicole Polizzi and by the 'Sitch I mean Mike "The Situation" Sorrentino, who refers to his incredible abs as "The Situation."  They're two of the stars of MTV's sensational reality show Jersey Shore.


While viewers fall over in laughter at these people's antics, the show has been absolutely huge for MTV.  According to Nielson data and the Wall Street Journal, MTV's overall viewership is up 18% this year through February 7th versus the prior year period.  That is massive for a network that has struggled lately  - struggled to the point of hiring a whole new programming team.  Sooo, the programming folks who put together Jersey Shore last summer are presumably out?  That sucks....

The immediate revenue impact from Jersey Shore's ratings boost hits Viacom's advertising revenues, but over time it will show up in affiliate fees, as higher ratings mean more lucrative contracts with cable operators.  It's difficult to peg the exact monetary impact of Jersey Shore, but the boost they give the entire MTV network could lead to $100million+ in extra advertising revenue in 2010.  With nearly zilch overhead for this show, these lovable idiots probably boost Viacom's market value by hundreds of millions of dollars. (a PE of 10 on minimum $100million revenue boost with tiny overhead....).  Even after the cast's "holdout" on pay, their salaries look to be about $960k for the 12 episode 2010 season...


There's SO much going on in the cable world now and over the next few years.  That said, I'd rather own the content than the distribution side = Viacom versus Comcast.  The risks remain however, as Viacom spells out in their 10k:

I'm above the street with my 2010 and 2011 estimates for earnings and free cash flow, but I can say that with an appropriate 8% Free Cash Flow Yield, Viacom B shares should trade above $40 versus $28.90 right now.  Lots of upside here.



Copyright 2010 AlphaNinja

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