Analysts: CBS Corp.-Amazon Streaming Deal Bodes Well for Sector Giants



NEW YORK - A streaming video deal between CBS Corp. and Amazon.com, which was announced earlier on Wednesday, is latest proof that entertainment giants stand to gain financially from online content distributors, according to analysts.

"We continue to see new entrants into the content ecosystem - first Netflix, now Amazon in the domestic market with potential for international sales and additional domestic entrants in the future - driving up the value of TV content," Morgan Stanley analyst Benjamin Swinburne said in a report.

He added: "While CBS is the most levered name to improving monetization of TV content (TV studio is roughly 25 percent of segment [operating profit] for CBS versus about 5 percent-15 percent of [operating profit] for large-cap peers), we view today's announcement as a positive for the media industry, where improving content monetization is a key tenet of our "attractive" industry view."

In case of similar deals, Time Warner's Warner Bros. TV studio "is likely the property with the most near-term upside" given estimated annual revenue from streaming agreements of less than $25 million, he added.

Lazard Capital Markets analyst Barton Crockett similarly called Wednesday's deal news "positive for content, challenging for Netflix" as it "clearly suggests that Amazon is stepping up to be a more meaningful rival to Netflix in online streaming."

Concluded Crockett: "We see more online bidders for content rights as positive for content. We see the expansion of distributors as positive for content rights holders, such as entertainment conglomerates, as it increases bidders for content and the value of content."

With a CBS deal done, Amazon is likely to do deals with other companies over time "and that other distributors will follow Amazon," the analyst argued.

Or as Barclays Capital's Anthony DiClemente put it: "digital media distribution is an incremental boon to core film/TV studio economics, as media content owners like CBS continue to benefit from the simple laws of supply and demand."

He suggested that CBS sibling "Viacom may be on deck for a similar type of broadband licensing agreement."

Email: Georg.Szalai@thr.com

Twitter: @georgszalai

comments powered by Disqus