How Profitable Is Epix?

 

NEW YORK – Premium TV company Epix turned profitable in the fourth quarter, but just how profitable?

In reporting its latest quarterly financials on Thursday, Viacom mentioned a $24 million profit for its portfolio of investments, which is principally made up of its nearly 50% stake in Epix - its joint venture with Lionsgate and MGM - and Indian TV venture Viacom 18. Management also said that both Epix and Viacom 18 were profitable in the quarter, meaning that each contributed a slice of the $24 million. The company didn't give further details.

Sources say that Epix's share of this figure was in the $10 million-$12 million range. Since Viacom owns only around 50% of Epix, it also only accounts for half its profit. This would put total profit for the premium TV firm at a range of $20 million-$25 million for the final quarter of 2010.

Davenport & Co. analyst Michael Morris on Friday even estimated that Viacom's share of Epix's quarterly profit could have amounted to as much as $15 million, which would put Epix's total profit at around $30 million.

Viacom didn't provide much detail on the financials, but CEO Philippe Dauman lauded a Netflix streaming deal for Epix content as having accelerated the march to a positive bottom line during the company's earnings call Thursday. "Epix has achieved profitability thanks to both the traditional distribution and the Netflix deal, of course, within a year of launch, which is unprecedented for a national network," he highlighted.

What does the quarterly result say for Epix's future?

Epix boss Mark Greenberg previously said that the five-year, $1 billion Netflix streaming deal will help make his firm profitable for the full fiscal year that started in October.

"We now have Epix on solid profitability settings, so you can expect to see that continue," Viacom's Dauman said Thursday. "The degree of profitability will be impacted by availabilities [of films]...that affect the cost side, and, of course, on increasing distribution."

Morris suggested that the quarterly profit was most likely "above the true trend [for the full fiscal year] given some timing [issues], but I do think it will be profitable for the year."

Dauman also vowed: "Epix is in profitability territory for good."

Morris predicts that Viacom will get a $30 million profit from Epix for its fiscal year ending in September. For Epix that would mean that its first year with positive financials could give it a profit of about $60 million.

Another Wall Street observer estimated an Epix profit in the $40 million-$50 million range for the 12 months that end in September, or a $20 million-$25 million Epix-related profit contribution for Viacom. That could include a slight loss in the final quarter of that period as new films are added to the service, which will boost costs, the observer suggested.

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