Currency

CBS Expects to Make $800M From OTT

Raises retrans and reverse comp estimate to $2.5B by 2020 3/15/2016 04:53:00 PM Eastern

CBS said it expects the over-the top business to generate $800 million in revenue by 2020.

Half of that revenue would come from CBS All Access and the other half from Showtime’s over-the top product.  By 2020, the company project each should have about 4 million subs.

Speaking at CBS’s Investor day, COO Joe Ianniello also raised the amount it expects to take in from retransmission and reverse compensation from stations to $2.5 billion by 2020, up from previous guidance of $2 billion.

By 2020, Ianniello said CBS also expects it international content sales to grow to $2.3 billion by 2020. “The competition for premium programming content continues to intensify,” he said.

The final pillars of CBS’s long-term growth plans are generating incremental revenue from skinny bundles and monetizing viewing currently not paid for by advertisers.

Ianniello said he expects skinny bundles to gain scale over the next few years and that some of the players will be big companies with big marketing budgets. And “for a skinny bundle to be successful it will have to include CBS,” he said.

He projected that CBS would get paid more when it’s in a skinny bundle than it does by traditional distributors. And he estimated that it wouldn’t be hard to imaging skinny bundles achieving $4 million subscribers. At $4 per sub per month, that would generate about $200 million in incremental revenue by 2020.

In term of advertising, Ianniello said that about 10% of CBS viewing occurs after the C3 and C7 windows, which means CBS doesn’t get paid. But with dynamic ad insertion, new commercials can be put in shows when they’re viewed on a delayed basis. “Now that e have both the consumption and the capability, it only makes sense that we should get paid for it,” he said

CBS generates $2.5 billion in ad revenue from its entertainment programming, and 10% of that is $250 million.

In all, Ianniello said that these incremental revenue drivers add up to $3.75 billion in high margin annual revenue by 2020.

If CBS sells its radio business (CBS said it is considering options for its radio division), the share of revenue it gets from advertising would drop from 50% currently to 45%.  Adding in these new incremental revenue opportunities, CBS’s ad revenue would be just 40% of its total.

“That sounds to me like an even stronger CBS,” he said.

Asked about rumors CBS is interested in Starz, CBS CEO Les Moonves said “we look at everything.”

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