22 BARRON’S October 21 ,20 19
telephone and TV businesses belong together in
an over-the-top world—or it will have to do some-
thing to change that.Fornow,however,itj ust
needs to stem TV declines and keep the dividends
coming.
Viacom and CBS
When Bob Bakish took over atViacom three
years ago, its young viewers were leaving for the
internet, advertising revenues were shrinking,
and its film studio,Paramount, was producing big
losses.Now, ratings are better,adrevenue has re-
turned to growth, andParamount is profitable.
That makesBakishagood pick to oversee the
stronger assets at CBS when the two companies
recombine for the first time in14 years.
CBS All Access is noNetflix killer.Itwill gain
some appeal onceViacom folds in shows from
Nickelodeon, MTV, and Comedy Central, and
films fromParamount, to formanew service.
CBS’ Showtime, like HBO, already has an over-
the-top offering. Ad-supported Pluto TV answers
the question of how to keep making money from
customerswho churn out of paid services, while
pitching them on upgrading again later.Together,
thes eassets giveViacom/CBSashot at becoming
the third or fourth most popular streaming ser-
vice, behindNetflix and Disney’sbundle, and not
counting Amazon PrimeVideo,agiveaway for
Amazon Primecustomers.
More importantisthat Bakish has an arms
dealer’sindifference to taking sides in the
streaming wars. Disney is strippingNetflix of
valuable children’s programming. Bakish can send
in TeenageMutantNinjaTurtles , DoratheEx-
plorer, and PAWPatrol to fill the gap. And in tra-
ditional TV,ashelikes to point out, the two com-
panies have 22% of the audience, but only11%of
payments from distributors.Forinvestors, the
killer featureisthe valuation. At five and six
times earnings,Viacom and CBS are priced for
disaster.Modest earnings growth seems more
likely.
Roku
Shares of Roku made their trading debut at $14
apiece in September 2017.Nowthey go for $126.
The company sells streaming boxes, but doesn’t
have nearly the name recognition of Apple and
Amazon. And the Roku Channel? Its website re-
cently gave top billing to TheTerminator —not
the new sequel coming outNov. 1, but the original
from1984. Roku’slimited content is part of its ap-
peal for media partners. They can put their apps
on the service without worrying about enriching
adirect competitor.
Roku enjoys rapid gains in revenues and view-
ership, and widespread deals with TV makers
that allowittobuild its service into new sets.
The company could swing to profitability in a
couple of years. Its stock trades now at just over
40 times the early consensus for 2023 earnings—
although individual estimates are all over the
place. There’snocash-generating side business to
fall back on, so the stock is for daredevils only.
Apple, Amazon,Alphabet
Yestoall, but not for TV.
The $5-a-month Apple TV+ service looks less
like abig Hollywood play than an effort to goose
hardware sales and expand future bundling
power.Disney is spending $120 million to make
one season of a StarWars spinoff called The
Mandalorian ,whereas Apple TV+ will have
OprahWinfrey talking about books once every
twomonths.
Whydoesn’t Amazon use its huge free cash
flow to squashNetflix in streaming? Because it is
aretailer first, and needs only so many shows to
offe raperk for its buying-club members. Alpha-
bet’sskinny bundle,YouTube TV,ismildly inter-
esting for investors, but its originalYouTube
video-sharing service is an endless gold mine.
Thesurest bet over the coming year is that
some streaming services will overspend in the
grab formarket share.
Couch potatoes are sitting pretty.
Tell Us What You
Think: Who doyou think
will emerge on top in the
streamingwars? Write
us at [email protected]
and we may publishyour
take.Find out more at
barrons.com/mailbag.
Presented ByVisit: http://www.dasmarkets.com andusepromocode MPBAR10for 10% offalltickets| Buy-side investorsare invitedtor egisterfreeofcharge
NETWORKWITH PARTICIP ATINGCOMPANIES:
Join
Us!
WEDNESDAY,NOVEMBER13, 2019|CIPRIANISOUTHSTREET|NEWYORKCITY
TheLeadingInsti tutional Conferen ce Focusedon
Crypto Market Infrastructure