M+E Connections

The Philo entertainment streaming service that was recently announced at $16 a month stands to satisfy at least some of the pent-up U.S. consumer demand for a non-sports, over-the-top (OTT) service, according to Viacom CEO Robert Bakish.

He’s “excited to see that the gap in the market for a sports-free, low-cost entertainment bundle – the entertainment ‘skinny’ pack that Viacom has been calling for – is now starting to be filled” thanks to the creation of the new service, he said Nov. 16 in an earnings call for the fourth quarter (ended Sept. 30).

Viacom is a participant in the new Philo service, along with A&E Networks, AMC Networks and Discovery. The service features live TV, DVR and on-demand content and included more than 35 cable channels at launch, including Discovery’s Animal Planet and Discovery Channel, Philo said Nov. 14. An additional nine channels can be added by subscribers for $4 extra a month.

The U.S. TV market continued to desperately need a skinny OTT bundle priced under $40, Bakish had told the Goldman Sachs Communacopia Conference in New York Sept. 13. The market was still “in a transition where certain elements have yet to emerge,” he said at the time, citing a sub-$40 entertainment pack as one of those key elements.

Viacom’s “momentum,” meanwhile, has been “driven by the new strategy” that it introduced in February – a strategy that Bakish said Nov. 16 his company had “spent the last nine months aggressively executing.” The momentum it’s seeing is also the result of organizational and operational changes that it made to support the new strategy, he said.

Shortly after becoming Viacom’s new CEO, Bakish in early 2017 laid out a five-point plan that he said was designed to improve the company’s performance. Key elements of the plan included the creation of a new unit focusing on developing short-form video content, a strengthened relationship between its Nickelodeon and Paramount brands in TV and film projects, and the rebranding of its Spike TV network as The Paramount Network in early 2018.

In the past year, deals with TV service operators accounting for almost 50% of Viacom’s subscriber base were renewed or extended, and there are now “no significant renewals” needed by the company “until well into 2019,” Bakish also told analysts Nov. 16. That’s a “key part of the stabilization story” for Viacom because it “removes the major area of uncertainty that hung over the business” in 2017, he said.

Viacom reported fourth-quarter revenue grew 3% from a year earlier, to $3.32 billion, with gains in media networks (up 3%) and filmed entertainment (up 2%). Adjusted profit from continuing operations attributable to Viacom grew 14% to $310 million, with earnings per share increasing to 77 cents from 69 cents.

Separately, “it’s just going to take some time” for Discovery Communications to start significantly benefiting from the growing number of OTT services, according to its CFO, Gunnar Wiedenfels.

The new Philo service that Discovery is participating in is “the first bundle that actually qualifies as a truly skinny bundle,” he said Nov. 16 at the Morgan Stanley European Technology, Media & Telecom Conference in Barcelona, Spain. “We continue to talk to all players in the market – be it emerging, new players or established, traditional distributors – and I am convinced that, over time, there will be more new packages because there obviously is a consumer demand for some lower-priced packages.”