CBS Extends Content Deal

Zacks

CBS Corporation (CBS) further strengthened its ties with Netflix, Inc. (NFLX) by announcing the extension of its multiyear streaming video deal for select library content. However, the terms of the deal were not disclosed.

The move is a strategic fit for CBS as the company continues to benefit from its streaming deals, evident from the strong double-digit growth in streaming revenues during first-quarter 2013. Moreover, the company’s strategy of adding diverse revenue streams makes it less susceptible to economic woes.

CBS has entered into long-term streaming deals for CW content with Netflix and Hulu, which is expected to boost its operating results. Moreover, the company entered into a deal with Amazon.com Inc. (AMZN) that extends the latter’s archive of television shows and films currently available on its streaming video site, Amazon Prime Instant Video. These measures facilitate CBS in monetizing its TV content.

As per the extended licensing agreement, new titles such as L.A. Complex, 4400 and CSI: NY will now be available to Netflix subscribers.

Going forward, CBS Corporation’s sustained focus on increasing subscription based revenue channels is expected to be a long-term growth driver. We expect the company to benefit from reverse compensation from affiliates, strong demand of its content, digital distribution, syndication sales and retransmission consent.

Alongside, CBS Corporation acquired the remaining 50% stake in TV Guide Digital, including the TVGuide.com and TV Guide Mobile properties from Lions Gate Entertainment Corp. (LGF). The addition of TVGuide.com to CBS’ impressive portfolio is believed to be a major boost for the company’s digital business as both TVGuide.com and TV Guide Mobile enjoy a strong audience in the lucrative TV information category.

Despite these positives, CBS currently holds a Zacks Rank #4 (Sell) as secular headwinds remain a concern for broadcast-driven media companies in the near term.

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