Viacom lags media peers as Netflix deal to end

LOS ANGELES (AP) -- Viacom Inc. was the worst performing media company stock in an upbeat market Tuesday after Netflix Inc. said it will end its broad deal to license content from Viacom's Nickelodeon, BET and MTV networks at the end of May.

Instead, Netflix said that it is in talks to license particular shows from Viacom for its streaming customers, but that no deal had been reached.

"As we continue to focus on exclusive and curated content, our willingness to pay for non-exclusive, bulk content deals declines," said the Monday letter to shareholders from Chief Executive Reed Hastings and Chief Financial Officer David Wells.

That means that Netflix will get more choosy in picking which programs to pay for, and that it will pay less for programs that are also on the streaming services of competitors such as Amazon.com Inc. or Hulu. One example of a show that is widely available is Nickelodeon's "Dora the Explorer." Amazon Prime subscribers can watch five seasons' worth, while Netflix subscribers can watch four.

Michael Nathanson, an analyst with Nomura Equity Research, estimated that Viacom's deal with Netflix is worth about $130 million in revenue per year to Viacom, or about $55 million in profit after tax, about 3 percent of its total.

That would be the worst-case outcome for a loss for Viacom, because the company remains in talks with Netflix on specific shows, Nathanson said.

A Viacom spokesman did not immediately respond to a request for comment.

He also said other media companies could be hurt by Netflix's gradual change in strategy toward its own original shows, such as "House of Cards," and toward shows it licenses exclusively. Many media companies license older shows to Netflix on a non-exclusive basis.

Companies such as Viacom generate significant profits from streaming providers such as Netflix, Amazon and Hulu. Such deals give CBS Corp. $138 million, or 8 percent of its total net income, Nathanson estimated.

That was followed by Discovery Communications Inc., with $53 million, or 6 percent; Time Warner Inc., with $151 million, or 5 percent; News Corp., with $143 million, or 4 percent; and The Walt Disney Co., with $87 million, or 2 percent.

Amid a nearly 1 percent gain in the Dow Jones industrial average, media stocks were mixed:

— Viacom Inc., down $1.12, or 1.7 percent, at $65.40.

— CBS Corp., down 39 cents, or 0.8 percent, at $46.56.

— Discovery Communications Inc., up 38 cents, or 0.5 percent, at $78.59.

— Time Warner Inc., up 17 cents, or 0.3 percent, at $60.36.

— News Corp., down 8 cents, or 0.3 percent, at $31.56.

— The Walt Disney Co., up 25 cents, or 0.4 percent, at $62.26.

— Comcast Corp., up 31 cents, or 0.8 percent, at $40.78.