ViacomCBS Q2 2020 Reaction: Bakish’s Stream Dream May Come True

Bob Bakish ViacomCBS Streaming Dreams
Cheyne Gateley/Variety Intelligence Platform

Bob Bakish’s approach to streaming — replicating the TV bundle with free, paid and premium tiers — is paying off.

ViacomCBS is one of the traditional media companies looking to transform themselves into streaming giants, and even a quarter dominated by coronavirus was unable to slow that progress. The market responded well to the results, with stock 3.2% higher at $26.84 mid-afternoon.

Domestic streaming revenues increased to their highest reported level yet, rising by 25% in comparison with Q2 2019. 

In truth, the amount of revenue currently generated from streaming is a couple drops in the total revenue bucket for ViacomCBS, but the fact that it continues to grow is a positive sign given consumer shifts away from pay TV and toward streaming.

Pleasingly for Bakish, all prongs of his streaming strategy grew in Q2. Pluto TV added 2.3m more monthly average viewers, totaling 26.5 million. The free ad-supported TV (FAST) service has an internal target of 31 million MAUs by the end of 2020 (so needs to add 4.5 million more) and will be aided with the mentioned plan to debut more than 40 CBS shows, including “Survivor,” “The Amazing Race” and “MacGyver” on Pluto. The integration with CBS content has been picking up, with Pluto adding “CSI”- and “Star Trek”-dedicated channels in recent weeks.

The FAST service was not the only domestic streaming division to grow during the pandemic. Bakish unveiled new streaming subscriber counts for CBS All Access and Showtime showing the second straight quarter of growth around the 20% mark.

One could argue that, given the insistence of Bakish that Showtime’s D2C service is separated from CBS All Access for consumers, it is odd that he chooses to group the two together for user stats.

One other point about the subscriber growth. This is likely aided by the increasing number of pay-TV cancellations, and some growth will be coming from Showtime subscribers switching their payment method only. Until ViacomCBS has a bit more transparency around its subscriber breakdowns, it will remain unclear how many of these subscribers are truly “new” to the company.

The expanded CBS All Access “super service” will see subscriptions continue to rise once it debuts in early 2021. Bakish reconfirmed some details recently released, such as 2021’s “SpongeBob” movie going straight to All Access after a brief PVOD window, but suggested there will be many original series based on premium ViacomCBS IP, similar to announced “SpongeBob” spinoff “Kamp Koral,” designed to whet viewer appetites.

Bakish also gave some information about what will become a lucrative revenue stream for ViacomCBS: international streaming. Pluto TV launched across Spanish-speaking Latin America in Q2, joining international operations in the U.K. and German-speaking Europe. This has seen international MAUs hit 6.5 million, which should continue with Bakish’s two-pronged approach for Pluto. 

A combination of expanding into more regions (Brazil and Spain in 2020, France and Italy in 2021) and expanding content offerings and channels in current regions will see users grow, with VIP estimating there will be at least 10 million international MAUs by the end of 2020.

This wasn’t the only international streaming expansion noted. Bakish mentioned that in the coming months ViacomCBS will be launching a paid streaming service in regions identified that they will be able to challenge for market leadership: Australia, Latin America and the Nordic region of Europe. This, too, should see a long-term gain in revenues, as ViacomCBS looks to harness the synergies of their recent merger.

Streaming aside, Q2 saw anticipated COVID-related revenue declines in broadcast television, down by 22%. Theatrical mustered just $3 million in movie revenue, versus $152m last year. Cable networks were a bright spot, as ViacomCBS was the only major U.S. cable channel operator to report an increase in revenue, up by 2% to $3.2 billion.

This was due to an increase in content licensing fees, which is revenue generated mainly by licensing out IP to in-house or external streaming services. In this instance, the $500m “South Park” streaming rights deal to HBO Max kicked in, which suggests future quarters will see yearly declines, as the company lacks other half-billion dollar unicorns to sell.

Overall, the results suggest that the streaming strategy Bakish unveiled in the Q4 2019 earnings call, which at the time seemed half-baked and saw ViacomCBS’s stock value crumble, is beginning to show some promise.

Eyes will be on the company to ensure streaming growth continues in the next few quarters, given it represents just about the only chance to pivot to a business that can keep growing in the next decade. Bakish’s streaming vision may well end up hailed as a strategic masterstroke, in spite of its rough start.