ViacomCBS’ newly created streaming division provided a welcome boost for CEO Bob Bakish when the overall Q3 fortunes of the media giant’s TV performance were reported Friday.
Total TV revenues for Q3 2020 were $5.415 billion, down by $322 million (or -5.6%) versus Q3 2019. This was better than the hit ViacomCBS took overall, with total revenue at $6.116 billion, a year-over-year decline of -8.7% to the tune of $582 million.
The market responded with a slight dip, with ViacomCBS down by -$1.92 a share at close following Bakish’s overview (-6.6%) to $29.30, versus $31.29 the day before the Q3 call.
In a reversal to the fortunes of most ViacomCBS divisions (save for Simon & Schuster, which was boosted by releasing a number of books about President Trump in Q3), total streaming revenues reached a record level of $636 million, up by 30.1% from Q2 and a 56.3% year-over-year increase.
This led to a bold promise by new CFO Naveen Chopra, who gave guidance for ViacomCBS to see total 2020 streaming run rate north of $2.8 billion. VIP analyzed the reported numbers for 2020 and found this to mean that ViacomCBS anticipates a record-breaking Q4 revenue of $1.2 billion, which represents a 89.3% increase from Q3 and a whopping 145.2% from Q4 2019.
It may appear a high target, but Bakish and Chopra wouldn’t set guidance they don’t think they could meet. We are already over a third of the way into Q4, meaning the pair must have some insight into current streaming trends within ViacomCBS to be confident.
It’s important to recall that this revenue figure includes both the subscription streaming division (led by CBS All Access and Showtime’s OTT product), as well as advertising and licensing revenue from Pluto TV. Chopra provided guidance for where ViacomCBS sees the pair growing in Q4, building upon the record total subscribers and monthly users seen this quarter.
Paid subscribers for domestic services increased by 10.5% in Q3, or by 1.7 million subscribers. In real terms, this was the fourth greatest number of new subscriptions out of seven available, driven by both the CBS All Access/Showtime bundle deal on Apple TV+ and the early addition of the UEFA Champions League to CBS All Access (two years ahead of schedule following WarnerMedia’s canceling of their rights package).
Chopra estimated growth will slow in Q4, for a total of 19 million paid subscribers across ViacomCBS SVODs. This is due to the company sunsetting a number of niche SVODs this quarter, with the aim to roll content from these into Paramount+ when that launches early in 2022.
It was a good quarter for Pluto TV. Total monthly average users increased by 1.9 million in Q3, taking the total domestic user base to 28.4 million. Year-over-year, this was an increase of 56.9%. What is more interesting to note is that ad revenue generated by Pluto increased by over 100% year-over-year — i.e., revenue growth is outstripping user growth.
This means users are spending more time within the platform, being served more ads, and thus increasing revenues. A spokesperson for Pluto TV confirmed that the greatest engagement is coming from viewing on connected TVs, as opposed to web or mobile. This source of revenue is seemingly overlooked by many, but VIP expects it to grow significantly over the next few years given Pluto’s unrivaled access to the ViacomCBS library.
Pluto is also the linear streaming service with the greatest number of available channels, with many of these branded with recognizable titles, ranging from “007” and “CSI” to “The Walking Dead” and “Narcos.” This scale is powering Pluto’s growth and will be what helps to keep engagement up, and revenues.
To hit the $1.2 billion in streaming revenue this quarter, Bakish and Chopra will be counting on substantial increases in monetization, given the modest user growth predicted for their free and paid services. In VIP’s estimate, it is an ambitious target, but given the growth seen in Q3 for streaming revenue, it would seem to be possible.
Such growth would cement Bakish’s legacy as a savvy businessman, since he drove the Pluto acquisition in 2019. It will also provide a welcome respite to the constant decline of overall TV and video revenue and show that ViacomCBS is, perhaps belatedly, embracing the future of video.