Paramount Pictures, the film division of Viacom Inc (VIA) is all set to end the ongoing year with box-office revenues of $1.86 billion and 18.86% market share. Time Warner Inc‘s (TWX) Warner Bros. is set to finish second with $1.76 billion in revenues and 17.95% market share, followed by Sony Corp.’s (SNE) Sony Pictures with revenues of $1.33 billion and 12.69% market share.
Warner Bros. had topped the box-office chart in the last four years but this time around was beaten by Paramount Pictures. Paramount Picture’s success this year is primarily credited to the movie “Transformers: Dark of the Moon” that earned a whopping $ 1.1 billion worldwide and was placed in the second position in terms of box-office collections. Harry Potter and the Deathly Hallows: Part II from Warner Bros., that garnered $1.25 billion, secured the top position. Moreover, Paramount is expected to end the year with another biggie, Mission Impossible 4: Ghost Protocol.
In U.S. the overall movie business dropped 5.4% year over year to $9.9 billion. It was mainly due to sluggish economic growth coupled with increasing threat from online video companies and video piracy.
Paramount Pictures boasts an impressive line up of movies for fiscal 2012. Movies like The Avengers and Madagascer 3, slated to release in 2012, will further widen the gap with Warner Bros. going forward.
We believe that Viacom is well positioned for long-term growth as it continues to benefit from its predominately cable networks-based business model, strong affiliate fee revenue growth, global brands, strong share repurchase plan, multi-platform content, and is one of the fastest growing traditional ad media. Moreover, continued success of movies during this holiday season will drive box-office revenues going forward.
However, stiff competitions fromother media companies like News Corp. (NWSA) and Time Warner along with slow economic recovery may act as headwinds for the stock going forward.
We, thus, maintain our long-term Neutral recommendation for Viacom. Currently, Viacom has a Zacks#3 Rank, implying a short-term Hold rating on the stock.
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