👋Welcome!
What is up Cruisers? We are back for Newsletter #32!
What is Inside?
🔍On The Radar: $VIAC| 💸Portfolio Update
📰Portfolio News |😂Meme of the Week
🎮Trivia Night! | 📕 Chart of the Week
**NEW**: 🧊Coolest Moment of the Week:
🔍On The Radar: $VIAC
👋Introduction:
It is a commonly accepted rule that when you have something big lined up, you go to bed early the night before. I often fail (with flying colors) to live by this (very helpful) principle.
On August 3rd, the eve of VIAC Q2 Earnings (big day), I failed to hit the hay early. The second I saw that my my beloved US Men’s Basketball Team had a 12:30 AM Tip-off against the Australian National Team, I knew it was going to be a late night. I was not going to miss this game against the Aussies- a team with a lot of NBA talent and one of my favorite Cleveland Cavaliers ever - Matthew Dellavadova. Whenever I find a quiet place, I can still hear the roar of 20,000 Cavs fans chanting “Delly. Delly. Delly.” for our beloved undrafted Aussie.
After an early scare, Team USA ended up securing a dominating victory. Although we won, I had lost, as the clock said 3:00 AM and wake up was scheduled for less than 5 hours later. When I woke up at 7:45 AM the next morning, even though I was exhausted, I felt like a kid on Christmas morning (or for me, Hannukah morning)- emotionally that is. Definitely not physically. Lets just say I felt like this week’s hilarious “Meme of The Week” which you can find at the way bottom of the newsletter.
The early wake up was totally worth it. ViacomCBS continues to absolutely crush it. Below, I break down the Q2 earnings and some of the important developments highlighted in the call. And do not worry- I made sure to listen to the call again later that evening when I was wide awake ;)
👋Background:
From a financial perspective, VIAC had strong earnings:
Revenue- $6.56 billion (actual) vs. $6.53 billion (projected)
Earnings Per Share- $0.97 (actual) vs. $0.99 (projected)
As you can see, the results for VIAC were rock solid, but to me and many others, the most important metrics for the company are their streaming figures, as the company strives towards its mission of being as big of a giant in streaming as it is in TV. The quantitative results in streaming were phenomenal:
Q2 Streaming Revenue: $983 million (Q2 2021) vs. $513 million (Q2 2020)
Represents 92% Y/Y growth
Q2 Global Streaming Subscribers: 42 million (Q2 2021) vs. 29.9 million (Q4 2019)
The company has added a jaw dropping 12+ million subscribers in just 6 months (6 million in Q1 & 6.5 million in Q2) in a time when competitors struggled greatly.
Q2 PlutoTV Global MAUs: 52 million (Q2 2021) vs. 43 million (Q4 2020)
The company added 2.8 million MAUs this past quarter while also increasing Y/Y Q2 revenue by 169%! This is the fourth consecutive quarter PlutoTV has doubled its Y/Y revenue.
As you can see, VIAC is quickly becoming a major player in the streaming industry displaying results that are shocking Wall St. (but not us!). There are many more developments in streaming that I would like to discuss and we are going to tackle a few of them in the next section where we will be discussing a few “major developments” from the Q2 Earnings Release.
👋South Park:
One advantage that ViacomCBS has that no other Streaming War competitor has (I would argue outside of Disney) is the ownership and rights to some of the greatest franchises in media history. Whether it is SpongeBob SquarePants, The Godfather, Star Trek, Avatar The Last Airbender, South Park or many many more, ViacomCBS has made it clear that they will be leaning into these assets heavily. Even I, Mr. ViacomCBS bull himself, did not think they would lean into these assets as heavily and quickly as they are. One example of this is seen through their commitment to South Park that they detailed in the Q2 call.
ViacomCBS announced that the creators of South Park (Trey Parker and Matt Stone) signed a 6 year $900 million contract (yes, you read that right) with VIAC. As part of the deal, to name a couple of highlights, VIAC will receive 6 more seasons of South Park for Comedy Central as well as 14 South Park movies that will be exclusive to Paramount+! That is 2 South Park movies a year that can only be found on Paramount+, starting this Fall. This is huge!
You might be thinking “how big is South Park’s fanbase?”. The answer is- huge. South Park’s 1 hour “Pandemic Special” received 5.3 million L+3 ( Live+ three days after on-demand) views from the special. To the best of my knowledge, this also does not include international viewership or ratings from streaming services after the 3 day window.
The TV Show South Park is currently licensed out to HBOMax on a multi-year $500 million deal. You might be thinking why would ViacomCBS be licensing out their best content when they are competing in the Streaming Wars themselves? Great Question. This licensing deal was made in October 2019 when Viacom (owns South Park) and CBS were two separate entities and Viacom could not pass up the opportunity to make this much money on the show. Would the company make the deal again? Who knows? But you could argue that the $500 million is a big part of what is making the $900 million deal a reality.
You might also be wondering if South Park is as big of a hit in streaming as it is on Cable TV. Another phenomenal question Cruisers- great work! As you might have guessed, the answer is a massive yes! According to Julia Alexander with Parrot Analytics, in the past year, South Park is the 3rd most watched show on HBOMax behind Game of Thrones and Rick & Morty. For reference, South Park ranked multiple spots above the legendary TV show, “Friends.”
Long story short, South Park is wildly popular. With the copious (big word) amount of new South Park content coming to P+, as well as the likely return of the old shows from HBOMax in a couple of years, Paramount+ is poised to gain millions of subscribers globally from South Park alone.
**Side Note**- I can only wait and see what ViacomCBS has in store for the “Avatar Studios”!
👋Yellowstone:
Yellowstone is THE most popular show on Cable TV and plays on Paramount Network (Linear Channel owned by VIAC). The show stars the legendary Kevin Costner where he plays the patriarch of a family of ranchers out west.
Just how big is the Yellowstone following? Check this out. The Season 3 premiere received 5.2 million Live+SameDay views and 7.5 million viewers including reruns later that night. These are absolutely huge numbers.
Just like South Park, Yellowstone is (currently) not on Paramount+ but rather on Peacock where VIAC is making a large sum of money from licensing revenue as well as gaining a new fan base from the exposure to Peacock subscribers. Due to the huge success of the show and looking to build Yellowstone into a franchise, VIAC announced that there will be two spinoffs of Yellowstone that will be exclusive to Paramount+. The first spinoff is “Y:1883” featuring a star studded cast of Tim McGraw, Faith Hill, and Sam Elliot which will be debuting later this year.
One of the most interesting components to the Y:1883 spinoff is a strategy they are deploying to help bring the Yellowstone following to P+. When Season 4 of Yellowstone premieres in the Fall, the first two episodes of Y:1883 will be slotted after the Yellowstone episodes. Once Yellowstone fans get hooked on Y:1883, they will then need to sign up for Paramount+ to see the rest of the series! A brilliant decision by the company showing that Linear TV, outside of the revenue and profitability, brings significant value to VIAC’s streaming efforts.
👋PlutoTV:
Would it be a ViacomCBS writeup if we did not mention PlutoTV? It would not! PlutoTV continues to crush it and CEO Bob Bakish shared an exciting announcement regarding the AVOD asset. Bakish shared that PlutoTV will earn over $1 billion in revenue in 2021- a shocking achievement as PlutoTV earned just $70 million in 2018. A couple of months back, Bakish shared that the company would achieve this goal in 2022. Hitting this milestone in 2021 is a breathtaking achievement.
**Side Note**- I have been investing and in the business world for almost a couple of decades now (I am counting my lemonade stand when I was 3, but I have actually been in the market for around 15 years). In my time in the market, I have never seen a company’s revenue grow this quickly in 3 years.
PlutoTV has now doubled revenue Y/Y for the fourth consecutive quarter. Specifically, in Q4, PlutoTV grew revenue Y/Y by 169%! Now, with tough year over year comparisons coming (due to massive growth this past year), I am curious to see what the growth rate in revenue will look like.
In my opinion, the most impressive statistic on the call regarding PlutoTV was that domestic watch time per MAU increased 45% Y/Y compared to Q2 of 2020. An absolutely breathtaking statistic when keeping in mind that Q2 of 2020 was the heart of the lockdown domestically. Not only are more people coming to watch PlutoTV but the ones that are already here cannot stop coming back for more!
Finally, PlutoTV’s international pursuits are growing by the day! Pluto recently launched in Brazil, with the mobile service Klara Android, to an eligible user base of 32 million users. Additionally, in 2022, PlutoTV will be launched in some big international regions/countries including the Nordics, Canada, Poland, and Benelux (Belgium, Netherlands, and Luxemberg).
PlutoTV is crushing it. The best part is, we are just getting started!
👋Paramount+ Overseas:
Time to state the obvious: In order to be an international streaming powerhouse, you need to succeed in many international countries/regions. One of the most important regions is Europe and in the Q2 call, VIAC announced an integral distribution partnership with Comcast owned Sky for the UK, Italy, and Germany. This is a phenomenal development for VIAC as Sky is an international powerhouse with significant consumer touchpoints, including 24+ million Cable TV subscribers as well as several million subscribers/users of SkyQ- Sky’s Smart TV Platform. Specifically, SkyQ subscribers will receive Paramount+ at no additional charge.
It is integral to point out how strong of a service Paramount+ international offering is. It has a very similar library to Paramount+’s domestic offering while also containing various hits that are licensed out to other platforms domestically as well as several of Showtime’s biggest hits (as there is no Showtime international package).
One great example to track the power of the international service is VIAC’s launch in Australia and New Zealand this past week. On the day of the launch, Paramount+ skyrocketed to #1 in the iOS app store rankings, even ahead of apps like Tik Tok and YouTube. Not only does Paramount+ Australia have the content mentioned above but also ViacomCBS produced multiple local originals for the service and also secured the soccer rights for the top Australian Soccer Leagues. As you can tell, ViacomCBS is serious about offering a differentiated service in every country that they launch.
The distribution agreement with Comcast will begin in 2022 and will likely lead to millions of additional subscribers to VIAC’s Global Streaming Userbase.
👋Bottom Line:
It is quite clear that ViacomCBS is executing their streaming plans with phenomenal decision making. Whether it is the success of the streaming services, franchise development, or the effective international distribution of their content, VIAC is crushing it. This continues to be my number one stock in the portfolio.
I look forward to keeping Cruisers updated as VIAC continues to enter the next successful chapter of its storied history.
-Alan
💸Portfolio Update:
Our portfolio started with $11,000 (mock) with $1,000 in each of our Portfolio Picks. Based off of our opinion, we ordered the picks from least risky (top) to most risky (bottom).
📰Portfolio News:
⚾Barstool + MLB?!?!: In rather shocking news, rumors serviced that Barstool Sports is in serious negotiations with the MLB to start broadcasting a package of MLB weekday games. This is a huge development for Barstool (owned by Penn) and continues to show that they are one of the hottest media company’s in the industry. It is starting to look like a huge steal that $PENN bought them for just a $450 million valuation.
🏌️♂️Hole in 1!: Portfolio Pick Callaway Golf announced phenomenal Q2 earnings where they reported $913 million in revenue and $0.36 earnings per share. These numbers absolutely smashed Wall St. estimates of $746 million in revenue and $0.00 earnings per share. The strong beat was driven by the growth of Callaway’s apparel business, strength in the golf club/ balls segment, TopGolf, and more! Callaway Golf is hotter than Tiger Woods on a Sunday in his prime!
🧠Brainsway = Right Way! Portfolio Pick Brainsway also announced strong earnings with revenue of $7.0 million representing 45% Y/Y growth. Most importantly, the company is continuing to make significant progress with their OCD treatment as well as Smoking Cessation. The progress is so strong that the company might just be the feature of our next edition! CEO Christopher Van Jacko and co. are not only helping many people with their technology, but they are also building a phenomenal company in the process!
📕Chart of The Week:
In the newsletter, we often discuss how ViacomCBS is a production powerhouse that does not deserve enough credit. This chart by Parrot Analytics below exemplifies that testament that we often stress showing that ViacomCBS has the second largest demand for its content (regardless of platform or medium of consumption).
🎮Trivia Night!
Question
How long does the average South Park episode take to produce?
A: 6 Years (true art takes time) B. 6 Months (much less than 6 years!) C. 6 Weeks (now we are talking) D. 6 Days (not enough time)
Answer: D
🤣Meme Of The Week:
This might or might not be footage of me after waking up bright and early for the VIAC earnings a couple of weeks back!
🧊Coolest Moment Of The Week:
Growing up I was a huge baseball fan. As the years have gone on and the responsibilities started increasing, my relationship with baseball is definitely not the same that it once was (and the game is kind of boring too!).
This past week, Baseball had the “Field of Dreams Game” where the MLB built a stadium and played a game in the corn fields of Iowa where the famous baseball movie “Field of Dreams” starring Kevin Costner (second shoutout for Kevin today!) was filmed.
Just like the movie, the current MLB players walked onto the field through the corn fields just like the MLB legends did in the movie. It was a phenomenal game and tapped into the legacy of baseball and what makes it so special.
The game was a smashing hit as the game had more than 5.9 million viewers- the most viewed regular season game since 2005! MLB Commissioner Rob Manfred has already confirmed that the “Field of Dreams Game” will return in 2022.