✈️ViacomCBS's Secret Weapon
PLUS: Some serious changes to the Portfolio!
👋Welcome!
What is up Cruisers? We are back for Newsletter #30!
What is Inside?
💸Portfolio Update | 🔍Spotlight: $VIAC
📰Portfolio News |😂Meme of the Week
🎮Trivia Night! | 📕 Chart of The Week
🎙️Final Thoughts
💸Portfolio Update:
Cruisers! You have talked, and I have listened! The old portfolio structure was way too complicated. Whether it was units or the lack of ability to track lots, it was (as the cool kids say) “not it.”
Introducing, the new and simple Cruising Altitude portfolio. After market close on July 19 (per our Tweet), we created a mock portfolio by putting $1,000 (mock dollars) into each portfolio pick. Therefore, the total money put into this new portfolio is $11,000 (mock dollars). Finally, based off of our opinion, we ordered the picks from least risky (top) to most risky (bottom).
Investing should be easy and simple. Our portfolio now reflects this. Enjoy!
🔍Spotlight: $VIAC
👋Introduction:
Whenever ViacomCBS $VIAC is the Spotlight pick for Cruising Altitude, it is always a very exciting week for me, to say the least. I think it is the best opportunity on the market from a risk/reward perspective because so many just do not get “it”. Today, we will be breaking down one component of the $VIAC thesis, which is PlutoTV. Before doing so, I want to tell Cruisers everywhere a little story just to show how $VIAC and I are “singing from the same hymn.” (I apologize for using this interesting metaphor. I once heard former Cleveland Browns Head Coach Mike Pettine use that phrase and ever since then, I thought it was funny)
Two weeks ago, I found myself in Dallas, Texas at a rodeo (real story). I was taken back by the passion that the locals had for the rodeo and how embedded in the culture it was. On any given weekend, millions of people are likely to be attending a rodeo or watching it on TV- it is kind of huge. I found myself thinking that rodeo and western sports would be a phenomenal asset for one of the many (endless?) streaming companies.
One week later, PlutoTV announced that they had signed an exclusive agreement with Professional Bull Riders (PBR) to be the new home for PBR Ride Pass, a streaming service that has exclusive rodeos, cowboy sports, and related TV shows. *Fun Fact* PBR Ride Pass brands itself as “The Netflix of Western Sports.” I have heard of Netflix. I have not heard of “The Netflix of Western Sports.”
Adding live sports to any streaming service is a huge subscription and engagement driver. I was happy because this was a phenomenal move for the company to continue growing PlutoTV. However, I was really happy, because it just showed me that the equation below is true:
ViacomCBS + Alan = Destiny!
👋Background:
PlutoTV is a streaming service that mirrors the classic TV experience that many of us grew up on. Here are some fun facts about the service:
140+ curated 24/7 channels over various genres
100% free and requires zero log in or account set up
Loved by consumers as it solves “decision fatigue” that consumers often feel when opening a paid streaming service
Considered an Advertising Video On Demand (AVOD) service and that is how they make money!
PlutoTV has been described as a “rocketship” by ViacomCBS CEO Bob Bakish. Why? Because it is one. The growth from both a Monthly Active User (MAU) perspective and a monetization perspective have been off the charts and wildly surpassed ViacomCBS’s expectations for the service when they acquired it for $340 million in 2019.
PlutoTV is on track to do “comfortably” over $1 billion in 2022 compared to $70 million in 2018. Yes. You read that right. $70 million to $1 billion in 4 years. Rocketship. On top of this, the service is very profitable for $VIAC as a significant amount of the content on the platform is ViacomCBS owned content. I asked an industry expert if it is a safe assumption to assume that PlutoTV’s gross margins are in the low 60’s and he said that is a “conservative/safe bet.”
When looking at the user growth side, PlutoTV is up to 49.5 million MAUs globally (at the end of Q1), up from 43.1 million MAUs at the end of Q4 of 2020! In just three months, the company added 6.4 million more users. PlutoTV has no plans on slowing down as they have made significant investments to expand globally, including Latin America, various European countries, and more!
Rocketship.
👋What you might not know:
One of the most successful companies in the stock market this year has been Roku $ROKU which is up a casual 168% this year. Roku specializes in providing an operating system for SmartTVs in which consumers can access their various streaming services in a simple manner.
Roku’s Platform Revenue makes up around 80% of Roku’s total revenue and is growing at a rate of 101% a year from $232.6 million in Q1 of 2020 to $466.5 million in Q1 of 2021.
The key driver for the company’s Platform Revenue is “The Roku Channel” (TRC). TRC is an AVOD service (like PlutoTV) which provides free content to consumers as well as discounts and trials for some paid streaming services.
Roku competitors have seen the success of Roku’s Platform and TRC and have now created their own. Samsung, who sells 31% of Smart TVs domestically, has launched Samsung Live TV, VIZIO, who sells 13% of TVs domestically, has launched WatchFree, and LG, who sells 12% of TVs domestically, has launched LG Channels. (For reference, Roku Smart TVs makes up 38% of TV’s sold domestically in Q1 of 2021).
Now the fun part. All three of these companies’ AVOD services rely in some form or another on PlutoTV. Yes. Samsung and LG license PlutoTV channels for their platform (along with PlutoTV’s competitor Xumo’s) while VIZIO’s WatchFree is advertised as “Powered by PlutoTV.”
Therefore, to bring it home, not only does PlutoTV have a massive and rapidly growing stand-alone streaming service but they also are embedded in three of the largest TV manufacturers’ AVOD services allowing Pluto’s licensing revenue to likely grow along with the TV manufacturers’ rapidly growing platform revenue.
I have taken some heat before on Twitter making comparisons between Roku and ViacomCBS (specifically PlutoTV), and I think this analysis shows that the comparison is not too crazy!
🎁Wrapping It Up!
ViacomCBS’s market cap today is under $26 billion. I think PlutoTV alone can be worth this much 3-5 years down the road. The company has not even come close to launching a “Freemium” component to the service which PlutoTV founder Tom Ryan (spoiler alert!) has hinted in the past. With the various other streaming assets the company has, billions of dollars of intellectual property from some of the most legendary brands in entertainment, and Paramount Pictures. I think $VIAC can be a grandslam.
Two questions I am going to look into as I continue to research PlutoTV’s embedment in TV manufacturers “Platforms” are:
Does PlutoTV current MAU count include users on third party services (I would assume not)
Is PlutoTV payed per engagement in the channel or is it a one time licensing fee? (I assume the former!)
As always, I will keep you guys and gals updated!
Feel free to email me with any more PlutoTV questions or thoughts to cruisingaltitude33@gmail.com!
If you are interested in more of my thoughts on the $VIAC thesis check out some of these older CA’s I have written:
-Alan
📕Chart of The Week:
What an interesting chart provided by Bain & Company displaying how Founder-led companies in the S&P500 greatly outperform companies who do not have founders running the company.
Sometimes bringing in an outsider that knows how to run a big company is a smart move, however, this chart shows there is real value to letting the founders keep executing their vision. Passion is a powerful thing and founders normally have that.
🎮Trivia Night!
A question you shouldn't know the answer to but will serve as a fun way to learn more about the portfolio picks or the Spotlight company.
Question:
Who is the founder of PlutoTV?
A. Jack Ryan 🎥 B. Matt Ryan 🏈 C. Tom Ryan 👀 D. Ryan Ryan ❓
Answer: C!
Tom Ryan, was the Founder and CEO of PlutoTV! Due to Ryan’s brilliance and strong understanding of the streaming landscape, he was promoted to CEO of Streaming at ViacomCBS!
Jack Ryan (TV show), Matt Ryan (NFL QB), Ryan Ryan (I made up!) are all incorrect!
🤣Meme Of The Week:
Okay. This meme is absolutely brilliant. Borders. I miss you. I never thought you would get a shoutout in Cruising Altitude but you made it!
📰Portfolio News:
👻The Disappearing Feature: Portfolio Pick Twitter announced that its “Fleets” feature (similar to Instagram and Snapchat stories) will be disappearing after the feature failed to improve engagement on the platform! The company’s continued focus on improving the apps experience is obvious through the creation of Twitter Spaces, Twitter Blue, and the possibility for creators to monetize their followings!
👋Go(ed) Away: Portfolio Pick 1847 Goedeker who recently merged with Appliance Connection, announced that they would be undergoing a “strategic and unified” rebranding process. We think this is a great move as, to put it nicely, ”1847 Goedeker” does not sound like a name of a billion dollar company!
🧬DNA Buddies: Portfolio Pick Invitae announced that they have agreed to expand their collaboration with Pacific Biosciences. The companies will be working together on combining “SBB with HiFi Sequencing.” Wondering what that means? How long do you have (lol)? Very long story short, just think of this as Invitae continuing to develop their technology by working with another revolutionary company.
💭Final Thought:
“Don’t pass up something that’s attractive today because you think you will find something better tomorrow.”
-Warren Buffett
As I have continued to mature as an investor, it has become clear to me that there are probably dozens of opportunities out there that are “right up my alley” that I have just not came across. That is okay. There will always be endless opportunities out there. I am always keeping my eye out for a new opportunity, but you can drive yourself crazy if you are too focused on finding what is “up next.” I have always felt spending more time learning about the stocks I do own has been more valuable than looking for a new pick!
Awesome post and I love the new layout for portfolio!