Viacom says Pluto TV deal is a $1B ad revenue opportunity

Viacom used part of its fiscal first-quarter earnings call to open up about the revenue possibilities for Pluto TV, the ad-supported streaming service it's buying for $340 million.

CFO Wade Davis elaborated on CEO Bob Bakish’s comments that the Pluto TV deal would create value for the company at multiples of the purchase price. He said that, in the ad space alone, Pluto TV is a $1 billion opportunity. That total likely reflects the chances to grow ad sales for Pluto TV.

“Pluto TV audience is young, gender-balanced & hard to reach – in fact, 50% of Pluto TV viewers are between the ages of 18 & 34. Importantly, Pluto TV – w/ its nascent ad sales force – currently sells less than 50% of this inventory, so there’s plenty of upside here,” said Bakish during the earnings call.

Davis said that inventories comparable to Pluto TV’s are monetizing at $3 to $5 per user per month. Pluto TV currently counts more than 12 million monthly active users, and 7.5 million of them are on connected TVs where higher value ad inventory can be sold. He said that Viacom’s Advanced Marketing Solutions and the company’s client relationships should help Pluto TV quickly scale its monetization levels.

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Pluto TV is already integrated with smart TVs from Samsung and Vizio, which Viacom said represent about 60% of the market. The company expects Pluto TV to be enabled on more than 30 million additional devices in the coming months

After the Pluto TV deal closes (which will happen in March if everything goes as planned) Viacom is planning to launch a Spanish-language streaming service later this year. The service will feature Viacom’s Spanish-language media networks content and content from Viacom’s Latin American channels.

As Viacom looks ahead to opportunities stemming from the Pluto TV acquisition, the company is immediately faced with slightly disappointing quarterly results. Viacom’s media networks division saw first-quarter revenue total just under $2.5 billion, down 2% year over year. That decline came as domestic revenues stayed flat and international revenues fell 10% amid falling ad revenue totals. Operating income for the segment stayed flat thanks to a decrease in SG&A expenses driven by lower advertising and promotion expenses.

Viacom’s consolidated revenues for the quarter approached $3.1 billion, up just 1% year over year. Operating income dropped 16% to $602 million.