With a deal with Amazon worth "hundreds of millions of dollars," Viacom will meet its goals for revenue from on-demand streaming video this fiscal year, according to Sanford C. Bernstein & Co. analyst Todd Juenger.
But even with the agreement to let Amazon stream Viacom shows such as "Dora the Explorer" and "SpongeBob SquarePants," it remains unclear how the programmer will increase its streaming revenue in the years ahead.
Viacom, which owns networks such as Nickelodeon, Nick Jr., Comedy Central and MTV, needed at least an additional $125 million to $150 million to meet its goal of 10% growth in fees from streaming content on-demand, Juenger wrote in a note to clients.
The value of the licensing agreement was not disclosed, though a person familiar with the matter told The Times it is estimated to be worth hundreds of millions of dollars.
"That would certainly be enough to plug the gap this year," wrote Juenger, who has an "underperform" rating on Viacom's stock and a target price of $64.
"But it begs the question, how will Viacom be able to grow SVOD revenue in the following years, considering the Amazon deal is multiyear and includes exclusive elements?"
Viacom's key networks MTV and Nickelodeon have struggled with lower ratings during the past 18 months, crimping advertising revenue and putting pressure on the company's top line.
The deal announced Tuesday is believed to be the biggest yet for Amazon's video streaming service, in terms of breadth of content and cost.
Juenger wrote that Viacom will get the bulk of the revenue from the deal during the current fiscal year, with additional revenue in fiscal 2014 as new shows are added to the deal and new seasons of older shows are made available.
Shares of Viacom rose less than 1% to $67.74 Tuesday afternoon.
The agreement with Amazon focuses on children's shows from Nickelodeon and Nick Jr. "Kids' shows are one of the most watched TV genres on Prime Instant Video," said Bill Carr, vice president of digital video and music for Amazon, in a statement.
The deal comes after Netflix, in April, told investors that it would allow its deal with Viacom to expire.
Netflix and Amazon are also going head-to-head with original content for streaming. Following its hit political drama "House of Cards," Netflix recently released its 15-episode reboot of the cult comedy series "Arrested Development."
Amazon last week picked up five original shows for its Prime Instant service, including a comedy about misfit roommate senators starring John Goodman.