The DVD market has entered maturity, and services such as video-on-demand continue to offer increasing competition to the disc format. But even within such an environment, media companies still find value by releasing works from their libraries on DVD. CBS (NYSE: CBS ) seems particularly committed to the medium, judging by its latest initiative.
According to a Reuters story, the broadcaster will attempt to maximize its DVD sales via a separate unit designed for the cause. CBS Home Entertainment is the name of the new arm, and it's aiming to increase disc flow by 20% in 2007. I can see why CBS would want to get a little more aggressive on home video. Consumers are still reportedly enthralled by multiple-disc packs of their favorite shows, and they enjoy buying whole seasons in one shot.
In addition, this gives CBS yet another opportunity to amortize costs related to programming. Plagued by audience erosion, the major broadcasters have sought ancillary revenue streams. For instance, Disney's (NYSE: DIS ) ABC, News Corp.'s Fox (NYSE: NWS ) , and General Electric's (NYSE: GE ) NBC have been well-represented in the basic-cable landscape, in addition to the free airwaves, for years now. More recently, they've been exploring nascent digital opportunities such as social networking and Web streaming.
CBS can really shine in the home-video market by releasing season sets of the increasingly popular original series from its Showtime cable channel. Motley Fool Stock Advisor pick Time Warner (NYSE: TWX ) has had a ton of success with quality shows on HBO, most notably The Sopranos, and you can bet that Showtime wants to increase its brand equity in this premium-cable space. The channel's recently gained considerable buzz from its new serial-killer thriller Dexter.
Investors are still waiting to see whether CBS will benefit from its recent split with Viacom (NYSE: VIA ) . With Viacom now occupied with MTV and Paramount Pictures, CBS is free to focus on DVDs, and it's got no excuse left for underperforming. I give the DVD-centric strategy a lot more credit than CBS's potential plans to go into theatrical movie production; after all, the split was designed to let each company focus on its strengths, without getting distracted by areas in which its new sibling was better able to compete.
If this new CBS segment ramps up successfully, it'll be poised to reap the rewards of the changing disc format; whether the ultimate winner turns out to be Blu-ray or HD-DVD (or perhaps a hybrid), a new platform should give CBS the chance to cash in by re-releasing all its old shows in high definition.
Tweaking corporate structures to capitalize on home video is hardly unique; Time Warner has also established a dedicated division for home video. Still, even if it's following others' lead, CBS is finally focusing on its side of the post-Viacom-split universe, and its DVD division should help extract value from the company's library assets.
Keep your Foolish eye on CBS:
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Fool contributor Steven Mallas owns shares of Disney and General Electric. As of this writing, he was ranked 2,235 out of 20,319 investors in the CAPS system. Don't know what CAPS is? Check it out. The Fool has a disclosure policy.
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