Yahoo! Inc.’s (YHOO - Analyst Report) Spanish entity Yahoo! en Español and Sony Music’s (SNE - Analyst Report) Latin division have entered into a strategic partnership to develop and distribute a series of entertainment programs. These shows will be aired starting early 2013.
The stalwarts will jointly produce videos and digital music programs exclusively for the U.S. Hispanic audience. Yahoo! en Español and Sony Music Latin will develop programs related to beauty, cooking, lifestyle, dance and music. These shows will be exclusively broadcasted on the OMG! en Español and Mujer channels across Yahoo! en Español.
Sony Music Latin features popular singers like Shakira, Ricky Martin, Chayanne, Marc Anthony, Pitbull among others, which is a positive for Yahoo.
Currently, Latin music is ruling the charts alongside American Pop music. Latin singers are growing in popularity, helped no doubt by the growth in the U.S. Hispanic population. Moreover, it is expected that the U.S. Hispanic market’s buying power may touch $1.5 trillion by 2015 (Nielsen). Companies such as Procter & Gamble (PG - Analyst Report), General Mills (GIS - Analyst Report), Unilever (UL - Analyst Report), Coca Cola (KO - Analyst Report) and Wal-Mart (WMT - Analyst Report) are all targeting the Latin segment for future growth strategies.
According to research by PWC, the music industry is poised to grow at a CAGR of 5.4% to $21.5 billion by 2016 in the U.S. alone. Therefore, Yahoo’s decision to tap the potential in this market makes perfect sense.
As per Global Industry Analysts, Inc. or GIA, the worldwide online advertising market may reach $72.8 billion by the end of 2015. Growth will be fuelled by rapid increase in the Internet user base in emerging countries.
Yahoo is seeing stiff competition from the Google and Microsoft (MSFT - Analyst Report) search platforms and the company is increasingly getting squeezed out of the search market. Therefore, such strategic partnerships are a big positive and the resultant increase in revenues may help to make up for the losses in search.
Further, Yahoo! en Español is creating a niche market in digital branded entertainment. In 2012, it launched 30 programs and is now providing opportunities to advertisers that can target multi-cultural audiences on a single platform.
In the third quarter of fiscal 2012, Yahoo reported revenue of $1.20 billion, which was down 1.3% sequentially and 1.2% year over year. TAC costs were down 17.7% sequentially and 22.2% from last year. Excluding these costs in all periods, net revenue was essentially flat on a sequential basis and up 1.6% from last year, in line with the consensus estimate.
Yahoo has a Zacks Rank #1 (Strong Buy) and Sony carries a Zacks Rank #3 (Hold).