Viacom, CBS Hope Merger Allows Joint Group To Compete With Rivals
CBS and Viacom have agreed to merge in a deal the media companies "hope will put them on stronger footing to compete with larger rivals in a business buffeted by cable TV cord-cutting and increasingly dominated by streaming," according to Mullin & Lombardo of the WALL STREET JOURNAL. The merger creates a "major entertainment player" valued at roughly $30B, but ViacomCBS would "still be a relative minnow, with a much smaller market capitalization than big industry players." It would "need to do additional deals to bulk up to the size of its rivals" (WALL STREET JOURNAL, 8/14). CNBC’s Rahel Solomon said Viacom and CBS "may be betting here that a larger company can better compete in an industry dominated by even bigger giants" (“Worldwide Exchange,” CNBC, 8/14). The AP's Mae Anderson noted acting CBS CEO Joe Ianniello "will head the CBS business in the combined company," which will "still be small" compared to those like Disney and Netflix. Moody's Investors Service Senior VP Neil Begley said that ViacomCBS "might have to consider other acquisitions to keep up," but noted that the "number of possible targets is dwindling." What is left is "mostly smaller companies such as the Discovery and the AMC television networks and the MGM and Lionsgate movie studios" (AP, 8/13).
BETTER TOGETHER: In Boston, Jon Chesto notes the deal "brings together Viacom’s Paramount movie studio and its cable TV networks -- MTV, Nickelodeon, BET, among them -- with CBS, Showtime, and the Simon & Schuster publishing house." Viewers will now "probably see Paramount movies on Showtime’s premium channel, or Viacom’s programming on the CBS All Access streaming service." Analysts on the merger call "seemed to wonder aloud whether the two companies, once united, will still be big enough to compete over the long haul" (BOSTON GLOBE, 8/14). The HOLLYWOOD REPORTER's Bond & Szalai notes ViacomCBS could look at "acquiring AMC Networks, MGM or even Rupert Murdoch's slimmed-down Fox Corp." (HOLLYWOODREPORTER.com, 8/14). NBC NEWS' Dylan Byers notes ViacomCBS, even with $30B in market value, is "still a fraction of the size" of companies like AT&T ($252B), Disney ($245B), Comcast ($193B) and Netflix ($136B) (NBCNEWS.com, 8/14). Ianniello said that the combined entity "would look to drive higher affiliate fees as he insisted CBS and Viacom" have a combined 22% of domestic TV viewership, and "yet only secure" 11% of retransmission fees (HOLLYWOODREPORTER.com, 8/13).
GRIDIRON IMPACT: CNBC.com’s Alex Sherman cited sources as saying that the new ViacomCBS wants to "buy up another company or maybe additional companies" to try to get into a position where it can "compete on content, particularly for sports rights such as the NFL." Sherman added CBS' deal with the NFL runs out in '22 so they are "probably going to be looking for companies to buy between now and then" (“Squawk Box,” CNBC, 8/14). S&P Global analyst Naveen Sarma said, “Viacom's significant free cash flow could provide more financial flexibility for CBS to both pay for the next NFL contract and increase programming investments. The current NFL contract costs CBS roughly $1 billion annually on average, and is likely to get more expensive after it expires" (HOLLYWOODREPORTER.com, 8/13). DEADLINE's Dade Hayes noted CBS Sports Chair Sean McManus "declined to offer a specific comment." But he said, "We all know the value of sports television. Whatever happens to CBS corporately, sports is going to remain an important part of our portfolio." Meanwhile, McManus has an "optimistic view" for NFL ratings this season. McManus also said that he "didn’t anticipate any issues" politically (DEADLINE.com, 8/13).
WHO WILL HAVE CONTROL? DEADLINE's Patten & Hayes cited a source as saying that Ianniello’s contract has been extended through '21, but "conceded many details of the new organizational structure have yet to be ironed out." Ianniello has "lost oversight of prestigious premium cabler Showtime, Pop TV, Smithsonian Channel and publisher Simon & Schuster." In a "further sign of Ianniello’s slipping authority under the new regime that Shari Redstone has planned for years, he no longer will have domain over ad sales and distribution." Ad sales is "another area where the integration could get interesting." CBS Chief Ad Revenue Officer Jo Ann Ross "has been at the company 27 years." Viacom Head of Ad Solutions Sean Moran is a 24-year company veteran who was "promoted to the top job" in '16 (DEADLINE.com, 8/13). In N.Y., Alexandra Steigrad notes the merger has CBS and Viacom staffers "bracing for layoffs" (N.Y. POST, 8/14).
HOW IT HAPPENED: The WALL STREET JOURNAL's Mullin & Flint go inside the deal, writing under the header, "Viacom-CBS Deal Drama Was Worthy of the Fall Lineup" (8/14).