CBS and Viacom announce deal to reunite

CBS and Viacom introduced a long-anticipated reunion Tuesday, bringing collectively their tv networks and the Paramount film studio as conventional media giants bulk as much as problem streaming firms like Netflix.

Viacom CEO Bob Bakish, who will grow to be CEO of the mixed firm, stated the brand new ViacomCBS might be “one in every of only some firms with the breadth and depth of content material and attain to form the way forward for our trade.”

Analysts say the reunion will assist each firms navigate an ever-competitive streaming panorama.

Viacom owns Paramount Photos and pay TV channels equivalent to Comedy Central, MTV and BET, whereas CBS has a broadcast community, tv stations, Showtime and a stake in The CW over-the-air community. MoffettNathanson analyst Michael Nathanson stated Paramount’s film library could possibly be added to Showtime’s premium networks and streaming service, for example, whereas CBS’ streaming service may get a lift from Viacom’s Nickelodeon video.

As soon as the all-stock deal is accomplished, anticipated by the top of the yr, CBS shareholders will personal about 61 p.c of the mixed firm and Viacom shareholders will personal the remainder. The businesses say the mixed firm can have $28 billion in income. By combining, the businesses say they’ll save $500 million a yr.

Performing CBS CEO Joe Ianniello will grow to be chairman and CEO of the CBS division within the mixed firm.

CBS, which separated from Viacom in 2006, was one of many first media firms to launch its personal streaming service, CBS All Entry. The $6-a-month service now has a brand new “Star Trek” sequence, a revival of “The Twilight Zone” and archives of previous and present broadcast exhibits.

Now, Disney, Comcast’s NBCUniversal and AT&T’s WarnerMedia are leaping in with their very own providers as effectively to problem Netflix, Amazon, Google and different tech firms encroaching into leisure. To broaden its library, Disney purchased Fox’s leisure companies for $71 billion in March, whereas DirecTV proprietor AT&T purchased Time Warner final yr for $81 billion.

The businesses say the mixed firm will create content material not only for its personal providers, however for third-parties as effectively. The brand new firm needs to hurry up the expansion of its streaming providers, together with CBS All Entry, Showtime, and Pluto TV, the free ad-supported service that Viacom owns, and drive extra promoting to its providers.

Moody’s media analyst Neil Begley stated the largest query might be whether or not the brand new firm will give attention to its subscription-based streaming providers equivalent to CBS All Entry and Showtime or ad-supported ones like Pluto TV, or maintain doing each.

Firms may not make sufficient on subscription charges to interrupt even, but it surely may not be capable of get sufficient viewers with free providers to draw sufficient promoting both, he stated.

“For those who’re entering into each instructions, you are hedging your bets, however are you pulling your punches on no matter the perfect technique might need been?” Begley stated.

CBS says All Entry and its Showtime streaming providers have eight million subscribers mixed. That is far lower than the 60 million U.S. subscribers that Netflix has, although it is comparable with the estimated variety of subscribers to HBO Now, that community’s stand-alone streaming service.

The mixed firm would nonetheless be small in contrast with behemoths like Disney, with an unlimited library of flicks and exhibits, and Netflix, the pioneer in streaming know-how. CBS has a market worth of $18 billion and Viacom has a market worth of about $11.7 billion. Disney’s is almost $245 billion and Netflix is at $136 billion.

Begley stated the mixed entity might need to think about different acquisitions to maintain up with rivals. Nonetheless, the variety of potential targets is dwindling, he stated, with what’s left principally smaller firms such because the Discovery and the AMC tv networks and the MGM and Lionsgate film studios.

CBS and Viacom have had an on-again, off-again relationship.

After splitting in 2006, CBS and Viacom each remained managed by Nationwide Amusements. Shari Redstone, daughter of media mogul Sumner Redstone, runs the holding firm.

The cut up was a approach to separate Viacom’s networks like MTV, Nickelodeon and BET, which had been very profitable on the time, from the slower development of the CBS community.

However over time, the 2 firms’ fates had been reversed. CBS underneath longtime chief Les Moonves turned extra worthwhile and Viacom struggled, harm by weak point in its Paramount studio and other people dropping cable in favor of streaming.

A recombination is smart now as a result of media firms are bulking up their content material choices to raised compete for advert {dollars}. However Moonves was in opposition to the thought, as CBS was stronger and extra worthwhile than Viacom.

Moonves’ ouster final yr within the face of a number of sexual misconduct allegations modified the dynamic. Underneath an settlement, Shari Redstone agreed to not push for a reunion for at the very least two years, however that left open the opportunity of CBS itself pushing for it.

Redstone might be chairwoman of the mixed firm’s board.

“We are going to set up a world-class, multiplatform media group that’s well-positioned for development in a quickly remodeling trade,” she stated.

The shares of CBS and Viacom each rose lower than 2% in afternoon buying and selling Tuesday, a mirrored image of Wall Road having anticipated this deal, particularly in current days. Disney’s inventory was up 1%, whereas Netflix was unchanged.

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