Commentary

CBS-Viacom May Be A Difficult Marriage

It’s virtually a shotgun wedding: CBS and Viacom. But maybe the gun isn’t loaded.

Shari Redstone, president of National Amusements (which controls 80% of the voting shares of CBS and Viacom) and vice-chair of both CBS and Viacom, is pushing hard at this -- possibly because it seems to make sense that bigger is better.

This wasn’t the case a few years ago.

When the two companies separated in late 2005, many expect the “new” media company Viacom would have the upper hand. That didn’t happen.

Lots of companies separate “old” and “new” media businesses -- especially those with newspaper/magazine assets and TV businesses. That idea is to separate the “slow” growth from the “faster”-moving businesses.

In somewhat of a surprise to many, broadcast TV remains strong -- with new retrans dollars coming their way. Cable networks? They got hit with the same audience erosion as the broadcasters -- along with subscriber declines.

And then digital media upset everything.

So if you are Redstone, you not only have to give Les Moonves credit for weaving CBS through all this turmoil, but you have to give him significant credit and value going forward.

Since late 2005, CBS stock outperformed Viacom’s. Higher retrans money, big revenue from selling shows internationally (and domestically), steady prime-time business, among other areas were responsible for continued growth.

Still, the word is a top-level firing could happen if this shotgun wedding doesn’t happen as planned.

Some would say Discovery Communications merging with Scripps Networks Interactive was more of wedding that needed to happen -- bigger scale with more cable networks. But for many, it would have been better if a big broadcast network or at least a big media company (that also owns a major TV production unit to make scripted/unscripted TV shows) would have been attached.

And while new digital virtual multichannel video program distributors are taking on cable networks, they are cherry-picking. Gone are the days when a pay TV provider will take on a dozen or two dozen cable networks at a time from a single cable TV network group owner.

Viacom is still a big owner of many cable networks -- 25. A year ago, it said it would focus on six key network brands.

Perhaps that is what CBS plans in acquiring Viacom; a narrow focus on a small selection of networks going forward, using CBS broadcast network as a lynchpin.

What then happens to those fringe Viacom brands? Better bring good gifts to the wedding.

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