Commentary

Viacom Rethinks Position As CBS Grapples With Moonves Scandal

If you are a senior Viacom executive looking at what is going on at CBS, what are your company’s future prospects?

CBS is now dealing with sexual misconduct allegations against Les Moonves, its CEO, as well as an openly testy relationship with majority owner National Amusements through its legal actions.

Perhaps for the near term, Viacom’s outlook might be more positive.

Brian Wieser, senior media analyst for Pivotal Research Group, wrote in a note: “Prior to last week, we thought it likely that Viacom would end up controlling CBS.” This is in reference to National Amusements' push to re-merge the two companies. National Amusements also has a majority stake in Viacom.

Still Wieser believed -- before all this -- that Moonves could have been in charge of the combined company. Now? Better prospects for Viacom. “The company [CBS] is consequently in a weaker position to negotiate with Viacom,” he says.

He adds: “Between the CBS’ board’s failure to investigate allegations months ago. ... and Moonves’ failure to step aside during the investigation of multiple claims against him, there is [now] a significant loss of credibility at CBS among investors.”

But what about CBS’ good financial second-quarter results and future prospects? “We think it would have had limited impact given the increasing likelihood of a combination with Viacom and with Viacom management eventually in charge.”

Much criticism has been levied around CBS' second-quarter earnings call with analysts, at which a CBS investor relations executive said the company wouldn’t take any questions regarding the misconduct issues. Stock market analysts dutifully complied.

But had that earnings call also included journalists? No way.

Questions absolutely would have been asked -- no matter what the results. Veteran, professional reporters would be buzzing questions in multiple ways: Calmly, directly, and then -- when all else failed -- some testy shouts. (Think of how reporters quiz politicians). Good journalists don’t mind putting people in squirmy positions.

Specifically, some of the queries might include: What had the succession plans been at CBS before The New Yorker story broke?

Also, one might ask whether it will hurt TV development plans? TV producers -- creative types -- are known to make fluid business decisions. This would impact CBS' self-definition as a “premium” TV content owner.

No doubt quarter-to-quarter results say a lot about the current state of the company -- and for the near term. Even in an age where big media companies need lots of supporting senior executives with strong operating skills, TV and media companies can be fickle.

In that regard, Moonves has been a consistent force, long known at times to be a micro-manager. But this has worked well -- as financial results have long shown. Also, CBS senior executives have had long-tenures at the company.

Consistency is good. Wall Street likes that.

Which is why the prospect of Moonves leaving suddenly would be a blow -- and why major questions needed to be asked — and answered.

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