Viacom and CBS are back together again
Merger creates global content powerhouse
NEW YORK: After more than a decade apart, CBS Corp and Viacom Inc are reuniting.
In a deal that closed on Wednesday, CBS, the company behind broadcast network CBS and publisher Simon & Schuster, merged with Viacom, owner of Paramount Pictures and cable outlets MTV, Nickelodeon and Comedy Central.
The combination brings together a set of businesses that once dominated the media and entertainment industries but are now fighting to stay relevant in an increasingly digital world.
CBS and Viacom were already corporate siblings before the deal, both controlled by National Amusements Inc, a theater company that grew into a major conglomerate under the mogul Sumner Redstone, who is ailing at age 96. His daughter, Shari Redstone, emerged as the company’s leader in recent years and had sought a merger since 2016.
With the deal, Shari Redstone cements her role as a trailblazing figure in a male-dominated industry, a woman whose peers now include leaders of media behemoths like Brian Roberts of Comcast Corp and Robert Iger of The Walt Disney Co.
Now that Disney has joined Netflix Inc and Amazon.com Inc as a force in the streaming industry, the merger is meant to make ViacomCBS, as the new company will be called, a bigger player in digital entertainment than the two companies had been as separate entities.
Unlike its streaming rivals — a group that includes Apple Inc, with its new Apple TV+ streaming service, and AT&T Inc, owner of HBO Max, scheduled to make its debut in May — ViacomCBS will focus on supplying films and television series to other companies.
With an executive team led by Redstone, chairwoman of the company’s board, ViacomCBS intends to follow a strategy of selling its wares to the highest bidder as demand for original content increases.
The number of streaming subscribers around the world surpassed the number of cable subscribers for the first time last year, and Netflix, Amazon, Hulu and other platforms are fighting to attract customers who have cut the cord or are one cable technician visit away from doing so.
That has set off a frenzy of activity among the streaming companies, and ViacomCBS has already started to take advantage of the new demand.
Paramount’s TV arm, for example, created Jack Ryan, a popular series on Amazon Prime Video, and CBS has produced content like the true-crime drama Unbelievable and the comedic thriller Dead to Me that streams exclusively on Netflix.
In October, Viacom sold streaming rights to the animated comedy series South Park to AT&T’s HBO Max in a deal worth $500 million.
“I actually feel great about this positioning,” Redstone said at a November event at the Paley Center in Manhattan.
She described the combination as a “global content powerhouse” that “has an incredible library.”
Viacom properties include Mission: Impossible, Star Trek and SpongeBob SquarePants, and CBS is home to NCIS, 60 Minutes and Young Sheldon, a breakout comedy that is owned by AT&T’s Warner Bros but has become a durable hit for CBS.
ViacomCBS also has a small toehold in streaming services with CBS All Access and Showtime, which together have more than eight million subscribers and feature originals such as the reboot of Twilight Zone and Star Trek: Picard, which is scheduled to have a January debut.
Viacom’s free, ad-supported streaming service, Pluto, has more than 20 million viewers a month.
From 2000, when National Amusements acquired CBS, until 2006, the two companies were a single entity. Sumner Redstone split them apart at a time when the Viacom properties were growing faster than the CBS broadcast network and radio stations.
A reunification was seen as necessary at a time when television audiences have eroded and the movie business is adjusting to streaming.
The creation of ViacomCBS is a victory for Shari Redstone, whose efforts to bring about a merger drew opposition from the CBS board, including its former chief executive, Leslie Moonves.
Moonves was pushed out last year after several women accused him of sexual misconduct, charges he has denied.
Some analysts have questioned the deal, saying it may not be enough to fend off the decline in traditional television.
Michael Nathanson, an analyst with Wall Street research firm MoffettNathanson, said ViacomCBS would have to “explain how the combination helps better insulate it” from the current pressures on the cable and satellite business.
“The merger seems to be largely a defence play,” he said. “For the stock to work, they have to prove that their current strategy is either building long-term asset value or generating more attractive returns. If they can’t, we remain in purgatory.”
Shares of both CBS and Viacom have dropped about 20% since the merger was announced in August.
Viacom’s chief executive, Robert Bakish, leads the new company, and Joseph Ianniello, the CBS acting chief executive, remains the head of the CBS unit.
The combined company expects to see about $500 million in cost savings, which typically come in the form of layoffs. The deal’s closing is sure to set off several rounds of job cuts over the next few years.