A poke in the eye

Viacom tie-up seen as CBS millstone

The media world may be buzzing about a potential CBS-Viacom merger, but Wall Street isn’t sold on the idea.

Despite CBS’s relatively upbeat fourth-quarter results last week, the broadcaster’s stock slipped 2.4 percent on Friday, to $55.39.

In fact, shares are down 5.8 percent since they initially popped on Jan. 12 on the first reports that it and Viacom were again talking merger.

Viacom shares are down less than 1 percent over that period, slightly better than the S&P 500 index, which is off 2 percent.

“The Viacom deal is leaning on [CBS],” said Needham & Co. media analyst Laura Martin. “I think people who own CBS stock, who really bought into the unique assets … don’t like the idea that CBS is going to buy a dozen cable networks.”

The Tiffany Network’s cur- rent strategy of focusing on growing direct-to-consumer services is gaining traction.

During the conference call after the bell on Thursday, Chief Executive Les Moonves pointed to the success of CBSN, its news streaming product, as a model for its upcoming CBS Sports and “Entertainment Tonight” streaming services.

“We believe we can build a significant audience by launching an ad-supported free service with full mobile and on-demand capabilities,” Moonves said.

“More importantly, we’re setting ourselves up for the direct-to-consumer future with another vertical that is right in our wheelhouse,” he added.

CBS recently inked deals with Hulu, DirecTV Now, Sony PlayStation Vue and YouTubeTV and has reached about 5 million subscribers for CBS All Access and Showtime combined — and predicted it would hit the 8 million mark by 2020.

“Les is clearly responding to the changing ecosystem by spending where he’ll get the biggest bang for his buck,” said Wells Fargo Securities senior analyst Marci Ryvicker. “The Street continues to overestimate the potential synergies.”

While the Viacom deal would give CBS much more scale, it would force the company to change strategies and, by inheriting the Paramount Pictures studio, navigate a completely different course.