CBS, Vi­a­com are get­ting back to­gether

Ex­perts say re­union will aid in chal­lenge vs. stream­ing firms

Baltimore Sun - - NATION & WORLD - By Mae An­der­son

NEW YORK — CBS and Vi­a­com an­nounced a long-an­tic­i­pated re­union Tues­day, bring­ing to­gether their tele­vi­sion net­works and the Para­mount movie stu­dio as tra­di­tional me­dia gi­ants bulk up to chal­lenge stream­ing com­pa­nies like Net­flix.

Vi­a­com CEO Bob Bak­ish, who will be­come CEO of the com­bined com­pany, said the new Vi­a­comCBS will be “one of only a few com­pa­nies with the breadth and depth of con­tent and reach to shape the future of our in­dus­try.”

An­a­lysts say the re­union will help both com­pa­nies nav­i­gate an ever-com­pet­i­tive stream­ing land­scape.

Vi­a­com owns Para­mount Pic­tures and pay TV chan­nels such as Com­edy Cen­tral, MTV and BET, while CBS has a broad­cast net­work, tele­vi­sion sta­tions, Show­time and a stake in The CW over-the-air net­work.

Mof­fet­tNathanson an­a­lyst Michael Nathanson said Para­mount’s movie li­brary could be added to Show­time’s pre­mium net­works and stream­ing ser­vice, for in­stance, while CBS’ stream­ing ser­vice could get a boost from Vi­a­com’s Nick­elodeon video.

Once the all-stock deal is com­pleted, ex­pected by the end of the year, CBS share­hold­ers will own about 61 per­cent of the com­bined com­pany and Vi­a­com share­hold­ers will own the rest. The com­pa­nies say the com­bined com­pany will have $28 bil­lion in rev­enue. By com­bin­ing, the com­pa­nies say they will save $500 mil­lion a year.

Act­ing CBS CEO Joe Ian­niello will be­come chair­man and CEO of the CBS di­vi­sion in the com­bined com­pany.

CBS, which sep­a­rated from Vi­a­com in 2006, was one of the first me­dia com­pa­nies to launch its own stream­ing ser­vice, CBS All Ac­cess. The $6-a-month ser­vice now has a new “Star Trek” se­ries, a re­vival of “The Twi­light Zone” and ar­chives of old and cur­rent broad­cast shows.

Now, Dis­ney, Com­cast’s NBCUniver­sal and AT&T’s Warn­erMe­dia are jump­ing in with their own ser­vices as well to chal­lenge Net­flix, Amazon, Google and other tech com­pa­nies en­croach­ing into en­ter­tain­ment. To ex­pand its li­brary, Dis­ney bought Fox’s en­ter­tain­ment busi­nesses for $71 bil­lion in March, while DirecTV owner AT&Tbought Time Warner last year for $81 bil­lion.

The com­pa­nies say the com­bined com­pany will cre­ate con­tent not just for its own ser­vices, but for third-par­ties as well. The new com­pany wants to speed up the growth of its stream­ing ser­vices, in­clud­ing CBS All Ac­cess, Show­time, and Pluto TV, the free ad-sup­ported ser­vice that Vi­a­com owns, and drive more ad­ver­tis­ing to its ser­vices.

Moody’s me­dia an­a­lyst Neil Be­g­ley said the big­gest ques­tion will be whether the new com­pany will fo­cus on its sub­scrip­tion-based stream­ing ser­vices such as CBS All Ac­cess and Show­time or ad-sup­ported ones like Pluto TV, or keep do­ing both.

Com­pa­nies might not make enough on sub­scrip­tion fees to break even, but it might not be able to get enough view­ers with free ser­vices to at­tract enough ad­ver­tis­ing ei­ther, he said.

“If you’re go­ing in both di­rec­tions, you’re hedg­ing your bets, but are you pulling your punches on what­ever the best strat­egy might have been?” Be­g­ley said.

CBS says All Ac­cess and its Show­time stream­ing ser­vices have 8 mil­lion sub­scribers com­bined. That’s far less than the 60 mil­lion U.S. sub­scribers that Net­flix has, though it’s com­pa­ra­ble with the es­ti­mated num­ber of sub­scribers to HBO Now, that net­work’s stand-alone stream­ing ser­vice.

The com­bined com­pany would still be small com­pared with be­he­moths like Dis­ney, with a vast li­brary of movies and shows, and Net­flix, the pi­o­neer in stream­ing tech­nol­ogy. CBS has a mar­ket value of $18 bil­lion and Vi­a­com has a mar­ket value of about $11.7 bil­lion. Dis­ney’s is nearly $245 bil­lion and Net­flix is at $136 bil­lion.

Af­ter split­ting in 2006, CBS and Vi­a­com both re­mained con­trolled by Na­tional Amuse­ments.

The stocks of CBS and Vi­a­com both rose Tues­day.

RICHARD DREW/AP

CBS has a broad­cast net­work, tele­vi­sion sta­tions, Show­time and a stake in The CW over­the-air net­work to bring to the re­union with Vi­a­com.

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