CBS- Viacom merger: What it means for cord- cutters
Both need a deal that improves prospects
CBS and Viacom are again talking about a merger — a media marriage that would accelerate the consolidation of content creators.
The resulting merger could have repercussions for TV lovers, whether they have cut the cord or are wedded to traditional pay- TV systems.
CBS and Viacom late last week separately announced special committees of independent directors to evaluate a possible merger, with both offering the qualifier that therewas no guarantee a transaction would occur.
Butmany Wall Street analysts have expected the two companies to consider a merger.
In this media industry game of musical chairs, CBS and Viacom are among players needing to land a deal that improves their prospects.
“Consolidation is absolutely necessary,” said Joel Espelien, senior analyst for The Diffusion Group, a Plano, Texas- based research firm.
The two companies split in 2005, but now both face an evolving competitive landscape. There’s a potentially stronger Disney, flush from agreeing to spend $ 52.4 billion for key assets from Fox including its TV and movie studios, an AT& T- TimeWarner media behemoth and Comcast, which less than two years ago added Dream- Works Animation to its already massive NBCUniversal portfolio.
The Disney- Fox deal still requires regulatory approval and the $ 85.4 billion AT& T- TimeWarner transaction is scheduled to be argued in court next month ( the Justice Department sued to block it for anti- competitive reasons). But for media executives surveying the landscape of bulked- up competitors, there’s little time to lose.
CBS would gain multiple benefits from teaming with Viacom, not only in streaming video but also in traditional pay- TV delivery, says Rich Greenfield, a media and technology analyst with financial services firm BTIG in New York.
A deal could broaden the reach and programming strength of CBS All Access, the subscription streaming video service ($ 5.99 monthly) CBS launched more than three years ago.
In addition to live CBS local channels, CBS All Access offers original shows such as Star Trek: Discovery and The Good Fight, plus an on- demand library of new and old shows.
“The problem with CBS All Access is the content is limited,” Greenfield said in an interview. “CBS just simply doesn’t have enough content and enough scale. ... ( A Viacom merger would) take it to the next level.”
Viacom owns BET, Comedy Central, MTV, Nickelodeon and Paramount, which two weeks ago launched the Paramount Network to succeed its Spike channel.
Adding Viacom could bolster CBS for an upcoming fight to hold onto highly coveted NFL rights, which generate revenue from advertising aswell as pay- TV and streaming subscriptions. Post- 2022 Sunday NFL rights are expected to be dealt out late next year or early 2020. The network already has lost
Thursday Night Football rights, which it had shared with NBC, to Fox.
“These industry changes have put CBS in a precarious position to maintain sports rights, which are vital to its long- term success/ profitability,” Greenfield said in a note to investors Thursday.
Viacom, too, would gain from the combination. It recently joined A& E, AMC, Discovery and Scripps to invest $ 25 million in subscription streaming service Philo, which launched in November. For $ 16 a month, Philo delivers A& E, AMC, BET, Comedy Central, Discovery Channel, HGTV, OWN and another 30 channels.
Viacom had found its programs squeezed out of lower- priced tiers on pay- TV giant Charter’s programming plans — and shunned completely from some of the new broadband- delivered subscription- TV services such as Hulu and YouTube TV.
“The trend over the past year is clear, Viacom needs protection,” said Michael Nathanson, founding partner and senior research analyst for Moffett-Nathanson. “It is amajor benefit if they can use the stick of CBS to protect them in the future round of affiliate negotiations,” he said.