Transactions & Finance

CBS-Viacom Merger: A Real Life American Soap Opera

The merger of CBS and Viacom has given birth to a powerful new audiovisual player. A delicately orchestrated remarriage whose ambition is to change the dynamics of the sector.

The merger of CBS and Viacom has given birth to a powerful new audiovisual player. A delicately orchestrated remarriage whose ambition is to change the dynamics of the sector.


Pugnacity is a virtue. After three unsuccessful attempts since 2016, CBS and Viacom recently announced they were to merge, becoming ViacomCBS. Still subject to the green light from the US competition authority, this merger will result in a global entertainment giant. Its market capitalization and its flourishing turnover ($30 billion and $28 billion respectively) are the result of a successful strategy.

 

ViacomCBS is a combination of free-to-air and subscription channels and a movie production division (CBS, MTV, Nickelodeon, Paramount). It has an impressive catalogue of nearly 140,000 television programs and 3,600 films, including successful franchises such as Mission impossible, NCIS and The Big Bang Theory.

 

Do-over

 

Viacom and CBS share a rather turbulent history. Under the umbrella of the National Amusements holding company now headed by heiress Shari Redstone, the two media groups were one until 2006. In ten years, the economic context has changed dramatically, however, with a trend towards consolidation now sweeping the sector. To wit, AT&T, the powerful telecommunications operator, created a major audiovisual hub by acquiring Time Warner and its subsidiaries Warner Bros., HBO and CNN. As for Netflix and other streaming platforms such as Hulu and Amazon Prime Video, they have disrupted a market where purchasing habits inherited from e-commerce have become the norm. The ViacomCBS merger therefore feels like a necessary union at a time when advertising revenues are being squeezed.

 

Soap opera

 

Long sought by National Amusements, this rapprochement is far from being unanimously accepted by the main stakeholders. A few months ago, Leslie Moonves, then CEO of CBS, publicly spoke out against it. From there things went downhill fast, and it wasn’t long before mud-slinging more befitting a daytime soap opera than a serious financial negotiation started. The low point? A secretly recorded video of a stuttering, haggard Sumner Redstone, the ninety-six-year-old head of the holding company, taken by a CBS director in January 2018, then circulated among shareholders. The video inevitably leaked and the general public were not slow to weigh in on the debate over Redstone’s fitness to remain in charge. Since then, Leslie Moonves has been dismissed following complaints of sexual harassment; a situation which, of course, has outraged the Redstones.

 

The ambition of the ViacomCBS conglomerate is far from modest. In the words of Robert Bakish, who has been running Viacom for three years, it is all about "shaping the future of our industry." And with competitors such as Jeff Bezos (Amazon), Robert Iger (Disney) and Reed Hastings (Netflix), the content battle promises to be a tough one. It remains to be seen whether this new media-couple has what it takes in to flourish in the current entertainment landscape. 

 

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