Viacom and CBS are expected to announce their long-rumored, and inevitable, merger any day now -- perhaps even ahead of their August 8th earnings calls. Although certainly not the most romantic proclamation, theirs is a smart and practical marriage of necessity in an era in which size really does matter. After all, it’s no time to be alone at the media dance when virtually all other potential dance partners have already paired up -- AT&T/Time Warner (now WarnerMedia), Disney/Fox, and Comcast NBC Universal/Sky.
Mega media M&A now rules the day as traditional media and entertainment companies like Viacom and CBS simply hope to survive (let alone, compete) in a world evermore dominated by new tech-driven media companies like Apple, Amazon, AT&T and Google that drive fundamentally different and more forgiving business models, or Netflix that virtually single-handedly decimated the once-lucrative cable bundle. While traditional media companies like CBS and Viacom monetize their content assets alone, new tech-driven media moguls use content as marketing to drive their greater ambitions. iPhone and Mac sales for Apple. Prime memberships and shopping for Amazon. Wireless plans for AT&T. Content is their Trojan Horse. Playing under a fundamentally different set of antiquated rules, business model expansion represents an existential reality for traditional media companies like Viacom and CBS. That means deeper consumer engagement and monetization in as many ways as possible.
Multi-platform 360-degree engagement is the theme of the day – a theme that means reach across all forms of consumer engagement (television, film, so-called digitally-driven “over-the-top” or OTT platforms and eSports, immersive entertainment like VR and AR, and increasingly out-of-home in the real-world of live experiences). That’s why Viacom with CBS makes more sense than Viacom without CBS (and vice versa). More consumer touch-points mean more ways to monetize and more overall business model resiliency. Think of it as building a balanced financial portfolio. Same thing. That’s what this is all about.
Viacom gives CBS significantly more operational stability and a deeper pool of content from which to draw, as well as far more global reach than it has today. Yes, CBS owns Showtime and “CBS All Access,” both of which have been surprising successes in the face of relentless competition (albeit at a much smaller scale than Netflix). But their international penetration is minimal. Enter Viacom’s Bob Bakish – who predictably has been anointed the new CEO for the combined entities – and will take CBS (as well as Viacom) to new international heights in a digitally-dominated world where the Internet respects no international boundaries and sees no physical footprints. Bakish, after all, lead Viacom’s international operations before hand-picked by Sumner Redstone to breathe new life into Viacom. International expertise is Bakish’s “X” factor -- a very good factor to have in our newly borderless world.
And new life he has delivered. Whereas Viacom was essentially digitally dead prior to Bakish’s crowning – a stodgy deer-in-headlights in the face of transformational systemic changes in the world of media and entertainment – Bakish essentially channeled his inner George Costanza and “did the opposite.” Aggressively. Viacom bought advertising video on demand (AVOD) service Pluto TV for $340 million and placed it at the center of Viacom’s digital universe to stand alongside the subscription video on demand (SVOD) giants already in the game. In so doing, Viacom chose a counter-programming strategy to complement CBS’s “All Access” SVOD, and the pair’s marriage will benefit each other on both fronts. Viacom also acquired kid-friendly digital studio AwesomenessTV for a song from Comcast NBCUniversal, paying only a reported $50 million for a property valued at about 13X that ($650 million) just a couple years before.
Under Bakish’s watch, and as a hedge, Viacom also invested in Jeffrey Katzenberg’s new, but still un-launched, mobile and millennial-first Netflix service Quibi. Even more boldly, Viacom either invested in or bought its way into the cross-platform worlds of eSports (investing in Super League Gaming) and live out-of-home entertainment (acquiring Vidcon, the Comic-Con of the video world, and then later SnowGlobe, proclaimed to be the largest outdoor New Year’s Eve music festival in the land, to help lift MTV to its former glory days). These bold moves in a relatively short period of time mean that Viacom now counts itself a multi-platform media maven.
CBS, at this point rather strikingly myopic in its reach as compared to the newly-bold Viacom, benefits from all of Viacom’s added heft and overall reach. Now its content and IP can find new ways to engage across platforms and across the globe. At the same time, Viacom benefits from CBS’s content and distribution success, which gives the combined companies significantly more scale to bring to marketers. Remember, it’s all about scale in the face of competing media giants (both tech-driven and not). Viacom’s Advanced Marketing Solutions hopes to be the new “secret sauce” that is expected to monetize more by targeting relevant audiences with more pinpoint precision. Bottom-line – bigger bucks.
And, finally, let’s not forget the importance of stability in any household. A Viacom/CBS marriage brings Bakish-driven executive rank stability to a CBS house that was roiled by Leslie Moonves’s departure not so long ago. Families perform better in stable environments. So do teams. Job 1, of course, will be for Bakish to ease the minds of his combined troops amidst the inevitable blood that will be shed by layoffs done in the name of efficiency. This is the human cost of our brave (yet frequently inhumane) new tech-driven world of media and entertainment.
Viacom and CBS. Perhaps not the most romantic story. But, certainly a practical and predictable one in a media and entertainment world that is anything but.
