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CBS-Viacom Merger: A Match Made in . . .

February 13th, 2018   ||    by Melanie Brown

According to recent reports, media giants CBS and Viacom are considering getting back together. The companies split in 2005, after a $35 billion CBS-Viacom merger in 1999 went south.

Over the years, the relationship between CBS and Viacom has taken on the air of a soap opera. In 1970, CBS was forced to spin off Viacom after a Federal Communications Commission (FCC) ruling about programming, according to Forbes.

In a 1999 plot twist, the student became the master—with Viacom agreeing to purchase its parent CBS for an all-stock deal that was the largest in media history at the time.

Big Promises

The 1999 CBS-Viacom merger was lauded by Wall Street analysts as a match made in heaven. CBS’s brand recognition, time-tested network, news offerings, and advertising properties (while struggling) held promise for Viacom, which owned properties like Nickelodeon, Comedy Central, Paramount Pictures, and Blockbuster Video. The merger brought together two complementary media conglomerates and made Viacom the second-largest media company behind Time Warner.

Rumors of internal turmoil and family rifts surrounded the 2005 separation, and this round of merger talks comes with a few plot twists of its own. Shari Redstone, president of the privately held group that owns both media companies, was pushing for a re-merger in 2016—which was opposed by CBS Chairman Les Moonves. In 2016, Redstone backed down from her push, but Moonves is reportedly now open to conversations again.

Should the CBS-Viacom merger go through, Wall Street isn’t so bullish on its success. Viacom’s properties no longer complement CBS’s as well as they used to, and some on Wall Street believe the companies are too small to see benefits from merging.

Bigger Trends

The merger seems like an active response to recent mergers like AT&T-Time Warner and the acquisition of Fox Entertainment assets by Disney. As the line between linear television and digital video becomes more and more blurred, the media industry has had to lower the walls of its silos. The CBS-Viacom merger—while done in the right mindset of adapting to the changing landscape—looks like it may miss the mark.

Neither company has a strong digital platform to compete with the streaming properties of an NBCU or Disney (which owns ESPN), and while CBS has a strong viewership, Viacom’s networks have been struggling for a while.

While the combined companies would garner 23 percent of Nielsen live-plus-seven viewing, according to MediaPost, soft ad revenues across the board would leave them in the dust of Disney, Fox, and NBCU. Their national TV ad revenue would be in second place (21 percent), and their U.S. affiliate revenues would come in at just fourth place (14 percent).

Overall, the merger is an unsurprising step for the two media companies. It simply means the media industry is about to gain another mega-company— which trends along with the industry’s shift away from specialization and toward multichannel and all-in-one offerings.

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