Viacom and CBS announced a merger but it seems that the company will still be not big and powerful enough to be competitive with such giants as Netflix.
CBS and Viacom have made an important announcement. These two entertainment giants are merging. The new company will have $28 billion in revenue and already formed brands like are MTV, Comedy Central and Paramount Pictures.
This deal is meant to gather two companies that were working and acting under the same corporation but 13 years ago took a decision to go their own way.
The move was pretty much expected if we look at the current situation in the sector dominated by competitors as Netflix, Disney-Fox and other rivals. After this news, at the time of writing, Netflix stock went up for 0.47% to $312.28 while Disney went up 0.88% to $137.01.
The new company, now dubbed ViacomCBS, will stay under control of the National Amusements. The holding company is owned by billionaire Sumner Redstone and his daughter, Shari.
However, this is not the first time the companies tried to collaborate. There have been at least three attempts before, but none of them was a successful one due because executives and investors couldn’t reach an agreement over decisions of who is going to be on top and how the business will be valued at all.
Now it’s known, that Viacom chief executive Bob Bakish will fulfill the president and chief executive role of the newly created company. Joe Ianniello, interim chief executive of CBS, will be the new chairman and chief of CBS.
This will come out good for both the companies since the expected cost savings hover around $500m only from the tie-up, which brings together a movie studio, string of cable channels, and some of US TV’s most-watched shows, including 60 Minutes and The Big Bang Theory.
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But how could this reflect on Netflix? Let’s just mention that Netflix has pretty much reduced the amount of content it licenses from others because those others have already created their own streaming services.
Netflix moved almost exclusively to producing original programming a number of years ago. Let’s not forget that all of the original Netflix costs billions of borrowed dollars, and we don’t see it generates new cash flow.
However, we have to consider the fact that, compared to Disney, that recently acquires Murdoch’s 21st Century Fox assets and is soon to launch a streaming service, Disney+, and Netflix, with 151 million global subscribers, CBSViacom will still be a relatively small player.
The new chair of the company, Shari Redstone commented:
“I am really excited to see these two great companies come together so that they can realise the incredible power of their combined assets.”
The daughter of American businessman and media magnate Sumner Redstone added:
“My father once said ‘content is king,’ and never has that been more true than today. We will establish a world-class, multiplatform media organisation that is well-positioned for growth in a rapidly transforming industry.”
Sumner Redstone divided CBS and Viacom 14 years ago with the belief it would unlock Viacom’s value.
Shari Redstone had been a big backer of re-combining the companies in the face of tough competition. The mergers of Disney with Fox, and AT&T and Time Warner, together with a very active expansion of the streaming services, left CBS and Viacom in a rather complicated situation though.