CBS and Viacom announced a long-anticipated reunion Tuesday, bringing together their networks and the Paramount movie studio as traditional media giants bulk up to challenge streaming companies like Netflix.
Viacom CEO Bob Bakish, who will become CEO of the combined company, said the new ViacomCBS will be "one of only a few companies with the breadth and depth of content and reach to shape the future of our industry." Analysts say the reunion will help both companies navigate an ever-competitive streaming landscape.
Viacom owns Paramount Pictures and pay TV channels such as Comedy Central, MTV and BET, while CBS has a broadcast network, television stations, Showtime and a stake in The CW over-the-air network.
MoffettNathanson analyst Michael Nathanson said Paramount's movie library could be added to Showtime's premium networks and streaming service, for instance, while CBS' streaming service could get a boost from Viacom's Nickelodeon video.
The deal is an all-stock transaction. CBS shareholders will own about 61 percent of the combined company and Viacom shareholders will own 39 percent. The companies say the combined company will have $28 billion in revenue. The reunion, expected to be completed by the end of the year, will be beneficial to earnings and lead to USD 500 million in cost savings, the companies say.
Acting CBS CEO Joe Ianniello will become chairman and CEO of the CBS division in the combined company.
CBS was one of the first media companies to launch its own streaming service, CBS All Access. The $6-a-month service now has a new "Star Trek" series, a revival of "The Twilight Zone" and archives of old and current broadcast shows. CBS says All Access and its Showtime streaming services have 8 million subscribers combined.
That's far less than the 60 million US subscribers that Netflix has, though it's comparable with the estimated number of subscribers to HBO Now, that network's stand-alone streaming service.
Now, Disney, Comcast's NBCUniversal and AT&T's WarnerMedia are jumping in with their own services as well to challenge Netflix, Amazon, Google and other tech companies encroaching into entertainment.
To expand its library, Disney bought Fox's entertainment businesses for USD 71 billion in March, while DirecTV owner AT&T bought Time Warner last year for USD 81 billion.
The companies say the combined company will create content not just for its own services, but for third-parties as well.
It wants to speed up the growth of its streaming services, including CBS All Access, Showtime, and PlutoTV, the free ad-supported service that Viacom owns, and drive more advertising spending to its platforms.
Moody's media analyst Neil Begley said the CBS-Viacom reunion would help cut costs and provide greater scale for creating and distributing content. "There's growing pressure on companies to bulk up content libraries and merging is the easiest and safest way to do that," Begley said.
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