CBS, Viacom reunion could lift both after media upheaval

Thu Sep 29, 2016 4:26pm EDT
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By Lisa Richwine and Jessica Toonkel

LOS ANGELES/NEW YORK (Reuters) - Eleven years ago, media mogul Sumner Redstone declared "the age of the conglomerate is over" as he prepared to split old-school broadcaster CBS from the fast-growing Viacom Inc (VIAB.O: Quote) cable networks and the Paramount film studio.

Now, the Redstone family's National Amusements, the controlling shareholder of Viacom and CBS Corp (CBS.N: Quote), wants the companies to consider stitching the pieces back together. News of a possible reunion, first reported by Reuters, sent shares of both companies higher on Wednesday.

In the intervening decade, options available to viewers have exploded. Digital streaming expanded video beyond the living room, making it possible to watch TV shows and movies virtually anywhere on phones and tablets. Customers started ditching cable packages with hundreds of channels. And YouTube hooked younger viewers with short videos by self-made stars.

Those drastic shifts now make a better case for reuniting the companies, an argument that National Amusements pitched to the boards of both companies in a letter on Thursday.

A merger "would allow the combined company to respond even more aggressively and effectively to the challenges of the changing entertainment and media landscape," the letter read, without going into further detail.

Spokespeople for CBS and Viacom had no comment on the matter on Thursday beyond earlier statements acknowledging receipt of the letter.

Conventional wisdom has held a re-merger would be more beneficial for struggling Viacom. But the combination could help both companies better compete with a massive increase in online programming that has shaken traditional business models, and to secure better terms from bigger-than-ever pay TV operators that remain the dominant distributors of programming, Wall Street investors and analysts said.

"Content companies are getting squeezed from both sides," said Salvatore Muoio, whose investment firm is a top owner of voting shares of both Viacom and CBS. "There have been big mergers on the distribution side, so they are dealing with behemoths in negotiations, while at the same time viewers are cutting the cord because they don't want to pay for cable anymore."   Continued...

The CBS "eye" and logo are seen outside the CBS Broadcast Center on West 57th St. in Manhattan, New York, U.S. on April 29, 2016.  REUTERS/Brendan McDermid/File Photo