Video services

CBS, Viacom Strike Deal to Combine

The big keep getting bigger.

Following scuttlebutt in recent weeks that such a deal was imminent, CBS and Viacom announced Tuesday formal plans to combine, creating a news and entertainment content behemoth that will pull down a combined $28 billion in revenues, a library of 140,000-plus "premium" TV episodes and more than 3,600 films.

The companies said that the newly formed entity, to be called ViacomCBS Inc., will be a global content player and supply premium content at much greater scale with a stable that includes CBS, Showtime, MTV, Nickelodeon, MTV, Paramount Network and Paramount Pictures.

OTT a key part of growth plan
ViacomCBS also outlined a three-pronged strategy for growth, led by a plan to accelerate a direct-to-consumer strategy with both subscription and ad-supported offerings. That will build on plenty of existing OTT options, including CBS All Access, Showtime and Pluto TV, the free, ad-supported service Viacom acquired earlier this year for $340 million.

The DTC plan going forward is to ramp up globally with a combined library and to tap into both companies' production capabilities and a mixing and matching of existing international infrastructure.

They'll also look to parlay this scale to drive more distribution and advertising dollars and to expand the way networks and other properties under the ViacomCBS umbrella work with licensing partners and third-party platforms.

They expect to wrap the transaction by the end of 2019. Bob Bakish (Viacom's current CEO) will head up the combined company as president and CEO, and Joe Ianniello (CBS's current CEO) will serve as chairman and CEO of CBS.

Why this matters
The deal announced today ends years of discussions about a re-combination of the CBS and Viacom assets (Viacom spun off CBS in 2006). CNBC called it a victory for Shari Redstone, vice chair of the boards for CBS and Viacom, who has been pushing for a merger of the two media companies controlled by Sumner Redstone's National Amusements.

Whether it's distribution or content, scale has become the name of the game in video and TV as pressures continue to be applied to the legacy business ecosystem as consumers gravitate away from traditional television and pay-TV options and instead go direct to the source in greater and greater numbers. That combination of factors has fragmented the industry and put significant pressure on the TV ad business and squeezed the dollars originating from traditional pay-TV services and caused programmers, studios and other media companies to expand and pivot to new forms of business.

For Viacom and CBS, the idea is to generate more scale and reap the cost benefits as it tweaks its business to become more OTT and direct-to-consumer oriented and build on some of the success it's seen with services like CBS All Access and the standalone, OTT-delivered version of Showtime. CBS and Viacom expect the deal to produce annual run-rate synergies of $500 million.

They are also looking to bulk up as the ongoing consolidation of the media space produces similar giants like WarnerMedia, Discovery Communications, NBCU, and as The Walt Disney Company, which owns ABC and Hulu and recently added Fox, ramps up its direct-to-consumer strategy with new services such as Disney+. Those traditional media companies are also retooling to make them better equipped to fend off streaming players such as Netflix and Amazon.

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— Jeff Baumgartner, Senior Editor, Light Reading

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