The long-term OTT implications of a CBS-Viacom re-merger

Viacom
Ben Munson

CBS has built a successful U.S. direct-to-consumer business. At last count, both CBS All Access and Showtime OTT have 1 million subscribers each, putting CBS well on the path toward a combined 8 million subscribers for those services by 2020.

As for Viacom, the book is still out on BET Play, the programmer’s first direct-to-consumer offering launched back in June. Viacom has yet to announce subscriber numbers for the service. The company’s other Play Plex Suite apps, like MTV Play and Nick Jr. Play, which are party of Viacom International Media Networks, are only available through pay-TV partners and other authenticators.

“Viacom is definitely behind the curve on OTT when compared with some of its peers,” Michael Goodman, director of digital media strategies for Strategy Analytics, told FierceBroadcasting.

But help could be on the way if Viacom does in fact recombine with CBS. A recent report from the New York Post indicated that a re-merger agreement between the broadcaster and the programmer could be in place by Thanksgiving. If Viacom does find its way back into the CBS fold, it will gain the expertise that’s helped to launch two of the most successful direct-to-consumer offerings to date.

“From a programming standpoint, it actually does give [Viacom] viable over-the-top properties. Certainly CBS, I would argue, is a success. Showtime is a success. So [CBS] could give [Viacom] that blueprint that would help feed into that marketplace,” Goodman said.

Part of the blueprint in question that CBS has helped establish is offering a vast back catalog of programs, something which Viacom networks including MTV, Nickelodeon and Comedy Central have no shortage of. Another key part of the blueprint is creating original content that is exclusive to the OTT platform, like what CBS All Access is going to do with Star Trek: Discovery.

But as BTIG analyst Rich Greenfield, a strong advocate for the recombination, has previously noted, CBS and Viacom could see big benefits of scale for their SVOD aspirations by pooling their assets.

“To really scale CBS All Access, it needs far broader content. Look at the diverse array of content you are seeing SVOD companies such as Netflix, Amazon, Hulu and even HBO Now pursue,” wrote Greenfield in a research note (sub. req.). “In turn, merging Viacom and CBS also creates a better long-term path to building a direct-to-consumer business – essentially creating a bundle of sports, news, comedy, kids, etc. Neither CBS nor Viacom is at scale today, in a world where scale is increasingly important, especially as distributor’ scale continues to increase (dominated by AT&T DirecTV, Comcast, Charter and Dish/Sling).”

While all of Viacom’s content would serve to broaden CBS All Access’s library, Goodman notes that Nickelodeon, MTV and other Viacom networks could still be tied up in distribution rights elsewhere. Indeed, in 2013, Viacom signed a multi-year licensing deal with Amazon Prime that includes tons of content from Viacom’s networks as well as “TV shows that customers won’t find on any other digital video subscription service.”

But CBS and Viacom could be thinking longer-term on a possible recombination, said Goodman, adding that the companies could be focusing now on accruing the rights to popular content like Nickelodeon now, then pulling together a Nickelodeon over-the-top or on-demand service when the rights become available.

“Viacom is not just thinking six months down the road. They’re thinking one, two or five years. I don’t know what the length of the contract is with Amazon but at some point in time the rights revert back to Nickelodeon and they can decide what they’re going to do with it,” Goodman said.

Whether Viacom decides to bundle those rights into the already up-and-running CBS All Access or take a shot at propping up its programming in a standalone direct-to-consumer service, having CBS as an ally should help.--Ben

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