Editor’s Corner—Viacom might just be OK without CBS

Viacom_CREDIT_André-Pierre du Plessis-Flickr
After Viacom’s most recent quarter and before the CBS-NAI volcano erupted, plenty of analysts saw Viacom on the right track as well. (André-Pierre du Plessis/Flickr)
Editors_Corner-MUNSON

CBS and National Amusements are bickering over Viacom like it’s a pile of dirty dishes no one wants to wash. But maybe Viacom is doing just fine on its own.

The latest shots against Viacom surfaced in a lengthy report this week from the Hollywood Reporter in which CBS CEO Les Moonves had multiple reasons for not wanting to pair back up with the cable programmer. Among them was the fear that Viacom’s channels including BET, Comedy Central, MTV and Nickelodeon represented an “albatross” that would weigh down CBS in negotiations with operators, especially if CBS were forced to bundle them with its existing channels.

Ben Weiss, chief investment officer at 8th & Jackson Capital Management, told the Hollywood Reporter that Moonves didn’t think adding Viacom’s channels would maximize the value of CBS’ existing portfolio and could ultimately extend CBS farther than it wants to be into the sagging pay TV market.

Of course, these points are largely moot at the moment as CBS has gone nuclear, pushing a dividend that would dilute NAI’s voting shares from 80% to 20% and effectively make CBS an independent company and blowing up any chance at a remerger with Viacom.

But Viacom’s resurgence under CEO Bob Bakish seems legit. According to a Viacom spokesperson, at the end of the most recent quarter:

  • Viacom has the top share of basic cable viewing in key demos (P2-11, P18-34, P18-49, P25-54, P2-49).
  • MTV has had three straight quarters of ratings growth.
  • Nickelodeon is the only kids' network growing share.
  • BET has had four consecutive quarters of share growth and three consecutive quarters of ratings growth.
  • Comedy Central had both share and ratings growth in the last quarter.
  • Viacom’s international network business continues its sustained double-digit growth.
  • Social was up year over year for each of Viacom’s flagship brands in the second quarter.

Indeed, Viacom’s networks have been racking up some wins. MTV’s Jersey Shore Family Vacation, which premiered in April, was the highest rated series premiere in MTV history in live-plus-3. In April, Comedy Central scored its fourth consecutive month of year-over-year ratings growth among Adults 18-49 in total day ratings. And while Nickelodeon’s ratings may be declining, the network is still well ahead of competitors Disney Channel and Cartoon Network; plus Viacom recently landed Nick’s SVOD Noggin on Amazon Channels, a platform that has a way of contributing a lot of subscribers.

After Viacom’s most recent quarter and before the CBS-NAI volcano erupted, plenty of analysts saw Viacom on the right track as well.

“Moving into the back half of the year, Viacom should benefit from improving results at Paramount, the easing of domestic affiliate fee pressures, and solidifying ad growth,” MoffettNathanson analyst Michael Nathanson wrote in a research note. “Viacom management has articulated three strategic priorities that are aimed at ensuring that outcome.”

He said in fiscal 2019, Viacom is eyeing mid- to high-single-digit operating profit growth for its domestic cable networks, a return to growth at Paramount and continued growth for its international business.

Jefferies analyst John Janedis saw some upside for Viacom as well.

“Given ratings/industry supply issues and a solid scatter market, the upfront should be solid—VIAB will look to be more aggressive on price this year relative to history given improved ratings and a new slate of programming,” Janedis wrote in a research note.

In the most recent quarter, Viacom’s overall revenues fell 3% to $3.15 billion, but based on the results, Bakish predicted full-year adjusted operating income growth in the low single digits. And though Viacom’s filmed entertainment segment’s revenues decreased 17% on lower theatrical revenues, the recent success of “A Quiet Place”—which just passed $300 million at the global box office—could be a sign of a turnaround for Paramount.

While the battle between CBS and NAI will likely be bloody and grab most of the headlines, if Viacom just keeps its head down and executes on its strategy, things may work out just fine. — Ben | @fierce_video

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