Viacom sees Ad Growth in the US; talks with CBS for merger continues

Viacom Inc. — the company that owns leading cable network channels such as MTV, Nickelodeon, and Comedy Central — has beaten its quarterly revenue and profit. The multinational media conglomerate posted a notable increase in its domestic advertising revenue last Thursday.

The increase has been driven by the company’s introduction of new approaches to its advertisers that introduces a better understanding of branded content, target viewers, and many other aspects. This is considered good news given the decrease it has been experiencing in the past five years.

Apart from news about its quarterly financial report, it has been reported that talks of a merger between Viacom and CBS Corp are continuing. As of Thursday, no agreement has been made by the two parties. The announcement regarding the merger agreement was expected to be made on August 8. However, Viacom has declined to give their statements regarding the matter.

Last week, Viacom and CBS — which are both under National Amusements Inc. — agreed-upon management structure. If the merger pushes through, the new company will be spearheaded by the current Viacom Chief Executive, Bob Bakish.

The proposal for Viacom and CBS to reunite was first made in September 2016. Shari Redstone, who is the board vice chairwoman of both companies, backed the merger — as this would build a more solid financial foundation, and could go head to head with tech and media giants like Apple and Netflix.

In a letter she wrote addressed to the shareholders of National Amusements Inc, Redstone said: “a combination of CBS and Viacom might offer substantial synergies that would allow the combined company to respond even more aggressively and effectively to the challenges of the changing entertainment and media landscape.” However, this proposition was soon called off in December of the same year.

By the end of March 2018, CBS proposed to Viacom again but was later rejected because the offer was too low, and they did not agree on who would oversee the company. CBS offered to a Viacom buyout, but it was way below its market value. It asked for $3 billion more than what CBS initially offered.

In May 2019, it was reported that CBS and Viacom agreed to discuss the merger in June. The deal between these two companies lies in their valuation.

For Viacom, they are in a great position as talks of the merger continue. Compared to last year, Viacom is poised to have better financial results this year. In the third quarter of the year, Viacom has recorded an income of $544 million. This is much higher than the $522 million reported in the same period last year.

Apart from the 6% increase in domestic advertising that was reported this week, its film division, Paramount Pictures, also saw growth. It surpassed the $855.7 million estimate, rising 14% to a total of $877 million. The increase is expected to continue with the release of around 16 films next year.

If the merger between Viacom and CBS pushes through; the new company has to come up with a competitive streaming strategy to stand up against its competitors like WarnerMedia and Disney. CBS currently owns a streaming service called CBS All Access. It currently has more than 8 million subscribers; it is estimated that by 2022, it would have more than 25 million subscribers.

There are possible strategies that the CBS-Viacom can focus on. They can either combine their services to rival existing media heavyweights. They can also sell their programs to other providers and collect their licensing fees. Whatever they decide to do, strategies must be in place to compete with other media and tech outfits.

In addition to the combined company, CBS can also strengthen its hold in the industry if it acquires Starz. It has been reported that CBS has held talks with Lions Gate about purchasing Starz.

In early May, CBS offered $5 billion to Starz, but this was later rejected. If this deal happens in the future, it would further strengthen and expand the content that CBS owns. Viacom sees ad growth in the US and talks with CBS for merger continues. Combining this with the content that Viacom can provide, the new company is looking at potentially combating existing streaming offerings in the market today.

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