CBS and Viacom Announce Merger Deal

Viacom and CBS

Viacom and CBS

CBS and Viacom have finally announced their long-awaited merger.

In a press release yesterday, CBS Corporation announced that the two companies have “entered into a definitive agreement to combine in an all-stock merger, creating a combined company with more than $28 billion in revenue.” Cue the Hollywood press going completely mental.

As I mentioned yesterday, this merger is of special interest to Star Trek fans, who commonly view it as a reunification of the fractured Trek brand, which has been split between CBS and Paramount Pictures since the last time CBS and Viacom parted ways, in 2006. I’ll come on to the Star Trek implications of today’s announcement later on, but first I’ll take a look at the important bits to know.

There’s a lot to unpack in CBS’s announcement, which consisted of a 6-page full-color PDF press release and a further 20-page slideshow full of bullet points and infographics. The focus of the announcement by CBS was on what the new combined company can offer investors and advertisers. And it’s prudent to point out that while CBS and Viacom have agreed to the merger, it still needs to be approved by regulators. CBS asserts that the deal is expected to close by the end of 2019.

So let’s break down the major story points:

  • The name of the new company will be ViacomCBS, Inc. While the name might imply some prominence of Viacom over CBS, that’s not actually a takeaway here. In reality, according to the press release, “Existing CBS shareholders will own approximately 61% of the combined company and existing Viacom shareholders will own approximately 39% of the combined company on a fully diluted basis.”

  • Current Viacom President and CEO Bob Bakish will be the new President and CEO of ViacomCBS, and current CBS President and Acting CEO Joe Ianniello will become chairman and CEO of CBS. Don’t be confused by the brand names here...CBS will be just one of many consumer brands under the new ViacomCBS umbrella, alongside Showtime, Nickelodeon, MTV, BET, Comedy Central and Paramount Network.

  • The new 13-member board of directors for ViacomCBS will be made up of six members from CBS, four members from Viacom, Bob Bakish as President and CEO, and two members from National Amusements. Shari Redstone, the current vice chair of both CBS and Viacom, will be named chair of the combined company.

  • When the merger is finalized, ViacomCBS is expected to turn over more than $28 billion annually, as I mentioned earlier. Approximately $15bn of that is from CBS-owned operations, and $13bn from Viacom.

  • And the big one: the combined company will boast the largest market share of the US TV-viewing audience, with a gargantuan 22%. The closest competitor will be Comcast with 18% (they’re the owners of Universal Pictures and NBC), followed by Disney and Fox with 14% each. Discovery, which controls the Discovery Channel, Animal Planet, TLC, HGTV, the Food Network and others, rounds out the top 5 with 11% of the total US TV-viewing audience.

CBS and Viacom’s new market share of US TV audience, image via press release

CBS and Viacom’s new market share of US TV audience, image via press release

So where is ViacomCBS going next?

The press announcement outlines what ViacomCBS calls a “powerful, three-part strategy for growth.”

  1. “Accelerate direct-to-consumer strategy.” In short: invest in streaming services, both ad-supported (like the free streaming service Pluto), and subscription-based (like CBS All Access, the current home of Star Trek).

  2. “Enhance distribution and advertising opportunities.” This is actually a big one that’s hard to wrap your head around. The announcement reads, “For distributors, this includes forming more expansive and multifaceted relationships, and applying the benefit of retransmission consent across a combined portfolio. For advertisers and agencies, the combined company will provide industry-leading reach through a variety of formats, including a portfolio of differentiated advanced advertising and marketing solutions.” What I hear through all the jargon is that the breadth of ViacomCBS’s reach will allow them to be able to sell you stuff in ways that haven’t even been invented yet.

  3. And finally, “create a leading producer and licensor of premium content to third-party platforms globally.” I’ve mentioned before how licensing productions to other networks has been a big profit-driver for CBS, and this is taking it to the next level. According to one of the announcement’s infographics, ViacomCBS will have production capability on 5 continents, with episodic content being aired in 183 countries in 45 languages. That’s a lot of content to sell to a lot of eyeballs.

Right. So I’ve covered the nuts and bolts of the CBS and Viacom merger that was announced yesterday, but what does it all mean for Star Trek?

Based on the information that we got in the merger announcement, who knows?! Be wary of news headlines the next few days and weeks, because until we hear any official announcements from CBS’s Star Trek Global Franchise Group, most of what you’ll be seeing with “Star Trek” in the headline will be what I call “hot takes”. Informed speculation at best, and wild guesswork at worst.

However, it’s worth pointing out that Star Trek did, in fact, appear in the press release yesterday. In the section titled “Strategic Rationale”, Star Trek got a brief mention in the “Premium content at scale” bullet point. Here’s what they had to say: “The combined company will possess a portfolio of powerful consumer brands, [...] as well as one of the largest libraries of iconic intellectual property, spanning every key genre and addressing consumers of all ages and demographics. This library comprises 140,000+ TV episodes and 3,600+ film titles, and reunites fan-favorite franchises such as Star Trek and Mission: Impossible.”

Make no mistake: Star Trek’s role in this announcement has so far been very much in service of ViacomCBS. While fans of the franchise - me included - are excited by the prospect of a reunited Trek, we must remember that ViacomCBS is a business - or it will be, once the merger is complete - and Star Trek is here for its benefit, not the other way around.

It’s also worth pointing out here - again - that while both CBS and Viacom have agreed to the merger plan, and publicly announced their intent to merge, the deal still has legal hurdles to go through, which will take time. Regulators in the United States will need to approve the merger, and at least one legal challenge has already popped up in the rumor mill. The Hollywood Reporter says that Mario Gabelli, the biggest independent voting stock holder in both CBS and Viacom, implied in a tweet Tuesday afternoon that he might seek a legal challenge to the merger, citing a lack of “appraisal rights”. Even if the merger is approved by the end of the year, like they expect, we’re not likely to see much change in the short-term strategy of products like Star Trek.

So to sum up, there are a few major points that you can take away from yesterday’s big news:

  • CBS and Viacom intend to merge to form ViacomCBS, with the leadership and control slightly in CBS’s favor.

  • The deal will mean that the new ViacomCBS will lead market share of US TV-viewership by a strong margin.

  • The forward-looking strategy is to leverage the new combined properties to build on the most successful parts of CBS’s recent strategies, like investment in streaming services and licensing to third parties.

  • And finally, there’s little to no information on what the impact will actually be on the Star Trek franchise.

And that’s all I have to say about that - for now. I expect that we’ll see several stories about this merger in the coming weeks and months before it’s all finalized, and more than a few “hot takes”. I’ll pick out some of my favorites of those later this week, because let’s be honest - everyone loves a bit of rampant speculation.

Alison Pitt