Why Viacom Must Merge With CBS

Hank Price

CBS actually created Viacom back in 1971 to comply with FCC rules forcing television networks out of the program production and syndication business.  Little did anyone realize in those pre-cable days how valuable the CBS library would eventually become. I Love Lucy, The Andy Griffith Show, Mary Tyler Moore and a host of others now churn out steady profits across multiple platforms.

In the height of irony, Viacom became so profitable that, thanks to deregulation, the company acquired CBS in 2000. The marriage was not a happy one, which led to a split back into two companies half a decade later, with Sumner Redstone remaining in control of the stock, but Les Moonves running CBS.

In continuing irony, today CBS is the stronger of the two companies, resulting in Viacom’s desire to re-merge. That cupidity led to the very public fight between Sumner Redstone and Les Moonves, two powerful egos, both unwilling to share the stage. Sumner’s advanced age eventually led to the rise of his daughter, Shari Redstone (no shrinking violet herself), who continued the fight with Moonves until Les was taken out by the Me-Too Movement.

With Les gone and Shari in charge, the Viacom/CBS merger makes too much sense to not happen. Here’s why:

CBS has been among the most aggressive networks in retransmission and affiliate negotiations, demanding an ever-increasing portion of affiliate retransmission fees, not to mention retaining 100% of the payments to their owned stations.  Although the actual numbers are confidential, it is no secret that CBS affiliates pay the larger portion of their cable and satellite payments back to the network.  Retransmission is a major source of CBS’s current success.

Consider now what would happen in a deregulated world if Viacom had the opportunity to combine its cable networks with the CBS network and owned stations in retransmission negotiations. Cable, satellite and OTT operators would be faced with an overwhelming loss of product should they fail to meet Viacom’s demands.  It could be a game changer for Viacom product.

Consider also the stand-alone OTT opportunity a combined company would offer.  Viacom could easily fold CBS All Access into a Disney-like streaming product. That move would not require regulatory approval, so it could happen almost immediately.

I recently published a book that made two points about the business of media.  First, the value is always in the content. Second, content always morphs to the latest technology. A Viacom-CBS merger achieves both goals.

Hank Price is a media consultant, author and speaker. He spent 30 years managing TV stations for Hearst, CBS and Gannett, including WBBM Chicago and KARE Minneapolis. He also served as senior director of Northwestern University’s Media Management Center and is currently director of leadership development for the School of Journalism and New Media at Ole Miss. His latest book is Leading Local Television.