August 14, 2019
CBS and Viacom have finally agreed to reunite in order to become a more competitive company within a media industry that is being disrupted by streaming technology and direct-to-consumer products.
The deal, which is supposed to close late this year, will allow ViacomCBS to produce more shows and movies and theoretically earn more advertising revenue. But while the new ViacomCBS, led by Viacom CEO Bob Bakish, is bullish and seems to have enough content to compete in the big leagues, there are still a lot of outstanding questions. Here's what it will need to answer in order to make an impact in the streaming wars:
Is ViacomCBS combined big enough to compete against Netflix and streaming media giants?
CBS is already in the streaming game with CBS All Access and Showtime. Viacom has plans to launch a BET streaming services with Tyler Perry. It also acquired ad-supported Pluto TV platform in late January for $340 million.
The two companies spent $13 billion on content over the last year, according to the Associated Press. (For comparison, analysts estimate Netflix will spend $15 billion this year.) In addition, it has more than 140,000 TV episodes and 3,600 movies. It's home to franchises like "The Godfather," "Mission:Impossible," "Star Trek," "Indiana Jones" and the "Transformers" films.
Still, it might not be enough to compete against Netflix, Disney, WarnerMedia, Comcast/NBCUniversal, and all the other streaming services out there. CBS All Access and Showtime only have 8 million subscribers compared to Netflix's 151.6 million paid global subscribers. Pluto TV just over 12 million active users.
In terms of market value, CBS is worth $18 billion while Viacom is around $11.7 billion. Netflix's is $136 billion.
It's likely ViacomCBS will have to acquire another media company to be a stronger competitor. Discovery/Scripps, Starz/Lionsgate, or even Epix, which had previously been partially owned by Viacom, seem like likely targets because they could benefit from partnering with another media company to boost their offerings.
What happens to Paramount Television productions on rival streaming services?
Amazon's "Jack Ryan" and "Snow Crash", as well as Netflix's "13 Reasons Why," "Maniac," and The Haunting of Hill House" are all produced by Paramount Television. The same goes for "Catch-22" and "Looking for Alaska" on Hulu.
As ViacomCBS ramps up their streaming efforts, it will be interesting to see what happens to these shows. WarnerMedia and Comcast are taking back "Friends" and "The Office" for their own streaming services, respectively. Netflix canceled its Marvel television series when Disney+ ramped up.
Will the same happen to these budding franchises? It's too early to say, but one could see a scenario where Paramount takes back its shows or decides to produce the next season exclusively for Showtime or another one of ViacomCBS' streaming offerings.
How can ViacomCBS improve Pluto TV's appeal?
Viacom bought PlutoTV as a way to reach viewers who weren't watching traditional cable or satellite TV. The ad-supported model lets people watch content for free while allowing brands to advertise in front of the cord-cutting audience — something most streaming subscription services don't allow.
ViacomCBS has said it plans to add CBSSports HQ and Entertainment Tonight Live to Pluto TV. By adding more sports and entertainment coverage to Pluto TV, it makes it more attractive than competitors like Xumo and Tubi. It also serves as a more shiny vehicle to convince people to upgrade to ViacomCBS' other subscription services like CBS All Access and Showtime.
Will all this new content make ViacomCBS a place where brands must advertise?
Viacom has traditionally pitched itself as a way to reach youth via networks like Nickelodeon, MTV, BET, and VH1. Meanwhile, the average age of a CBS viewer is 60. While there are still some holes to fill, ViacomCBS encompasses a larger age range of viewers — and more networks to boot.
According to data from Standard Media Index, the combined ViacomCBS would have owned about 20.2 percent of all national TV ad revenue between October 2018 to May 2019 (minus CBS' Super Bowl ad sales). It puts it above NBCUniversal (18.4 percent), Disney (16.4 percent) and Discover (9.9 percent). It also would dominate about 11.4 percent of cross-platform ad revenue, above Disney, Google, and WarnerMedia.
Viacom's upfront ad sales were flat this year, according to Variety, meaning marketers committed about the same amount of money to buying ads on upcoming programming as they did the prior year. Meanwhile, CBS's upfront ad sales were up, per Deadline, thanks to its late night and primetime programming. CBS has been the total-viewing leader for more than a decade, but with marquee shows like "Big Bang Theory" ending it will be interesting to see if it can keep that position. Whether advertisers line up for ViacomCBS remains to be seen.