3 big ways CBS merging with Viacom could help it fight Netflix — and one downside to the deal (CBS, VIAB)

star trek discovery

  • After 13 years apart, CBS and Viacom have agreed to a reunion
    that would bring together the companies’ broadcast networks, cable
    channels, streaming services, and film and TV studios.
  • The proposed deal could also bolster the combined company’s
    streaming initiatives, which management highlighted as a big
    incentive for the deal.
  • Wall Street analysts and a media strategist previously broke it
    down for Business Insider.
  • ViacomCBS, as the company is to be called, wouldn’t have the
    global footing of Netflix or the brand power of Disney. But it
    would have more advantages than either CBS or Viacom has on its own

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CBS’ marriage with Viacom could give the combined company an
edge in streaming video.

After 13 years apart, CBS and sister company, Viacom, have
agreed to merge in a deal that would create a new media
conglomerate with a combined market value of around $30 billion,
with $28 billion in revenue.

Read more:
CBS and Viacom have agreed to become ViacomCBS, as part of a deal
to reunite the media companies after 13 years

There are corporate reasons to merge the two companies, which
are both majority controlled by the Redstone family through
National Amusements, Inc.

But the proposed deal could also bolster CBS’ and Viacom’s
streaming initiatives, as the companies emphasized on a call with
investors following the merger announcement. Wall Street analysts
and a media strategist previously broke it down for Business

A combined CBS-Viacom wouldn’t have the global footing of
Netflix or the brand power of Disney. But it would have more
advantages than either CBS or Viacom has on its own today. The
companies, together, could reach a wider audience, build a broader
catalog, and have more negotiating power with the help of Viacom’s
Pluto TV.

Where CBS fits into the streaming wars

CBS has largely been overlooked in the streaming wars this past
year as legacy media giants Disney, WarnerMedia, and NBCUniversal
prepare new streaming services that could pose threats to
incumbents Netflix and Amazon.

Yet, CBS — which is still the
most-watched network on TV
— also has two standalone
streaming subscriptions, CBS All Access and Showtime. The two
platforms reached a total of 8 million subscribers at the end of
last year, and CBS raised its goal to 25 million subscribers
domestically by 2022, up from a target of 16 million. That would be
a little
smaller than Hulu today
, across its on-demand and streaming-TV

CBS also has free, ad-supported streaming sports and news
networks, including CBS Sports HQ, CBSN, CBSN Local, and ET Live.
Its studios, including CBS TV, produce some programming for other
streaming services as well, such as “Dead to Me” on Netflix.

The advantages of a Viacom deal

ViacomCBS, as the company is to be called, could be a more
compelling streaming contender.

Viacom’s streaming and production assets would open up CBS to a
broader audience. While CBS is known for having the
oldest audience in network TV
, Viacom’s networks like Comedy
Central and MTV, and its children’s channel, Nickelodeon, cater to
younger crowds.

“It would give CBS the cradle to the grave now, literally,” Mary
Ann Halford, a senior adviser at the strategy consulting firm
OC&C Strategy Consultants, told Business Insider. “It gives CBS
more balance.”

CBS and Viacom would have a broader international footprint
together, and could use each others’ programming —rather than buy
from outside studios — in places like the UK, where Viacom is
more established, and Australia, where CBS has a bigger

The combined CBS-Viacom would also have a larger catalog and
production output, which its could use to fill its own platforms
and license more programming to other services. Viacom’s studios,
like CBS’, also produce series now for other streaming services,
like Paramount TV’s “13 Reasons Why” on Netflix, “Jack Ryan”on
Amazon Prime Video, and MTV Studios’ “The Real World” reboot on
Facebook Watch.

“They could fill a hole that is being created by Disney,” said
Marci Ryvicker, an analyst at Wolfe Research, referring to Disney’s
all-in streaming strategy, which has resulted in it pulling content
from Netflix.

Viacom comes with baggage

Viacom would come with some baggage that could hold CBS back in
the streaming sphere.

Not all of CBS and Viacom’s brands fit neatly together. Viacom’s
cable networks have struggled with the consumer shift away from
traditional TV services as well.

The children’s networks have had a particularly tough time, as
more kids watch programming on place like Netflix and YouTube,
instead of cable TV. Nickelodeon lost nearly 30% of its viewers in
2018, according to Nielsen data
published by IndieWire

“We don’t believe the concept of a fully distributed kids’
linear network will exist for much longer,” analysts from
Bernstein, a Wall Street firm, wrote in January, in a note that
argued against a CBS-Viacom merger.

Merging with Viacom would expose CBS to more risk from Viacom’s
cable channels. But the combined company would also have more
opportunities to repackage its programming, with its mix of
standalone subscriptions, ad-supported services, and across Pluto

“[Nickelodeon] has to be repackaged in some way,” said Ryvicker
at Wolfe Research, which upgraded its price target for CBS in May
on the condition of a deal with Viacom. “Kids has been one of the
first types of programming that has been replaced by

Viacom has a few standalone streaming offerings in the US,
including Comedy Central Now, Noggin — for pre-school aged
children — and an upcoming BET subscription service. It also has
a free, ad-supported TV service, Pluto TV, which Viacom
acquired in January for $340 million

Leaning on Pluto TV

Pluto TV has been a bargaining chip for Viacom, and could also
be an asset for CBS. Viacom recently struck a deal with cable
operator Comcast to get the free, ad-supported TV service with more
than 100 channels — including at least 14 networks with Viacom
content — on the Xfinity X1 platform.

“What it’s helped Viacom do is help guarantee Viacom carriage
with distributors who are difficult to negotiate with,” Ryvicker

Pluto TV also had about 16 million monthly active users at the
end of April, up 31% from December 2018, Viacom
. That’s an audience CBS and Viacom could build on. CBS
could offer its subscription services like CBS All Access and
Showtime as add-ons to the free Pluto TV service, for example.

“It’s a promotional platform for you then to upsell people to
buy a paid service, like CBS All Access,” Halford, the advisor,
said. “Those are things that can become very interesting, if CBS
ends up moving from a broadcast world to an IP TV on-demand

This story was updated from a previous version.

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3 big ways CBS merging with Viacom could help it fight Netflix — and one downside to the deal (CBS, VIAB)