Media mergers are becoming increasingly necessary these days, as the landscape for content consumption continues to evolve. The latest headline in the space is the possibility of a merger between CBS Corporation (NYSE:CBS) and Viacom, Inc. (NASDAQ:VIA), or more accurately, an integration of the two companies. CBS was split off from Viacom a number of years ago.
There are, to me, a number of reasons why I would like the two companies to merge. I like the assets that CBS stock represents a lot more than the ones at VIA stock represents, but there’s no denying that both are profitable and both generate strong free cash flow.
CBS has a robust lineup of network television programming. CBS has stayed on top of the ratings for a very long time because Leslie Moonves discovered a vision for what the CBS brand is, and didn’t veer from it.
Consequently, it has developed into more than just strong network presence. It also owns half of the CW network, which is enjoying exceptional ratings for all of its DC-comics-driven entertainment. CBS also owns Showtime, the movie channel, flex, numerous international television stations, Simon & Schuster publishing, an enormous number of local broadcasting stations, and it has a very robust sports lineup.
Viacom has some work to do with Paramount Studios. That entity has struggled in recent years as it tries to define its own brand. It also has a number of well-known cable assets including MTV, VH1, Comedy Central, the Paramount network formerly known as Spike TV, Nickelodeon, TV land, BET, CMT and a few other scattered assets. Again, I’m not thrilled about the content coming out of these units but the company is profitable in the cash flow is nice.
What I don’t like about Viacom has been the public relations optics that has been embroiling the company for far too long. The Redstone family’s success is undeniable, but they can be polarizing figures, and it brings a lot of bad press into a business.
Moonves is universally well-regarded in Hollywood, and his track record speaks for itself. He has never attracted bad press, and has all of the skills necessary to pull the two companies together. I also have no doubt that he has the savvy to know how to leverage content from both entities for optimal synergy.
I think, given the current state of increasing competition in regards to content production and distribution, the combined company’s needs someone like Moonves to bring it to the next level. Some might fairly argue that Moonves is more an exceptional manager and CEO, and less of a visionary. His approach to the CBS flagship network was that he discovered what worked, and just kept making more of it, keeping advertisers very happy.
A CBS-Viacom merger would require him to elevate current and future contract content into a streaming branded identity. The Walt Disney Co (NYSE:DIS) buying up Twenty-First Century Fox Inc (NASDAQ:FOXA) assets, is going to work beautifully when Disney gets it streaming platform up. Apple Inc. (NASDAQ:AAPL) will be enhancing its streaming offerings. Amazon.com, Inc. (NASDAQ:AMZN) has rejiggered its approach into spending billions along with Netflix. Inc. (NASDAQ:NFLX).
If the merger occurs, whoever runs the new entity is going to have a real challenge.
Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance and is the Manager of The Liberty Portfolio at www.thelibertyportfolio.com. He owns ahres of DIS and AAPL He has 23 years’ experience in the stock market, and has written more than 2,000 articles on investing. Lawrence Meyers can be reached at TheLibertyPortfolio@gmail.com.
