The removal of Les Moonves as CEO of CBS (NYSE:CBS) over sexual harassment is a big story today. But Moonves’ failures as CEO weren’t all sexual, and that should be a bigger story.
Consider. Moonves had been CEO of CBS since 2003, when it was still part of Viacom (NYSE:VIAB). The two companies were split in 2005 when CBS became a separate, publicly owned company. The price of the stock was in the mid-$20s. As this was written it was in the mid-$50s.
What moves has Moonves made to increase shareholder value? He bought Last.FM. He bought CNet. He created the TV Guide Network. He spun out the company’s billboard unit and sold CBS Radio.
Do you notice anything missing here?
CBS Stock Is Facing a Streaming Failure
CBS was very late putting its Showtime network into streaming, launching it in 2015. The company finally launched CBS All Access in 2017, and that’s going nowhere. Reviews of the app are horrible.
As this was written Showtime was the No. 11,401 most downloaded app on Google Play in the U.S., No. 606 in the entertainment category. The numbers for CBS All Access are worse.
And nowadays, streaming is the whole ballgame.
Despite owning what was, at the time of its purchase, the dominant technology web news site, Moonves and CBS ignored the streaming revolution. Just five years ago CBS and Netflix (NASDAQ:NFLX) were close in market cap. Today Netflix is worth $154 billion. CBS? $21 billion.
Meanwhile, Moonves was pocketing pay packages that came to $36.65 million last year. For what exactly?
Supporters noted that CBS was first in TV ratings, and first in several categories, under Moonves. This is because it was the only TV network that cared about TV ratings. ABC is just a tiny part of Walt Disney (NYSE:DIS), NBC is just a tiny part of Comcast (NASDAQ:CMCSA) and the Fox Network is just a tiny part of 21st Century Fox (NASDAQ:FOXA). Yet that’s the battle Moonves cared about.
Moonves’ performance as CBS CEO was worse than that of Jeff Immelt at General Electric (NYSE:GE). At least Immelt had a strategy, even if it was stupid. Moonves didn’t even have that. All he had was a tactical plan straight from the 1970’s. The only thing missing was a cardigan sweater, and not in the comforting Mr. Rogers sense either.
What’s Left?
Hard as this may be to believe, market analysts have continuously pounded the table for this dog. At last check, the average rating was overweight, with 17 saying buy it and no one saying sell.
What is supposed to happen now? Yes, Viacom is likely to buy out CBS on its terms, but the two companies, combined, have a market cap of $33 billion. It’s a minnow in a sea of sharks.
Worse, who would want it? Scheduled television, whether delivered on broadcast or cable, is a failing business. Which means neither CBS nor Viacom have what is needed to compete in the streaming era. It’s possible Verizon Communications (NYSE:VZ) may make a bid, but they’re busy looking for a way out of Oath, the former America Online and Yahoo.
The Bottom Line
Oil bears and climate analysts like to talk about “stranded assets,” proven reserves in the ground that are unlikely to be brought to the surface because of renewable energy and climate change.
CBS is a stranded asset. Les Moonves stranded it. He should have been fired five years ago.
Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this article.
