When I was a child CBS (NYSE:CBS) was a huge deal. Ratings of 30 were common.On Sunday CBS’ evening line-up scored an average rating of 3.1. The re-boot of the CBS Evening News, once “must see” TV with Walter Cronkite, drew just 5.6 million viewers.
CBS is talking about merging back with Viacom (NASDAQ:VIAB), but even that would create a minnow in the new entertainment universe. That combined $30 billion market cap would be competing with ABC-parent Walt Disney (NYSE:DIS), now worth $254 billion, and NBC-parent Comcast (NASDAQ:CMCSA), worth $199 billion. Let’s not even discuss Cloud Czars like Alphabet’s (NASDAQ:GOOGL, NASDAQ:GOOG) YouTube and Amazon (NASDAQ:AMZN) Prime controlling the new world.
The bottom line is, if you bought CBS shares five years ago, you’re down 14%, and have collected $2.16 per share in dividends on a $60 investment.
Bad Days at Black Rock
CBS has been hampered by the slow demise of Sumner Redstone, whose National Amusements has control of both CBS and Viacom. Redstone’s daughter Shari has control of the stake now, and wants to put the companies back together, under Viacom CEO Bob Bakish.
The prime asset would be “Star Trek,” originally an NBC show that debuted in 1966. CBS is teasing a new show called “Star Trek: Picard,” starring 79-year old Sir Patrick Stewart and members of the original “Star Trek: Next Generation” cast.
But bringing CBS back may be “Mission Impossible” (which they also own). Combining the CBS All Access streaming service with Viacom’s Showtime still gets you to just 8 million households. Netflix (NASDAQ:NFLX) has over 151 million (and a market cap of $135 billion).
The hope is that Viacom’s Paramount studio would bring content that increases the take-up of All Access. Much depends on Bakish, who bought Pluto TV, an ad-based streaming service, for $340 million. He also bought a stake in Jeffrey Katzenberg’s Quibi and pushed Viacom into e-Sports. Maybe, given a bigger war chest, Bakish could buy Starz or Univision. Maybe he could merge the combined entity with Discovery (NASDAQ:DISCA), which has a market cap of $15 billion (for now, CBS is competing against Discovery with a new network called Dabl).
CBS No Access
The dispute with AT&T highlights the company’s weakness.
Cable operators still pay broadcasters for the right to put local stations on their networks. CBS claims AT&T is offering less than other operators for its content, which includes news, sports, and the Smithsonian channel.
AT&T accuses CBS of being a repeat “blackout offender,” pulling its content from DISH (NASDAQ:DISH) and Charter (NASDAQ:CHTR) Spectrum to get better terms. They also don’t like CBS pushing viewers toward its All Access streaming service, which competes with AT&T’s HBO Max.
The Bottom Line on CBS Stock
The rise of Netflix has changed the entertainment game and no one, especially not CBS, has yet adjusted.
Streaming makes all a service’s shows and movies available 24 hours per day, seven days a week. The issue isn’t the money it costs, but the time people are willing to spend watching it all.
Cutting cable, which saves upwards of $150-$200 per month at some households, leaves a huge pot of gold for streaming services, but it doesn’t add time to the TV-watching budget. Whether a service costs $10 a month, like CBS All Access without commercials, or whether it’s free like Pluto TV, matters less than if people have time to watch.
Services like CBS All Access, HBO Max, and Disney’s Disney+ are paying out big bucks to build “must see” lineups, but they can’t all get through the small door of viewer attention. There are going to be casualties. CBS and Viacom could easily be one of them.
Dana Blankenhorn is a financial and technology journalist. He is the author of a new environmental story, Bridget O’Flynn and the Bear, available now at the Amazon Kindle store. Write him at email@example.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AMZN.