Viacom/CBS, Seeking 'Fair Value' for Content, Seen Driving Higher Fees

Viacom, CBS and those worried about their long-expected combination (see 1908130039) foresee more retransmission and affiliate fee pressures. The combined company will have 22 percent of U.S. TV viewership, and will look to greatly beef up its affiliate fees as part of its growth strategy, CBS acting CEO Joe Ianniello said in a call with analysts Tuesday as the two programmers announced the recombination; the companies split in 2006.

ViacomCBS will be a "a global, multi-platform premium content powerhouse," said Viacom CEO Bob Bakish, who will head the combination. See the personals section for more personnel moves in the deal. Bakish said it will be "one of the largest spenders" in the content industry, with the two having spent a combined $13 billion over the past 12 months. He said ViacomCBS would have one of the largest libraries of iconic properties, including 3,600 films. It also would reunite TV and film rights for such properties as Star Trek and Mission Impossible, he said.

Bakish said the ViacomCBS growth strategy includes bigger efforts in direct-to-consumer, using its ad-supported Pluto TV streaming service as an entry point that allows upselling. He said it also would have stronger foothold in advertising and distribution, with more services to offer "while helping ensure we get fair value for all our services."

That CBS and Viacom seemingly structuring the deal so there’s no FCC review-triggering transfer of control isn’t a surprise, broadcasters and broadcast attorneys said in interviews. The transaction is expected to proceed similarly to Disney/Fox, they said. It's unclear whether the FCC will decide to not review the transaction. Viacom and CBS didn't comment on any such review.

Since the companies previously were together and the deal has been telegraphed for a while, it hasn’t caused much hand-wringing in the industry, said a broadcast executive. More access to Viacom content will likely benefit broadcasters with CBS affiliates, one said. As a larger and more powerful company, ViacomCBS could have increased leverage in affiliation negotiations, the executive said. CBS has been seen as more “tepid” about ATSC 3.0 than other networks, and the Viacom deal isn't considered likely to change that, the executive said.

Even if the transaction could be structured to not need FCC review, it's not automatic the companies would go that route, said former Commissioner Harold Furchtgott-Roth. Other considerations, such as ensuring shareholder interests, are reflected in an agreement, he said.

ViacomCBS raises concerns for some. Paul Raak, ITTA vice president-legislative affairs, said it would mean more opportunity for the combined programmer to bundle programming that distributors may not even want. With CBS “notoriously high” in retrans, the combination would be “another kick in the gut” for MVPDs, he said, saying if there’s organized opposition to the deal, ITTA might be part of it.

ViacomCBS, like Comcast, is part of "the mass migration toward integrated media platforms," emailed American Antitrust Institute President Diana Moss. That means the competition will be between platforms, as opposed to between levels in the platform such as film studios or cable channels, she said. "We need a lot of platforms to compete with each other [and] more mergers threaten that."

Moss said DOJ review will start with looking at horizontal overlaps, if any, that would increase concentration in a market. Justice also would look at any vertical combinations that might give rise to concern that ViacomCBS could withhold content from rivals for strategic competitive reasons, she said. "Competition in those markets will be important, as will the value of the various assets that are being combined to advertisers and subscribers."

The deal will be an all-stock transaction valued at more than $48 billion, CBS Chief Financial Officer Christina Spade said. Existing CBS shareholders will own about 61 percent of the combined company, Viacom shareholders about 39 percent, she said. Ianniello would be CBS CEO/chairman and Spade CFO of the combined entity.