NEW YORK, N.Y. – Media mogul Sumner Redstone’s firm is calling for CBS and Viacom to combine again, more than a decade after they went their separate ways.
National Amusements, which owns most of the voting shares of the two companies, sent a letter to CBS and Viacom board members Thursday saying that a tie-up would help it better compete in a rapidly changing media industry. National Amusements is a movie theatre operator run by Redstone, who oversaw the split of CBS and Viacom in 2006.
At the time, the split was intended to let the more profitable Viacom, which owns cable channels MTV, Nickelodeon and VH1, operate separately from CBS, which produces TV shows and owns its namesake network.
But the TV business is changing dramatically as more people cut the cord and choose to stream TV shows or movies on Netflix, Hulu and other services. Viacom has been struggling with too-few hits from its movie studio Paramount Pictures and sagging ratings, while CBS has fared better in prime time with sporting events and popular shows like “The Big Bang Theory” and “The Good Wife.”
Viacom said it expects its board will form a special committee of independent directors to consider the move. CBS did not immediately return a request for comment.
The move follows the settlement of a long running legal battle between longtime Viacom CEO Phillippe Dauman and Sumner Redstone’s daughter Shari, now a Viacom director and president of National Amusements, over the fate of Redstone’s media empire.
In August Viacom CEO Phillippe Dauman said he would step down, effectively ceding victory to the Redstones. Viacom’s interim CEO Tom Dooley will leave Nov. 15. Some have speculated that CBS CEO Les Moonves could to take charge if the two companies combine, although Moonves has said in the past he doesn’t believe a merger would be a good idea.
MoffettNathanson analyst Michael Nathanson said in a client note that the move makes sense because the combined company would be paid more by affiliates. Together they deliver 23 per cent of national viewers, but are paid only 14 per cent of affiliate fees. Viacom’s networks would fare better if they were CBS branded, he added, and the combined company could also cut down on corporate costs and executive compensation.
The news “represents the next chapter in a story that in our minds should have never occurred to begin with,” Nathanson wrote.
In a letter to the board, Redstone said National Amusements won’t accept a buyout by a third party of either company, or any deal that would result in National Amusements losing its controlling position in either company.
AP Writer Joseph Pisani in New York contributed to this report.