CBS, Viacom Form ViacomCBS, Merging to Combat Netflix and YouTube

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Case in point, today's announcement that CBS and Viacom have entered into a definitive agreement to combine in an all-stock merger, creating a combined company with more than $28 billion in revenue.

CBS Corp. and Viacom, once part of the same company, plan to again join forces in a merger to bolster their positions in a rapidly changing entertainment industry that's pushing other media giants to consolidate their digital content for the streaming age.

The combined company, ViacomCBS Inc., will have more than $28 billion in revenue and the largest market share - 22% - of the USA television viewing audience, according to the companies.

The companies said they expect the deal, which still needs to win regulatory approval and clear other conditions, will close by the end of this year. The combined company will be called ViacomCBS and reunites the companies after they split up in 2005. That's far less than the 60 million US subscribers that Netflix has, though it's comparable with the estimated number of subscribers to HBO Now, that network's stand-alone streaming service.

But over time, the two companies' fates were reversed. Viacom's angle on streaming as been more advertising-oriented, while CBS is more subscription-based.

"CBS's and Paramount's production asset will quickly move up the ranks to challenge the big boys of Disney, Comcast, AT&T and Netflix, and will be an attractive home for creative talent", they said. Sure, the network may dominate the ratings now, but when streaming becomes the primary form of entertainment, will CBS All Access (or maybe even another newly-branded service that they've yet to launch) be able to not only compete, but thrive against rivals like Netflix, Amazon, Disney+, HBO Max, the NBCUniversal streaming platform, Quibi, and Apple TV+?

"If you're going in both directions, you're hedging your bets, but are you pulling your punches on whatever the best strategy might have been?"

Shari Redstone, whose family investment vehicle National Amusements Inc. controls both companies, would become chairman of the combined entity, the people said.

In her Sumner Redstone biography "The King of Content", Keach Hagey describes Shari Redstone as "her father's daughter: doggedly determined, shrewd, and not particularly patient".

During a call with analysts, executives said they hoped to bulk up CBS All Access with kids programming from Viacom, which owns Nickelodeon.

But over time, the two companies' fates were reversed. In response, legacy media companies are consolidating to bulk up. But Moonves was against the idea, as CBS was stronger and more profitable than Viacom.

Moonves' ouster past year in the face of multiple sexual misconduct allegations changed the dynamic. Six will come from independent members from CBS, four independent members from Viacom, Bakish, and two National Amusements members.

It ultimately took an extraordinary set of circumstances to clear the way for the reunion, but after three years of hemming and hawing (and the headlines-grabbing ouster of Les Moonves), CBS and Viacom have at long last agreed to a merger. Disney's stock was up 1%, while Netflix was unchanged.

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