Written by Kevin Baxter
Published: June 25, 2005 at 3:25 PM
Well, kinda. Viacom has decided to split into two companies, Viacom and CBS. The makeup of each company may seem a bit odd at first glance: Viacom Inc will retain MTV, VH1, BET, Nickelodeon (and other cable channels) and Paramount Studios (the film division); CBS Corp will consist of CBS, UPN, Infinity Broadcasting (radio division), local television stations and the Paramount theme parks. But everything that remains under the Viacom umbrella is considered fast-growing while everything under the new CBS name is seen as cash-rich but slower-growing. So there is a method to this madness.
But what's the point? Viacom stock has languished of late and the board, led by chairman Sumner Redstone, decided to create one company for stockholders looking for fast rewards and one for those looking for long-term stability.
While analysts question the success of this move - many departments will have to double, Viacom's cable channels will lose negotiating muscle without CBS - it does make sense. It was getting to the point where Viacom might've started making questionable moves to bump up the stock.
Sound like another major media company we know? The analysts can say what they want, but check out the moves Disney has made to try to increase stock prices: paying too much for ABC, paying too much for Fox Family, keeping too many inhouse television shows on the ABC schedule, creating questionable US parks, creating questionable overseas parks, going cheap on existing theme parks, "Wal-Marting" the Disney Stores, spending millions on an unnecessary Internet portal, and so on.
And Disney wasn't alone in focusing more on the stockprice than on the health of the company itself. Vivendi Universal was another company that made lots of horrible decisions to help artificially jack up stock prices. And their recent history is even rockier than Disney's, to the point where they were forced - by stockholders - to sell off most of the risky entertainment division.
So will this work? It's too early to tell yet, but history shows that it couldn't be worse than going on a buying spree, or going on a cheapness binge either. Chances are CBS Corp will probably remain a steady business, especially with cash cow CBS leading the way. Viacom will remain the risky venture, which is what many traders want.
How does this affect theme park fans? Well, a stable parent company promises a more stable set of parks. Remember when the Disney parks would suffer due to a bad year at the film studio? Remember when the Universal parks sat ignored during the Vivendi fire sale? The Paramount parks should continue to grow at their current rate, and there couldn't be a better time for that to happen.
Now if only Disney would follow suit! (We'll give NBC Universal a couple years to see if they should also.)
That's my two pennies... gimme yours!
Although it is on a much smaller scale, doesn't Mr. Iger's decision to break up the centralization of Disney's strategic planning department -- granting more independence to the different division heads -- embrace the same philosophy Viacom is embracing?
I also find Paramount's decision to be interesting considering what Newsweek reported last regarding Mel Karmizan. Specifically, after Mr. Karmizan resigned as Viacom's president, he was considered to be a potential Disney CEO candidate. While acknowledging that Mr. Karmizan had the chops, Newsweek cautioned that he "can't stand theme parks." I wonder if Mr. Karmizan's attitude is reflective of Viacom's executive hierarchy -- right up to Mr. Redstone.
Two things now have to happen to push Paramount Parks new face over the top....some real hit movies that lend themselves to themed rides (that weren't made 15 years ago), and some money to sink into their properties.
Not that this is something that would necessarily work if Paramount spun the parks off all by themselves. But would this work splendidly for Disney. Honestly, if the Disney parks went IPO, how fast would they sell all their stock? And how much more would they be able to sell it for, compared to current Disney stock? Disney Dorks would LOVE to own Disney Theme Parks stocks from Day One, wouldn't they?
This is a bad idea. A large company owes various divisions because of the synenergy that it creates. Now some of the divisions make sense to dump or spin-off. There isn't a lot of synenergy in billboards or even radio with some of these other divisions.
When Disney has a ride (say, Roger Rabbit cartoon spin) and people buy merchandise related to the ride (toys, shirts, DVDS, etc) then Disney owns almost the ENTIRE revenue stream. The own the license, they own the studio that produces the DVD, etc.
Or worse case scenario, you are Knotts Berry Farm and you get stuck with characters (Peanuts) that you don't own and no one (not even the license holder) gives a crap about. And they can't do anything about it because they only own a PORTION of the license.
As to Disney. Disney made BAD decisions, but that didn't have anything to do with the stock price. Disney paid too much for ABC?!??! WHAT?!?! ESPN was worth the price ALONE!!! Disney made some mis-steps with ABC in the beginning, but they are getting it back on track. And ABC is PERFECT synenergy for the Disney company. Did Disney pay too much for FOX Family? ABSOLUTELY!
I think it is a bad idea for Viacom. It was a good idea for Vivendi-Universal because they were involved in many, many businesses that had NOTHING to do with one another, but all of Disney's business and almost all of Viacom's businesses are closely related.
Viacom is doing this for short-term gain and not for long-term health of the company in total. I wouldn't be surprised if someone else gobbled up either one or both of these now separate divisions.