ViacomCBS’ Path Ahead Grows Steeper Amid the Coronavirus Pandemic
ViacomCBS has come to a crossroads, once more.
The corporate that has endured extra drama within the C-suite lately than any of its bigger rivals was already below stress this yr to show it may muster a comeback in a giant approach.
Now, with the black swan named coronavirus roiling the waters, leaders of the newly enlarged conglomerate should handle that comeback in a wildly totally different enterprise surroundings. The approaching months will check the mettle of CEO Bob Bakish and his newly built-in administration group of Viacom and CBS Corp. executives. The social and financial devastation brought on by frantic coronavirus response efforts began virtually three months to the day after Viacom and CBS Corp. closed their long-awaited remerger on Dec. 4. The newlyweds didn’t even get a one-quarter honeymoon earlier than onerous instances hit.
For certain, ViacomCBS isn’t the one media firm unpredictable headwinds for the remainder of 2020, if not a far longer interval. Discovery Inc. and AMC Networks are seen as weak to obsolescence because the media market undergoes seismic shifts wrought by digital distribution and the rise of streaming. Buyers have been already apprehensive about how conventional cable community gamers would navigate the transition to an on-demand area. Now analysts that have been plotting out earnings declines from core sources like cable affiliate charges on a three- to five-year timetable are sounding the alarm about that course of dashing up considerably in a recessionary enterprise surroundings. For ViacomCBS, the state of affairs is difficult by a excessive debt load, together with obligations of $1.Four billion coming due in 2021.
“Shareholders of shares like [ViacomCBS, Discovery and AMC Networks] personal underlying belongings that rely virtually fully on an outdated enterprise mannequin with each extreme antagonistic structural forces and cyclical danger, in addition to the preexisting situation of overly prolonged steadiness sheets,” wrote Sanford Bernstein Co. analyst Todd Juenger in a March 26 report.
COPYRIGHT_BP: Published on https://bingepost.com/viacomcbs-path-ahead-grows-steeper-amid-the-coronavirus-pandemic/81581/ by Cecilia Jones on 2020-04-01T14:35:57.000Z
ViacomCBS did get an essential vote of confidence amid the coronavirus disaster final week when it raised $2.5 billion in debt underwritten by Goldman Sachs and different prime banks. A few of that money will probably be used to refinance the debt that comes due in 2021.
ViacomCBS stands taller on this group due to its measurement — giant sufficient to nonetheless be a media large however small in contrast with Disney and Comcast, not to mention Amazon and Apple — and its legacy. CBS, Paramount Photos, MTV, Nickelodeon, Comedy Central, Showtime, BET Networks: These have lengthy been pillars of the TV ecosystem. CBS for thus a few years was the most important of the Large Three networks.
Earlier than the scope of the pandemic disaster turned clear, Bakish was on a appeal offensive with Wall Road to clarify his imaginative and prescient for revving up ViacomCBS utilizing proverbial post-merger math: to make one plus one equal greater than two. As a longtime Viacom enterprise govt who was a administration advisor earlier than that, Bakish speaks fluent Wall Road. He is aware of what traders need to hear, and he is aware of the timetable by which his efforts will probably be judged. In current weeks, Bakish has outlined detailed operational plans for a variety of the corporate’s commodities.
“We have now an unimaginable asset assortment at ViacomCBS. That asset assortment is permitting us to each generate free money movement immediately principally by our linear companies whereas concurrently utilizing that to construct asset worth together with in streaming,” Bakish mentioned March Four at Morgan Stanley’s Expertise, Media and Telecom investor convention in San Francisco.
“We’re a core resolution in video within the U.S. We’re a core resolution in promoting within the U.S. We have now an incredible platform to construct outdoors the U.S.,” he continued. “One of many highly effective issues about this deal was you took Viacom’s working footprint outdoors the U.S.; CBS didn’t actually have one. And you then add extra content material to that and you should use that to develop share in each linear and drive streaming.”
The opposite asset that ViacomCBS has that ought to show invaluable at this second is one which has usually been seen as a adverse from an funding perspective: a controlling shareholder. Shari Redstone, ViacomCBS chairman and president of guardian firm Nationwide Amusements, has ironclad voting management of the corporate, as she has flexed greater than as soon as over the previous few years.
With out the affect of a controlling shareholder, ViacomCBS would possibly nicely be weak to vulture patrons seeking to scoop up name-brand belongings on a budget. A greater than 50% plunge in inventory worth since 2016 can put on out the endurance of even probably the most long-term traders. An important lifeline that ViacomCBS receives on this disaster will be the present of time to get that comeback on monitor from a benevolent boss.