On paper, it looks good. With an expectation that the merger of CBS
and Viacom will be completed by yearend, there should be excitement in the air for
this new company with its breadth of content (140K premium TV episodes, 3.6K+
film titles, contracts for live sports programming) and multiple distribution
channels (broadcast and streaming). The
firm also anticipates a minimum of $500 million in cost savings.
Yet, because ViacomCBS’s annual content spend of $13
billion pales in comparison to Disney’s $27 billion; the value of its sports
contracts with the NFL, NBA, NCAA basketball, and PGA golf (The Master’s) pales
in comparison to the other broadcast networks; its direct-to-consumer
subscriber counts for Showtime and CBS All Access pales in comparison to those
for Netflix and HBO; and its share of box office receipts (approx. 5% in 2019
YTD) pales in comparison to the other major studios of Buena Vista (Disney), Warner
Brothers (AT&T), NBCUniversal, and Sony/Columbia, there is little excitement
for this deal. It was seen as a must
happen deal. It was not seen as a WOW deal
as its scale is not as large as the others.
But, how big does an entertainment company have to be? Might a firm that is at a sufficient size in
a market be big enough to be price competitive and profitable? Afterall, when a firm becomes too large, inefficiencies
can occur by trying to manage too many projects/units and too many people. A firm focused on consistently delivering in
a cost-effective way a product in the market that consumers value will be around
for the long run. Size is not
everything!
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