Viacom Needs to Think Like “Via.Com”
Viacom was profitable, but those profits fell.
- For the first quarter, Viacom’s profit fell 12% to$396 million, or $1 a share, compared with $449 million, or $1.13 a share, in the prior-year quarter. Excluding certain items, Viacom earned $1.04 a share.
- Revenue grew 5.4% to $3.32 billion, but was more than offset by a rise in operating expenses and costs from restructuring and severance.
Now I’m not going to lose any sleep over Viacom’s profits decline. But for a corporate behemoth born and raised in the traditional corporate media structure, an alarm bell is going off. The CEO is looking to create skinny packs of entertainment for $20 a month rather than an expensive cable package purchase. He also acknowledged that he has to mend relationships with cable operators. Consequently, Viacom has wrestled with a number of cable operators as the entire industry experiences upheaval in pricing and reach.
Viacom needs a turnaround and fast. The major media network is experiencing some quickstand under its corporate shoes.
In this Wall Street Journal entry, we see that:
- Spike channel would be rebranded as the Paramount Network in early 2018 to serve as its general entertainment brand.
- Rebranded channels: Nickelodeon, Nick Jr., MTV, Comedy Central, BET and the rebranded Spike.
Most Profitable Channel Features
CEO Bob Bakish said the company picked those six brands because they have:
- Large, distinct audiences
- Global reach
- Substantial amount of owned content
- Multiplatform potential, including the strength to carry movies.
I think that he’s correct in his analysis.
Large Distinct Audience:
Viacom is regarded as a ‘broad’ cast network. However, the world’s viewing audience is trending toward ‘narrow’ casting. The ‘distinct’ audience element is key. We are now binge-watching shows which means more narrow topical interest. TI recently watched “Generation Kill” which is like a World War II army platoon – but now crossing the fields of Iraq instead of wartime France. This is not a show that my wife will watch – but one that my son and I will watch. “Generation Kill” is gritty, violent (the nature of war) and has dialogue between men fighting that war. Not for the meek.
You can no longer make shows – profitable and long-lasting shows for just the U.S. and NorthAmerica. While humor based on dialogue is a success here, this material is prone to difficulties in translation. In additiona, there are unique national cultural norms about alcohol, sex, behavior, etc., So Viacom needs to cut down on channels to make those with Global Reach more profitable.
First of all, I think Netflix has put $6 Billion into production immediately because of two trends. One, technological advances are going to change the streaming industry – again – and put them at a disadvantage. Two, Netflix can only work with content and subscriptions. It has no advertising capability right now as a SVOD. Most noteworthy, “House of Cards” might’ve cost $100 Million to produce – but by adding 3.5 million subscribers a month at $10 – they covered that production cost. And would make another $35 Million per month thereafter more or less. Netflix is in a run to build a content library so vast that, even with technology changes, they can license for a long time to come.
The CEO chose six channels – Nickelodeon, Nick Jr., MTV, Comedy Central, BET and the rebranded Spike – can be looked at as demographics. Young Kids, Young Kids, Teen/Millenials, Millenials/Gen X, Black Audiences and Gritty Spike. They are covering generations and the potential of sales to these groups. The younger groups in particular have purchasing power. The black demographic is sorely underserved. Furthermore, I think that you could employ multiplatform strategies and their potential on TV, Internet, Magazines. Consequently, other types of Portals: Club, Subscription, DVD sales, etc., so that you have multilevels of multiplatforms.
Viacom is wise to look at the big picture of consolidation, moving toward their internal strengths and recognize that the internet is changing the game for even traditional television.