CBS And Viacom Streaming Assets Offer Potent Blend Of Subscriptions And Advertising

Dade Hayes

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As media giants gird for battle with Netflix and Amazon, CBS and Viacom continue to pursue marginally more patient streaming strategies, gaining steady ground without spending their way into trouble.

Now, as the companies prepare finally to consummate a merger that has been many years in the making, they stand to become a bulked-up media player with arguably the industry’s most diversified streaming portfolio. Disney and WarnerMedia have bigger footprints and are taking riskier swings, and Apple remains a tantalizing mystery, but CBS-Viacom would be streaming’s biggest dual threat. Its emergence, assuming the merger deal gets done, also coincides with a counterintuitive uptick for traditional TV advertising.

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Viacom has eschewed streaming (save for a marquee BET-branded service launching this fall and Noggin, a long-established preschool outlet) and placed a bet big on free, ad-supported streaming. CBS also has a collection of free, ad-backed outlets spanning news, sports and entertainment, but it has made the most waves with its twin subscription services CBS All Access and Showtime — each of which launched ahead of the subscription curve in 2015.

Advertising video on demand, or AVOD, has been more in vogue of late thanks to the boom in smart-TV penetration and the general shift toward streaming. Beyond the top echelon of media companies, Sony Crackle this year got a reboot in a joint venture with AVOD specialist Chicken Soup for the Soul Entertainment. Startup Tubi TV projected spending upward of $100 million on content to meet surging tune-in. The trend should accelerate through 2020 and beyond. NBCUniversal is planning a major AVOD launch in April, and WarnerMedia says some form of advertising will come to its HBO Max service after the subscription version gets off the ground in the spring.

Results of the efforts by CBS and Viacom, meanwhile, haven’t exactly vaulted the companies into parity with Netflix, but they have been solid and steady. CBS has repeatedly upped its forecasts for All Access and Showtime, saying they will combine for 25 million subscribers by 2022. (While CBS generally doesn’t provide a breakdown of how many subscribers there are on each platform, executives have said in recent months that it tends to be roughly an even split.)

Viacom has stayed mostly in the ad zone because it wants to leverage its networks’ decades of expertise as well as some newly integrated ad-tech tools. The company’s main vehicle for this is Pluto TV, which reached 18 million monthly active users by the end of July, up 50% from January, the month that Viacom paid $340 million to acquire it. Featuring a version of the pay-TV bundle’s on-screen schedule grid, the streaming service offers more than 100 networks, including versions of many Viacom channels designed to approximate what paying customers get the traditional way.

Michael Nathanson, a veteran media analyst with MoffettNathanson, factored streaming into his research note Friday sizing up the merger’s benefits. “The combination of CBS-Viacom will create the second largest player in U.S. TV advertising” (after Comcast), he wrote, “with strong linear reach and a growing digital footprint.” Plugging Paramount films and Nickelodeon programming into All Access in the future, he continued, should “reduce churn, drive more usage, and improve the price to value offerings.”

Bigger also is better in terms of reducing costs and offering talent another destination, he said. “CBS’ 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,” Nathanson argues.

“We believe its going to be a hybrid world out there with AVOD and SVOD offers combined,” observes Gideon Gilboa, SVP Media and Telecom Product and Marketing for Kaltura, a provider of streaming platform technology for Viacom, HBO, Turner and other clients. “The streaming platforms of the future will have to be super aggregators, and CBS and Viacom will have a head start.”

Indeed, many dealmakers have begun to make noise about the dominance of pure tech companies like Netflix and Amazon, which have traditionally not offered much, if any, back-end participation. Steeped in traditional TV deals, CBS and Viacom could take back some momentum, in the way that Disney and WarnerMedia have started to persuade agents and talent that they offer more options.

All Access, which was took shape at the hand of digital veteran Jim Lanzone and his team at CBS Interactive, also is a unique offering in that it blends live TV with on-demand fare. Last week, CBS dramatically expanded its initial forays in New York and Los Angeles with live, local station streams to more than a dozen additional markets. That live dimension could give Viacom, for example, interesting ways to amplify awards telecasts like MTV’s VMAs. (Last weekend’s middling Teen Choice Awards numbers certainly would have benefited from extra reach.)

CBS, meanwhile, has used its top-viewed broadcast network to cross-promote All Access at events like February’s Super Bowl and aired streaming spinoff The Good Fight on the linear network as another form of a teaser. Jo Ann Ross, the company’s chief ad revenue officer, said on the company’s quarterly earnings call Thursday that “over-the-top” (OTT) and linear platforms are gaining potency as they blend. “As a leader in OTT, she said we’re seeing a greater share of premium video budgets than ever before, whether it’s on CBS All Access or CBS.com or several of our other platforms,” she said. Big Tech, ironically, is a major ad category, with Google, Apple and others all pouring dollars into TV and streaming spots. Disney has said it will target a host of ways to advertise the launch of Disney+, including on rival broadcast and digital platforms.

Bob Bakish Viacom
Bob Bakish Viacom

Viacom CEO Bob Bakish, who is expected to take the reins of the combined company as CEO, was asked last Thursday on the company’s earnings call with Wall Street analysts about his view of the November 12 launch of Disney+. There has “certainly [been] a lot of discussion on this, and their pricing does look very competitive,” he said. “Our view continues to be that the consumer market is segmenting by price points, from big basic to skinny bundles to SVOD to free and there will be movement across those segments both up and down. And there will be bundling benefits in some of those segments, particularly with broadband and video bundles.”

The strategy at Viacom — and what should be ever more the case post-merger — “is to play in all the segments from big bundle to free and our evolving product lines allowing to do just that,” he added. “So, we feel good about that in the shifting landscape.”

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