RealTime IT News

Viacom + CBS = .COM

True, an upstart company like Amazon.com can conquer a "brick-and-mortar" powerhouse like Barnes & Noble. But can an upstart Net entertainment business do the same?

I don't think so. In entertainment, big is better.

After all, entertainment is about hits and flops; unfortunately, the flops dominate. In other words, to be successful, you need infinite amounts of capital.

You also need to diversify risks, such as by integrating vertically. Take a movie. In the old days, a movie made money primarily from the domestic gross.

Now, there are a myriad of revenues streams: the soundtrack, the network TV rights, the cable rights, foreign distribution, toys/merchandising, a book deal, perhaps even theme park rides and restaurant deals. Oh, and yes, the Web site.

This is why Viacom (VIA) and CBS (CBS) merged yesterday (the new entity will be called Viacom), with a combined market value of about $80 billion.

Expect more of this. For example, the latest rumors are a combination of NBC and Paxson, as well as a combination between Disney and USA Networks.

Media Marriage

Here's how Viacom and CBS stack-up. CBS has 163 radio stations, 14 television stations, and cable properties such as The Nashville Network (TNN) and Country Music Television (CMT). Of course, CBS is also the biggest prime time network.

As for Viacom, it has MTV, Showtime, Nickelodeon, VH1, TV Land, as well as 19 broadcast TV stations.

The company also owns Paramount Studios and Spelling Entertainment. There is also Simon & Schuster.

In fact, while CBS has the older-generation demographic, Viacom has the younger generation. By combining the two, you have a so-called "cradle-to-grave" strategy.

But most importantly, the new Viacom has the two most important elements for Net entertainment: content and distribution.

I think the Viacom Net strategy will involve a variety of targeted spin-offs. This makes it easier for Wall Street to value the companies.

Also, managements will not be hindered by unnecessary bureaucracies. So far, CBS has been successful with this strategy with the IPOs of SportsLine USA and MarketWatch.com.

Others I expect include:

1. MTV.com: This will be combination of MTV.com, VH1.com, Image Radio and SonicNet.

2. Nickelodeon.com: This, of course, will target the young market. Folded into this will be such properties as SimonSaysKids.com and Noggin.


But there are no guarantees. The biggest risk: integration. It's not easy to mesh huge media empires.

What's more, there are two huge egos involved, Viacom's Sumner Redstone and CBS' Mel Karmazin.

Although, if both can work together -- and I think they can -- they have an Internet powerhouse on their hands.

Introducing Internet StockTracker, the new weekly e-mail newsletter from internet.com Corp. Every Friday internet.com will deliver to your e-mail in-box the latest performance data on individual Internet companies and their competitors. Internet StockTracker will deliver to you all the statistics you need to assess the week's activity. Subscribe today and receive the Charter Rate of $157 -- a savings of $70 off the regular subscription price! e-newsletters