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Viacom: When Less Means More

CEO Bakish gets to the core of the matter 2/13/2017 8:30 AM

Viacom is the latest company to take a close look at its cable services in an effort to maximize its future in an uncertain television marketplace.

Unlike NBCUniversal, which started reducing its cable-channel portfolio by pulling the plug on Cloo and Esquire Network, Viacom’s new cable-network strategy doesn’t eliminate any channels. But it is clear that the company, which has struggled on the ratings front, is putting a high value on six of its core brands — BET, Comedy Central, MTV, Nickelodeon, Nick Jr. and Paramount, which will get a network of its own when Spike rebrands into the Paramount Network next year.

Core networks like MTV may also get a facelift. The network will most likely forgo its scripted fare — it has already said it will not bring back freshman scripted comedies Loosely Exactly Nicole and Mary + Jane — for unscripted and music-themed shows.

Left out in the cold are such networks as VH1, Logo, CMT and TV Land that, combined with the core services, made Viacom the envy of the cable industry in the late 1990s and 2000s. But a continuing shift in how and where viewers watch TV content has led to a disturbing amount of cable-subscription churn, forcing MVPDs to take a closer look at paring down the once revered 200-channel cable bundle into smaller, less-expensive packages that consumers will purchase.

Viacom CEO Bob Bakish said during the network’s fiscal first-quarter financial report that the networks on the outside looking in at Viacom’s new strategy will survive for now — and both VH1 and CMT will launch high-profile, music-themed scripted series, The Breaks and Sun Records, respectively, over the couple of weeks — but it’s clear that they will not receive the same financial and marketing love that their six core brethren will.

With change comes risk, and eliminating a significant source of revenue has the potential of negatively affecting Viacom’s bottom line. Viacom’s non-core networks represent 29% of the company’s domestic revenue, according to Sanford Bernstein media analyst Todd Juenger. VH1 in 2016 was one of a few Viacom networks that didn’t suffer double-digit ratings declines. With such hits as Love & Hip Hop, VH1 finished as Viacom’s second most watched network in primetime with 639,000 viewers, flat from 2015.

“You have to drop the weaklings … but you cannot afford to cut out $1-plus billion of EBITDA,” Juenger said in a note, referring to Viacom’s suite of 19 (!) channels outside of the six “core” networks.

But maintaining the status quo in an evolving television landscape also carries inherent risk. Viacom will find out very quickly if less is indeed more.