CBS Eyes Retrans After Viacom Split


Viacom Inc.’s CBS broadcasting network is likely to seek cash for carriage from cable operators for retransmission consent in the years following its planned split into two separate operating units, company officials told analysts Tuesday morning.

Viacom announced in March its plan to cleave itself into two separate, publicly traded units -- one company consisting of its MTV Networks cable channels and Paramount studios, and the other including its CBS and UPN broadcasting networks, TV stations, radio properties and outdoor advertising.

The MTVN unit will be led by Viacom co-president and co-chief operating officer Tom Freston. Viacom co-president and co-COO Les Moonves will head up the other division.

In a conference call with analysts to discuss first-quarter results, Viacom chairman Sumner Redstone said that plan is moving forward.

Redstone said the company should make a decision on the separation by the end of the current quarter, and the spilt could be completed by the first quarter of 2006.

Asked what would happen with retransmission consent once the spinoff is completed, Moonves said it presents a perfect opportunity to start getting cash for carriage from cable operators.

“We think there’s a real possibility that CBS will be able to generate cash for our retrans,” Moonves said on the call.

Cable operators have largely resisted paying cash for carriage of broadcast networks. And the four major broadcasters have largely used retrans to force operators to carry their less popular niche networks.

However, on the conference call, Freston said Viacom’s cable networks don’t expect to get that much benefit from retrans in the future.

“Retrans has been a great value to MTV Networks over the past five years since we merged with CBS, as we’ve been able to mop up all kinds of analog and digital space coincident with the cable operators rolling out their digital network platform,” Freston said. “We think that game is largely over. Most of our deals are done until the end of the decade. Cable operators will be focusing more and more on VOD [video-on-demand] and broadband.”

Moonves said CBS will not likely see cash for carriage for several years, mainly because most of its deals won’t expire for a few years.

“Nothing is going happen until these deals expire. Some of them are coming up in the near future,” Moonves said. “As we go forward post-split, we think in the next three to five years, [cash for carriage] could be worth tens of millions of dollars to the CBS network.”

Freston also gave some insight on possible acquisition targets for the MTVN division after the split.

“If a cable network comes up for sale -- particularly something that has an older skew where we have less inventory than kids, teens and young adults -- we would be very interested,” Freston said. “It’s going to depend on the quality of the network and, of course, on the price.”

He continued, “We’re also looking at acquisitions [in] smaller, largely Web-based companies that would enhance our existing Web businesses in the demographics we appeal to. Those would be things around video games, community sites and things of that like.”

For the quarter, Viacom reported revenue growth of about 5% to $5.6 billion and cash-flow growth 6% to $1.3 billion, mainly due to strong performance at its cable networks. Cable-network revenue was up 19% in the period to $1.7 billion while cash flow increased 17% to $695 million.