Purchase provides media giant with another outlet for library content

Viacom took another step towards becoming a more digitally-oriented company with the announcement of a deal to acquire streaming video company Pluto TV.

For $340 million in cash, Viacom is getting a business with 12 million active users. More importantly, Pluto TV becomes a stepping stone towards creating new direct-to-consumer video business, a bigger footprint for Viacom’s data-driven advanced advertising business a home for its library and a new card to play in its negotiations with traditional cable, satellite and telco distributors.

“Today marks an important step forward in Viacom’s evolution, as we work to move both our company and the industry forward,” said Viacom CEO Bob Bakish, who continues in his post as talk that Viacom will be recombined with CBS Corp. escalates.

“As the video marketplace continues to segment, we see an opportunity to support the ecosystem in creating products at a broad range of price points, including free,” Bakish said. “To that end, we see significant white space in the ad-supported streaming market and are excited to work with the talented Pluto TV team, and a broad range of Viacom partners, to accelerate its growth in the U.S. and all over the world.”

Credit-rating agency Fitch Ratings said the deal reflects a more aggressive push into the direct-to-consumer segment. In addition to the benefits the acquisition offers, Fitch added, it “also presents some execution risk and that Viacom will have to make investments in order to monetize business at scale.“

Pluto TV co-founder and CEO Tom Ryan will keep his job; the streaming platform will operate as an independent subsidiary after the deal closes.

“Viacom’s portfolio of global, iconic brands and IP, advanced advertising leadership and international reach will enable Pluto TV to grow even faster and become a major force in streaming TV worldwide,” Ryan said.

The streaming field is quickly getting crowded, with new entries planned by The Walt Disney Co., AT&T, Comcast and Apple. At the same time, established SVOD powerhouses Netflix, Hulu and Amazon are ramping up their spending on content.

Meanwhile, reports last week indicated that Pluto TV might be facing competition from an free, ad-supported mobile video service from T-Mobile, which would use technology licensed from Xumo.

The service would come from Layer3 TV, the multichannel video programming distributor T-Mobile acquired early last year, according to Cheddar.

An app for the service would be pre-loaded on devices distributed by T-Mobile.

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