Viacom Plans To Scrap Retail Outlets

Author:
Publish date:
Updated on

New York -- Viacom Inc. is pulling the plug on its efforts
to match the successful retailing forays by rivals The Walt Disney Co. and Time Warner
Inc.

Viacom said last week that it will shut its 18-month-old
flagship store in Chicago next month, and that it will phase out its 15 Nickelodeon
stores, concluding that it's more profitable to license Viacom properties to other
retailers than to make the capital investment in building more stores.

Licensed merchandise from Viacom properties like
Nickelodeon and MTV: Music Television now rakes in $2.8 billion in annual retail sales, up
from $1.1 billion in 1993, the company said.

The closing of the lavish Viacom Entertainment Store in
Chicago has been long rumored, as consumers failed to identify the corporation with Beavis
and Butt-head
or Rugrats. The more-focused Nickelodeon stores have done better,
though.

"The Viacom retail store was a nice concept, but not a
reality," ING Barings Furman Selz media analyst Fred Moran said. "Unfortunately,
Viacom doesn't have the retail potential that Disney has. That stems from the fact
that they don't have a deep library of characters from animated movies to drive the
business."

Given the company's push to cut debt and generate
earnings growth, "it makes sense not to press forward and deal with ongoing losses in
that start-up operation," Moran said.

Viacom is also gearing up to sell off its Blockbuster Video
chain next year, following an initial public offering of part of the business. So the
company will lose retail expertise and distribution resources.

Company executives at the recent PaineWebber Media
Conference said the IPO of 10 percent to 20 percent of Blockbuster would probably take
place in the second quarter of 1999. Some analysts had thought that it might come in the
first quarter, but Moran said it makes more sense to have first-quarter numbers to discuss
during road-show presentations to investors.

Related