Viacom ‘Circus’ Caused by 2005 CBS Split, Media Analyst Says

MoffettNathanson Research calls current situation “wrong,” “bizarre,” “lunacy,” “reverse synergy” and result of decade-old mistake

Last Updated: May 31, 2016 @ 7:29 AM

This recent nuttiness between Viacom and the Sumner Redstone family can be traced back to one bad decision made more than a decade ago, media analysts at MoffettNathanson Research wrote Tuesday in a biting blog post.

“In our view, the circus at Viacom was put into motion more than 10 years ago by the ill-fated move to separate CBS and Viacom,” the firm wrote in a piece titled “Viacom – What Took So Long?” “The idea that the market was mistakenly valuing the old Viacom asset made zero sense to us at the time.”

“Furthermore, the actual separation of assets just made the idea all the more wrong,” the company continued.

After all, without CBS attached to it, Viacom channels like MTV and Comedy Central became far less valuable a few years ago — something MoffettNathanson believes was predictable (and predicted by them) — and the cable content provider even started to see itself dropped by MPVDs (Multichannel Video Programming Distributor) over sour affiliate fee negotiations.

“At this point in time, we would have thought that either the management of Viacom or Mr. Redstone would see the errors of their ways and recombine with CBS,” MoffettNathanson wrote, referring to 2013-2014. “To our surprise, that never happened.”

And that’s when Viacom’s film studio Paramount Pictures also started to suffer, the analysts pointed out. Losing Paramount TV and Showtime, the cash-eating big-screen business had no small-screen cushion to help out — a move MoffettNathanson sarcastically called “genius.”

“Oh, and Viacom had to start its own premium cable network business (Epix) after CBS dropped its Paramount output deal,” the analysts continued in its harsh-yet-humorous tone. “Reverse synergy in play.”

It then became “painfully obvious” to the research firm that it was time to sell Paramount — but chairman-at-the-time Sumner Redstone wouldn’t, and as current chairman emeritus, the 93-year-old still doesn’t want to. The Viacom Board of Directors, however, does.

“Maybe he realizes the lunacy of his asset separation and wants to make things right by recombining these assets,” MoffettNathanson suggested, spelling out a little later: “Viacom and CBS should be recombined.”

“Nothing will be solved until the pieces are put back together again,” they concluded, adding on the “bizarre” twists: “We just aren’t sure how or when that happens.”

And no one is sure who will actually be seated on that Viacom board in the near future.