How ViacomCBS’ CNET Sale Fits Into Refocus on Video

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ViacomCBS has been offloading assets it deems non-essential to its core TV, video-based business

Viacom building

Analysts at S&P Global Ratings said in a note on Tuesday that they expect ViacomCBS’s sale of tech website CNET to Red Ventures to “modestly reduce” ViacomCBS’s leverage. The move is a continuation of ViacomCBS’s recent business plan of selling off assets it views as non-essential to the future of the company’s core video business in hops of chipping away at debt. “We do not think the sale will affect the company’s size and scale because CNET is not part of its video content business,” S&P analysts wrote on Tuesday. “We expect ViacomCBS to use the proceeds to reduce its debt over time and view the sale of CNET as consistent with its stated plans to sell non-core assets to reduce its leverage.” ViacomCBS said it anticipates that the sale, which is expected to close in the fourth quarter of 2020, will provide between roughly $330 million and $350 million in net proceeds. Red Ventures’ $500 million acquisition of CNET Media Group includes multiple websites, such as Gamespot, Metacritic and Shares of Viacom have been up nearly 5% in the last five trading days, 25% in the last three months, yet down more than 28% in the year-to-date. S&P analysts said that while ViacomCBS’s debt is still high at 4x for the cost of the sale of CNET, they expect the company’s leverage to improve to about 3.5x by the end of 2020. To lower its debt obligations ViacomCBS has been working to improve its operating trends, taking cost-management actions, and in 2019 rolled off of about $600 million of programming charges. ViacomCBS has also been looking to offload its Simon & Schuster publishing unit as part of the push to focus its assets on video-based content, including the recent rebrand of CBS All Access to Paramount+. During an investor conference back in March, ViacomCBS CEO Bob Bakish said: “[It’s] not a core asset. It is not video-based. It does not have significant connection for our broader business.” In February S&P analysts revised their outlook on ViacomCBS to negative due to the company’s weaker-than-expected results and high level of debt following the long-awaited merger between Viacom and CBS. “Since that time, the economic landscape has materially deteriorated due to the COVID-19 pandemic. Despite weaker ad revenue trends, ViacomCBS has significantly reduced its costs to offset its weaker revenue and accelerated certain cost synergies from the combination of the two companies,” S&P analysts wrote. They also touted ViacomCBS’s streaming services, which have seen stronger-than-expected growth during the pandemic. ViacomCBS has, on top of that, been able to leverage its network portfolio to extend several distribution deals and add carriage fees for its cable networks to YouTube TV. “However, due to the uncertainty created by the COVID-19 pandemic, the timing of these asset sales is uncertain and will likely be delayed into 2021,” analysts wrote. “We will now look to resolve the negative outlook in 2021 when we get more clarity about the timing and amount of proceeds from the non-core asset sales, as well as the company’s ability to improve its operating trends despite the continued economic uncertainty and increasingly competitive media landscape.”


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