Viacom CEO Vows To Make Company More Focused And Forward-Looking

Viacom CEO Bob Bakish told Wall Street analysts that the new strategic plan unveiled this morning is designed to meet four needs: to make the company more focused, more distinct, to unlock “the benefits of our scale,” and to “be more adaptable.”

Investors liked what they heard, including this AM’s stronger-than-expected financial report for the last three months of 2016: Viacom shares are up close to 7% in morning trading.

CFO Wade Davis said that “from a financial perspective, you can expect to see strong growth in the second half of the year” as changes are “reflected in the financial performance” with profit margins improving in Q4.

That won’t include a lot of one-time boosts from content sales to subscription VOD services such as Netflix or Amazon — which some analysts say have undermined the much bigger returns from ad-supported pay TV channels.

“SVOD is not going to be a significant part of our affiliate revenue as it has been in the past,” Davis says.

One of the most important initiatives is the plan to develop co-productions between the Paramount movie studio and Viacom’s six newly designated core, flagship brands: Nickelodeon, Nick Jr., BET, Comedy Central, MTV, and Paramount — with Spike rebranded as a general entertainment service: The Paramount Network.

Each of the TV brands will develop one-to-two co-branded movies per year.

Bakish says his plan to create six flagship networks should present to distributors “the strongest entertainment pack” that they will deem as a must-have.

“You have pre-school, kids, young adults, comedy, African Americans, and you’re going to have a marquee general entertainment network. That’s a very significant cornerstone. Ultimately the market will embrace that.”

While declining to name a distributor who might first pick up such a pack — perhaps for a non-sports entertainment tier — he says that there’s “activity” in the market.

With the tighter alignment, execs plan to hit the upfront ad sales market with “the most comprehensive, cross-portfolio package Viacom has ever offered: a product we call ‘Epic’ that spans nine networks, 20 tentpoles, and 60 returning series.”

The networks also will develop more original and live programs, as well as short-form content. “Nickelodeon is already well established in this model, and MTV is moving quickly,” Bakish says.

MTV’s scripted programming “didn’t really work,” he says, although it won’t go away. The network will shift toward “a better balance” favoring reality shows, music, and live.

MTV’s recent decision to pick up reruns of the sitcom Friends “is working well,” and serves as “a bridge strategy.”

“We needed to reset MTV in a variety of ways” and the show gives it “time to implement a new slate of shows” that will be ready to air this summer.

Viacom also plans to become more deeply involved in live events. For example, this summer Comedy Central will partner with marketing and event company Superfly — which produces the Bonnaroo Music and Arts Festival.

“This is a big opportunity for Comedy Central to grow its standing as the dominant comedy brand in the U.S.,” Bakish says.

It also will help the TV networks to do “a better job of keeping home grown talent in the Viacom ecosystem” — an obvious reference to the company’s loss of Comedy Central stars including Jon Stewart, Stephen Colbert, John Oliver, and Samantha Bee.

That won’t happen with The Daily Show‘s Trevor Noah. “We’re collaborating across our portfolio to drive greater growth for Trevor,” Bakish says.

The non-core channels such as VH1, TV Land, Logo, and CMT  “will not go away.” But they “are not global prospects; they are not film prospects.” As a result, they “won’t benefit from an increased resource commitment” and have been “realigned within our organization to to reinforce the flagship six.”

At the end of the day “there won’t be an increase in spending” for networks, Bakish says. But the effort to rebrand Spike means that it “will benefit from an increased commitment of resources within Media Networks.”

The Viacom chief says he checked with some large pay TV distributors about the Spike rebranding, and was assured that they’d have “no issues” with the change in focus triggering breach of contract complaints.

Meanwhile, he hopes that as The Paramount Network it will better appeal to advertisers who want to reach adults. “That’s an important growth driver” for the company.

Advertisers pre-briefed on Viacom’s plans gave “very positive feedback,” Bakish says.

The CEO called the Paramount studio’s recent financial performance a “significant disappointment,” after offering it a “well-deserved word of congratulations” for its 18 Oscar nominations.

But he talked up the recent deal with Shanghai Film Group Corp and Beijing-based Huahua Media for those companies to put up as much as $1 billion to fund 25% or more of the studio’s entire film slate for the next three years, with an option for a fourth.

“They did not buy a set of markets” such as China, he says. “This is selling a 25% interest in the slate” with a few unnamed exceptions.

Turnarounds in film “can take some time,” he noted. But broadly he vowed to deliver “a steady march toward progress” at the company.

The company anticipates a $1 billion improvement in the studio’s free cash flow this year.

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