Stepping back into the spotlight, Viacom execs banged the drums for the progress they have made in turning around the legacy media company even as intrigue swirls about its past, present and future relationship with CBS.
Ending a relatively quiet summer dominated by it former corporate sibling CBS due to the investigation of conduct by CEO Les Moonves, CEO Bob Bakish turned the quarterly earnings call into a one-hour sales pitch. Wall Street seemed to buy in, boosting the company’s shares above the $30 mark for the first time in a month. On a day of broad gains for stocks, Viacom was up 6% to $30.33 midway through the trading day.
“We think there’s a clear and demonstrable fact set that this company is making material progress in a whole set of areas,” Bakish said. “At the same time, we totally agree that the company is currently undervalued by the public marketplace. We’re not going to comment on any specific M&A related to Viacom. We’re focused on operating the company and continuing to move the ball down the field.”
Bakish, a longtime company veteran, has been in the CEO role for nearly two years. He succeeded Philippe Dauman, who was ousted amid a welter of palace intrigue and legal fights with chairman emeritus Sumner Redstone. Bakish, a favorite of Shari Redstone, Sumner’s daughter and the head of Viacom and CBS controlling shareholder National Amusements, has faced one of the most challenging tasks in the media business.
The Viacom chief is setting out to rebuild a company whose young-skewing networks have seen significant ratings erosion as young audiences gravitate to YouTube, streaming services and social networks. Viacom’s previous management team, including Dauman and late Paramount Pictures boss Brad Grey, also made strategic choices that starved the company of resources at a critical inflection point for traditional media in its battle against digital.
While Bakish and CFO Wade Davis reeled off enough stats to fill a 20-page slide deck about the current quarter, they reserved most of their optimism for 2019. Paramount’s release slate will double and the international outlook will improve, the company said. A slump in advertising hampered the quarter’s results, but Bakish relentlessly turned attention to quarters to come. Internationally, he conceded, “we did see some slowdown, but that was overwhelmingly due to currency.”
Affiliate sales — a critical area of importance that suffered under Dauman’s iron-fist negotiating style — have rebounded as new carriage deals have been implemented with Altice and other MVPDs. “We had to manage through the implementation of a new affiliate strategy,” Bakish said. “We broadened what we were doing to include advanced advertising and co-production as we simultaneously got a number of our brands healthier.”
Analysts greeted the latest round of upbeat optimism with a degree of skepticism. “We think focusing on a smaller core set of flagship entertainment brands (BET, Comedy Central, MTV, Nickelodeon, Nick Jr., and Paramount) makes sense particularly as the pay TV market continues to evolve,” wrote Doug Creutz, an analyst at Cowen & Co, in a research note. “However, execution on strategy remains very important, and the overall secular problems facing TV in general appear amplified in Viacom’s case due to the youth of their audience. We think any potential recombination with CBS will remain off the table at least until CBS/NAI litigation is resolved (trial is set for early October).”