CBS Sues Controlling Shareholder for Independence

CBS Corp. May 14 filed a lawsuit in Delaware Court of Chancery alleging breaches of fiduciary duty by majority shareholder National Amusements, which is run by Sumner Redstone and his daughter Shari Redstone.

CBS is seeking to prevent the Redstones from allegedly interfering with a special meeting of its board of directors to consider declaring a dividend of shares that would dilute the value of National Amusements’ voting rights to 17% from 80% — as is permitted under CBS’s charter.

The dividend would not dilute National Amusements’ economic interests, or any other CBS stockholder.

CBS said it took this step because it believes it is in the best interests of all its shareholders, and necessary to unlock significant stockholder value.

If consummated, the dividend would enable CBS to operate as an independent, non-controlled company and more fully evaluate strategic alternatives — including merging with Redstone-controlled Viacom.

CBS contends that without the litigation National Amusements would seek to oust its board members and/or change its bylaws — allegations National Amusements denies.

“National Amusements had absolutely no intention of replacing the CBS board or forcing a deal that was not supported by both companies,” the company said in a statement. “National Amusements’ conduct throughout supports this and reflects its commitment to a well-governed process.”

 

Paramount Posts First Quarterly Profit Since 2015

Paramount Pictures April 25 reported second-quarter (ended March 31) operating income of $9 million on revenue of $741 million. It was Paramount’s first quarterly income since Sept. 30, 2015. The studio reported a $66 million loss on revenue of $895 million during the previous-year period.

Theatrical revenue decreased 79% to $50 million, primarily due to fewer titles in the quarter and a modified release strategy that resulted in certain legacy slate titles moving from theatrical to licensing distribution. Domestic and international theatrical revenues decreased 64% and 86%, respectively.

Licensing revenue grew 37% to $477 million, primarily driven by the release of The Cloverfield Paradox on Netflix, as well as Paramount Television product, including “The Alienist.” Domestic licensing revenue increased 46% while international licensing revenue grew 31%.

“Turnaround efforts have firmly taken hold as the studio improved margins and returned to profitability. This month’s outstanding box-office performance of A Quiet Place, the first film produced and released under the new team at Paramount, is a clear sign of our progress,” Bob Bakish, CEO of parent Viacom, said in a statement.

Paramount Pictures Home Media Distribution posted revenue of $163 million, which was down 18% from revenue of $198 million last year. The home entertainment unit has generated $346 million through six months of the fiscal year, down 22% from $441 million last year.

Domestic home entertainment revenue decreased 29% while international home entertainment revenue increased 13%. Ancillary revenue decreased 54% to $51 million, with domestic and international ancillary revenue down 63% and 11%, respectively.

Overall studio revenue topped $1.2 billion through six months, down 23% from revenue of $1.65 billion through the same period last year.

 

Research: OTT Sub Households to Far Outstrip TV Sub Households in 2020

U.S. OTT subscriber households will far surpass TV subscriber households in 2020, according to new data from Convergence Research.

In five years at the current run-rate Netflix will have in the United States as many subscribers as all the the traditional TV access providers combined, according the Convergence’s Brahm Eiley. Amazon Prime at the current run rate will surpass the traditional U.S. TV access providers in terms of subscribers in three years.

However, the average revenue per unit (ARPU) for U.S. TV subscribers in 2020 will still be four times U.S. OTT subscriber households’ ARPU, down from 6 times in 2017.

Convergence has just released its annual 2018 Couch Potato Reports, “The Battle for the American Couch Potato: OTT, TV, Online” and “The Battle for the American Couch Potato: Bundling, TV, Internet, Telephone, Wireless.”

Convergence estimates that U.S. OTT access revenue (based on 55 OTT providers led by Netflix) grew 41% to $11.9 billion in 2017, forecasts $16.6 billion for 2018 and $27.6 billion for 2020.

The firm estimates 2017 U.S. cable, satellite and telco TV access (not including OTT) revenue grew 1% to $107.6 billion ($94.30 per month ARPU) in 2017, forecasts $107.4 billion ($97.90 per month ARPU) for 2018, and $106.9 billion for 2020.

In 2017, the United States saw a decline of 3.66 million TV subscribers and in 2016 a decline of 2.2 million. Convergence forecasts a decline of 3.72 million TV subs for 2018.

The firm reports that 2010 saw the start of the rise in cord cutter/never households, and as of the end of 2017 estimates 32.13 million U.S. households (or 26.1% of households) did not have a traditional TV subscription with a cable, satellite or telco TV access provider, up from 27.56 million (22.6% of households) at the end of 2016. Convergence forecasts 36.76 million (29.6% of households) will be cord cutter/never households by the end of 2018.

Meanwhile, 2017 saw U.S. residential broadband subs surpass U.S. TV subs, growing to 96.95 million. Convergence estimates 2.33 million U.S. residential broadband subs were added in 2017 (2.66 million in 2016) and revenue grew 7% to $56.8 million; the firm forecasts 2.57 million additions and 6% growth to $60.5 billion for 2018.

“The gloves are off,” commentary in the report reads. “The TV-movie Industry is being reconstructed from the inside and by the outside, as programmers now directly compete against their traditional TV access and independent OTT buyers that rival them in terms of content spend. Amazon, Apple, DAZN, Facebook, Google and Netflix all have the money muscle to finance their own productions or outbid on programming including major sporting franchises.”

Because the OTT services are acting more like studios and vying for top content, traditional content owners may fight back, the commentary reads.

“We expect especially for the U.S. market going forward fewer content deals between programmers and independent OTT providers: 2017 saw Disney choose not to renew with Netflix and embrace OTT, HBO not renew with Amazon in the U.S., Hulu (which is spending more on content on a per U.S. subscriber basis than Amazon or Netflix) continue to bolster its offerings, compete more directly against TV access providers, and A+E, AMC, Discovery, Scripps, and Viacom back supply Philo,” the firm commented. “The traditional TV ecosystem does not show decline ‘yet’ except for TV subscribers. TV access players continue to raise prices (ARPU is growing but we forecast TV access revenue decline going forward), and programmers have kept up increases in programming fees and advertising rates, but this architecture cannot last in the long run.”

Ericsson, Telefónica Partner for TV Everywhere

Ericsson has partnered with Telefónica to power the Spanish telecom’s TV Everywhere initiatives in Latin America.

As part of the three-year deal, Ericsson Media Solutions will deploy its video storage and processing platform technology to enable Telefonica to bow seven-day catch up and time-shift services for TV programing to subscribers in 13 countries in the region – including Argentina, Brazil, Chile, Colombia and Peru.

TV Everywhere services have been long championed by pay-TV operators as an antidote to third-party over-the-top video competitors such as Netflix and Amazon Prime Video.

Angel Ruiz, CEO, Ericsson Media Solutions, said service providers today are faced with huge libraries of content and HD recordings that they need to efficiently deploy as part of complex time-shifted TV services.

“This deployment will enable Telefónica to transform its service delivery by virtualizing the storage and processing capabilities of its servers ensuring that catch-up and VOD services are delivered reliably … to subscribers all over Latin America,” Ruiz said.

The deal builds on the long-standing collaborative partnership between the companies, which has lasted for more than a decade, and has already seen Ericsson technology deployed by Telefónica in Peru. Telefónica has also deployed Ericsson Media Solutions services in Spain.

Earlier this year, Telefónica announced a subscription streaming agreement with Viacom in Latin America. The global deal represented a first for Viacom with a mobile carrier to carry all its international TV channels, as well as mobile streaming apps and VOD content.

Viacom Asks CBS to Up Merger Bid

Media giant Viacom reportedly has asked CBS Corp. to increase its undisclosed merger bid by $2.8 billion. CBS previously offered an amount (reportedly $11.9 billion) below Viacom’s market capitalization value, according to CNBC, which cited sources familiar with the proceedings.

Viacom, which includes Paramount Pictures and Paramount Home Media Distribution, is majority owned by National Amusements – the corporate shell run by Sumner Redstone and his daughter Shari Redstone that controls Viacom and CBS.

Viacom spun off CBS in 2006 with Les Moonves assuming control of the publicly traded company.

With ongoing media consolidation industrywide, Shari Redstone seeks to consolidate the two companies, putting Moonves in charge. Redstone, however, wants Bob Bakish, current CEO of Viacom, to be president/COO of a combined Viacom/CBS, while Moonves prefers that position go to Joseph Ianiello, current COO at CBS.

Separately, CBS nominated Richard Parsons, the 70-year-old former CEO of Time Warner, to its board of directors. Parsons, who was replaced by Jeff Bewkes in 2008, was an earlier supporter of releasing movies digitally day-and-date with their packaged media debut – a move criticized at the time by video stores seeking exclusivity.

Parsons then enflamed the situation when, in a fiscal call, he said it would be a “cold day in hell” before leaving his Manhattan apartment to go to a video store. His comments came as Warner Home Video ranked #1 in domestic home video disc sales, with an industry-leading 20.2% market share.

 

CBS/Viacom Merger Caught Up in Management Roles

Ongoing talks regarding the possible merger of CBS Inc. and former corporate parent Viacom isn’t revolving around price or who would head both companies. That would be CBS CEO Les Moonves. Instead, the multibillion dollar deal is reportedly hung up by who would be Moonves’ second-in-command, among other management decisions.

CNBC reported that Moonves is eyeing CBS COO Joe Ianniello, while Shari Redstone, who controls majority shares of Viacom, wants Viacom CEO Bob Bakish assuming the role.

Moonves contends that if the Viacom board of directors wants him to lead the combined companies, he has the right to name his management team. Shari Redstone believes otherwise.

“[The acquisition price] is not actually going to be the key issue whether or not these talks succeed in reaching a deal,” said David Faber, host of CNBC’s “The Faber Report”.

Ianniello, who was recently promoted to the COO position from CFO, has been with CBS since the media company separated from Viacom in 2005. He typically backs up Moonves on fiscal calls.

Bakish, who replaced Philippe Dauman in 2016 as CEO of Viacom, formerly headed Viacom International Media Networks. He has been with the company since 1997.

“So, we are setting up, it would seem, for a potential debate and/or clash between Shari Redstone and Les Moonves about what the reporting structure in the new company will be,” Faber said.

Indeed, as controlling shareholder at Viacom (including Paramount Pictures), Redstone has the right to replace the board or even Moonves, according to Faber.

In addition, both Bakish and Ianniello have clauses in their employment contracts that call for significant financial compensation in the event of a change in ownership of either company. For Ianniello, that reportedly would be $70 million should he not get the No. 2 position in a combined CBS/Viacom.

Analysts contend cost synergies in the merger would range from $500 million to $750 million.

Viacom Inks Deal With Production Company Led by ‘Daily Show’s’ Trevor Noah

Viacom Inc. March 26 announced a strategic partnership with Day Zero Productions, an international production and distribution company led by Trevor Noah, host of Comedy Central’s “The Daily Show with Trevor Noah.”

Under the long-term deal, Viacom will have exclusive “first look” rights on all projects developed by Noah and Day Zero Productions in all media, including television, feature films, digital and short-form video content. Viacom will also make an investment in Day Zero.

“I’ve found a strong and incredibly valuable partnership in Viacom,” said Noah in a statement. “Our shared vision of bringing diverse cultural conversations and exciting creative projects to the forefront of the entertainment industry and to our constantly expanding audience, continues to strengthen our relationship. I couldn’t be more excited to share ‘Born a Crime’ with Paramount and the very talented Lupita Nyong’o.”

“Working with the best, most versatile talent in the entertainment industry is a strategic priority for Viacom, which is why we are thrilled to expand our relationship with Trevor and his creative team at Day Zero with this cross-house partnership,” said Viacom president and CEO Bob Bakish in a statement. “Trevor’s creative sensibilities and ability to drive the cultural conversation around issues that matter to our young, global audiences make him an ideal partner for Viacom across every screen we serve. We are particularly proud that ‘Born a Crime’ will be produced and distributed by Paramount.”

Financial terms of the transaction were not disclosed.

As part of the expanded relationship, Paramount Players will adapt as a feature film Noah’s memoir, Born a Crime: Stories from a South African Childhood, to which Academy Award-winner Lupita Nyong’o is attached to star as Trevor’s mother, Patricia. Noah will produce the project through his Day Zero Productions alongside Norman Aladjem, Derek Van Pelt and Sanaz Yamin of Mainstay Entertainment, and Nyong’o through her Eba Productions. South African born Liesl Tommy, who earned a Tony nomination for her work directing Nyong’o in the play Eclipsed, will direct the film.

“The degree to which people underestimated Trevor as he took over ‘The Daily Show’ has made his success all the more meaningful,” said Kent Alterman, president of Comedy Central, in a statement. “Seeing audiences on multiple platforms embrace his incredible comedy chops, his thoughtful and nuanced point of view, and his global perspective has been gratifying beyond measure. Trevor has limitless curiosity, vision and passion. He is just getting started.”

Viacom CEO: ‘Our Brands Coming to Mobile’ in the U.S.

Look for Viacom and its key brands – Paramount Pictures, MTV, Nickelodeon, Comedy Central and BET – to go increasingly mobile in the United States.

Speaking at the Morgan Stanley Technology, Media & Telecom confab in San Francisco, CEO Bob Bakish said recently announced moves partnering with Spain’s Telefónica making Viacom’s brands available on the telecom’s Movistar Play platform, underscored a need to “export” that strategy in the United States.

“We’re also in a very interesting conversation here in the U.S. right now about bringing our brands to mobile, and I believe that will happen in 2018,” Bakish said.

The executive said the year revolves around growing margins in established businesses, new distribution channels as well as improving synergies among internal brands through consumer products, live-events and incremental studio opportunities.

“We see a clear path toward top-line growth,” Bakish said, adding he expects Paramount growth to materialize in 2019.

The executive said Paramount is transforming from an underleveraged “fiscal mess” in 2016 that “ate over” $1 billion in cash, to a unit with a content library growing more than $300 million in value annually.

Half the studio’s release slate will be franchise sequels, with the remaining branded around Nickelodeon.

Viacom in January rolled of the Paramount Network (formerly Spike TV), an ad-supported service distributing original (“Waco” miniseries, starring Taylor Kitsch as cult leader David Koresh) and catalog content.

Future original series include, “Yellowstone,” starring Kevin Costner; “American Woman,” a single-camera comedy set in the 1970s amid the sexual revolution and the rise of feminism, starring Alicia Silverstone and Mena Suvari; and “Heathers” an hour-long pitch-black comedy anthology set in the present day, based on the 1988 cult classic film of the same name.

“[Paramount] is an iconic brand, known all around the world. It’s on a clear path to return to profitability,” Bakish said.

 

 

NBC Universal Cutting TV Commercials 20%

In an era of ad-free subscription streaming video, NBC Universal Feb. 28 announced it would air 20% fewer commercials during original primetime programing – decreasing overall ad-time by 10% this fall.

The company is launching/marketing a new 60 second contextually-programmed “prime pod” in the first or last break of a show to two advertisers for stronger impact with viewers.

“Sometimes, a little bit less means a whole lot more,” Linda Yaccarino, chairman, advertising and client partnerships, NBC Universal, said in a statement. “We need to make the [TV] experience better for viewers.”

NBC isn’t alone. Turner and Viacom are experimenting with fewer ads across all of its networks.

Over the past five years, the video viewing environment has become more cluttered with more than 400,000 ads, according to Nielsen. As consumer behavior has shifted and viewers have migrated to other platforms, mass TV advertising effectiveness has waned.

As a result, NBC Universal is making reductions in more than 50 Primetime original shows across its entire portfolio. It will also unveil a suite of new ad products, including “interactive picture in picture,” and “social commercials,” and “social first pods.”

The new ad formats were experimented with during NBC’s telecast of the Winter Olympics in South Korea.

NBC contends contextually targeted ads fuel greater consumer conversion and will use a new artificial intelligence (AI)-based content targeting product that comb through scripts and data sources to make every ad that much more relevant to its audience.

“In TV now, what’s largely done is we don’t program our pods the way we program our networks,” Yaccarino told AdAge.com. “This is a wholesale effort to stop doing that and start programming our pods in a way that marry advertisers creative with our originals.”

 

Nick Jr. App Bows Internationally

Nickelodeon Feb. 21 announced the international launch of Nick Jr. Play, interactive app that enables parents of preschool-age children access to Nick Jr. shows, games and music on portable devices.

Since the domestic launch of the Nick Jr. app in 2014, the platform has generated more than 16 million downloads to date. Foreign expansion begins in the U.K. and Denmark, with additional markets to follow.

Nick Jr. Play is available on iOS and Android, with multi-language support.

Content includes access to full TV episodes, educational games, and original videos. Users can explore with easy-to-use swiping and tapping. Available videos and games include content from the network, including “PAW Patrol,” “Nella The Princess Knight,” “Dora the Explorer,” and “Bubble Guppies,” among others.

Nick Jr. Play is the latest addition to Viacom Play Plex, a suite of apps for each of Viacom’s international brands, which include Nick Play, MTV Play, Comedy Central Play and BET Play.

“Nick Jr. Play combines programming with interactive play that families can do together from the comfort of home,” Kate Sils, VP multiplatform and brand engagement, Nickelodeon International, said in a statement.

In Denmark, Nick Jr. Play will be available through a partnership with YouSee and available via YouSee’s advantage program for mobile, TV and broadband subscribers. The Danish launch offering will also include Nickelodeon Play.