[opendtv] As Viacom's Paramount Looks For Partner It May Be Bought Out
- From: Craig Birkmaier <craig@xxxxxxxxx>
- To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
- Date: Wed, 1 Jul 2009 07:31:55 -0400
http://www.marketwatch.com/story/as-viacoms-via-paramount-looks-for-partner-it-may-be-bought-out
Jul 1, 2009, 6:07 a.m. EST
As Viacom's Paramount Looks For Partner It May Be Bought Out
By 24/7 Wall St.
The DVD business is bad. Video-on-demand, available on most cable
systems, and internet streaming of premium content have cut into one
of the largest profit centers in Hollywood.
Viacom's Paramount studio operation is looking for a partner for its
home entertainment unit, which produces and sells DVDs, in the hope
of cutting costs. The most logical marriage of that business would be
to another studio which faces that same problem with eroding margins.
According to the FT, Viacom "is in advanced talks with Sony Pictures
and News Corporation's Fox studio, signaling that Hollywood could
soon see a wave of consolidation." The conversations are not likely
to end with the subject of back office savings given the state of the
global premium entertainment industry.
Profits at large media companies including Viacom, News Corp, CBS,
and the entertainment and news operations at GE are getting worse
almost every year. Content offerings that the firms used to be able
to make a profit on from advertising and subscriptions are faltering.
Print and broadcast marketing revenues are being hurt by online
availability of content and the recession. Movie budgets are up.
Theater sales are still strong, but DVD sales are not. Shows that
used to support CBS, ABC, and NBC are now shown on internet services
like Hulu where the income from advertising is less than it was from
traditional broadcast sales.
Sony's core electronics business is in deep trouble. It has not had a
hit like the Apple iPhone or iPod in years. Its digital cameras and
flat screen TVs are commodities. Its studio has no relationship to
the rest of the company. It needs to sell it off or merge it with the
film business of one of its peers. Viacom's earnings have been
weakened by the economy. Its shares are down 40% over the last two
years. The controlling shareholder of the company, Sumner Redstone,
is anxious to keep his fortune. His other large investment, in CBS,
is down 80% over that last 24 months. He has plenty of incentives to
dump his studio or consolidate it with a competitor to improve
margins or raise cash.
Studios will go beyond combining DVD operations. It can't afford not to.
Douglas A. McIntyre
This blog is reprinted by permission from 24/7 Wall St, © 2007 24/7
Wall St., LLC All rights reserved.
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