Industry Analysis Case Study

The Viacom Split: Is it the Right Solution?

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Abstract:
Viacom, the media conglomerate, has had a history of splitting into two units and remerging as one entity. In 1999 they became one, but in 2005, the Viacom Board decided to again divide the company. The split was structured in such a way that the existing company (Viacom) changed its name to CBS Corporation, while the new Viacom was a freshly founded spin-off company. The new CBS Corporation was actually the same company (Viacom) that was founded in 1986. The 1986 Viacom, in turn, was the successor to a previous company also known as Viacom and founded in 1971.

Industry watchers wondered about the advantages of the split. Founder Sumner Redstone had justified it stating emphatically that the days of the big conglomerates were over. The future would be interesting to see. Would the two companies evolve and grow into individual behemoths? Or would they again come together and become a single entity?

The case traces the history of Viacom from 1971 when the television syndication division of CBS Films was renamed VIACOM, from Video and Audio Communications. It highlights the acquisitions made over the years to expand operations and increase revenues, the entry of Sumner Redstone in 1986 when National Amusements bought over and reincorporated Viacom, the merger with CBS Corporation in 1999, and the separation into two companies again in January, 2006.

The case also discusses investors’ apprehensions, the observations of analysts and industry watchers, the views of the Redstone family, the process of consolidation and growth, and the future of the two companies.

Pedagogical Objectives:

• To study and analyse why the Viacom group merged and split over the years especially from 1970 onwards
• To enumerate and understand the pros and cons of division and re-merger, and the likely future progress of the two companies.

Keywords : VIACOM; CBS Corporation; Split; Spin-off; Division; Stock price; Industry Analysis Case Study; Investors; Debt-burden; Strategy; Sumner Redstone; MTV; Networks; Paramount; Digital; Distribution; Consolidation; Growth