Viacom shows signs of life, 8 months after meltdown

After years of struggling with ratings, revenues and distribution, Viacom is showing signs of life again. The company beat Wall Street’s dire expectations on revenue and earnings for Q2, but the company is still suffering advertising revenue declines – as are most of the other networks. And while ratings dips continue to plague most pay TV networks, two of Viacom’s strongest channels, Nickelodeon and MTV, have both seen some ratings rebounds recently.

The signs of new growth were enough to spur Barclays analyst Kannan Venkateshwar to give accolades to the company: “Turning around ratings in media companies in itself tends to take a long time, but doing so in the midst of secular shifts and in a demographic that is moving the fastest away from TV, is even more challenging,” Venkateshwar said in a research note. “There is likely to be a lag in the ratings improvement showing up in numbers. However, if sustained, these trends could help Viacom multiples recover some of the gap relative to peers.”

Recently appointed Viacom CEO Bob Bakish has spent his short tenure looking for ways to bring Viacom back to life. Bakish is hoping to revitalize the company by revamping Viacom’s TV offerings around six core brands: Comedy Central, MTV, BET, Nickelodeon and Nick Jr, and a new channel called Paramount Network. The other, non-core channels, like VH1 and TV Land, will remain on air, for now, but we wouldn’t be surprised to see some of that fat trimmed. Bakish also sold off Viacom’s share of Epix for $600 million.

Part of Bakish’s strategy has been to return the likes of MTV to more unscripted reality shows and music videos, after its brief sojourn in pricey scripted series territory. The show TRL will return, as will My Super Sweet 16 and MTV has a new, upbeat reality show called Promposals, documenting different and elaborate prom proposals. There’s emphasis on “upbeat”.

Speaking at the JP Morgan Global Technology, Media and Telecom conference earlier this year, Bakish said, “It’s not going to be dark. It’s going to be upbeat, because research says that’s what people need. You can think about your day-to-day life and the news you’re watching. Upbeat will be a good thing. MTV will be a positive force.” Overall, there will be 11 new series on MTV that’ll premiere during the fall season.

Paramount Network will take the place of the fallen Spike TV, whose primetime ratings plunged 13% in 2016. That move is more astute than at first glance: Bakish wants to leverage some of the content producing prowess of Paramount for TV.

Paramount has produced a handful of series, including Netflix’s original show 13 Reasons Why, a teen-focused scripted drama. So while Bakish has removed all of the pricey, scripted shows from MTV, he wants Paramount to become Viacom’s premium channel a la Showtime for CBS, or HBO for Time Warner, along with tentpole films from both Paramount Pictures and other studios. New series for the network include American Woman, starring Clueless star Alicia Silverstone, and Yellowstone, starring Kevin Costner.

It’s an ambitious plan, and one that comes at a moment of too much premium, must-see scripted TV shows. Other networks that ventured into premium scripted series have since cut back after overextending themselves financially, with no ratings bumps to justify the costs of the programming. And it doesn’t help that Paramount Pictures’ poor performance over the past few quarters has contributed to Viacom’s decline.

As for BET, Viacom recently announced signing an exclusive partnership with Tyler Perry, set to take effect in 2019, when Perry’s contract with the Oprah Winfrey-owned OWN network will expire. It’s a big content win for Viacom, and will see new Perry-produced series appearing across Viacom’s channels, and includes film projects.

Bakish has promised that the overall push of his new strategy will revolve around re-positioning these channels to thrive, or at least survive, in the digital streaming world. But his strategy doesn’t seem all that sound. Bakish has said he wants to build the company’s digital presence by creating short-form video. In today’s media landscape, the short-form strategy falls flat without the magic word “mobile” thrown in front of it.

As far as mobile video goes, Viacom’s content mix, which spans comedy, music and cartoons, should perform well. Viacom’s deal with Perry also includes short-form series for digital distribution.

And while logic dictates that a company that is focused on the younger demographics that don’t watch very much linear TV would want to expand its streaming presence, Bakish has instead indicated he wants to improve relations with the traditional distributors, while being selective about Internet streaming partners.

Relations with both legacy and streaming distributors have certainly soured. Charter Communications recently removed Viacom’s channels from its basic bundle, which prompted threats of legal action from Viacom; and in 2014, a whopping 60 smaller cablecos, including Suddenlink and Cable One, dropped Viacom channels altogether. Internet TV provider Sony announced earlier this year it was dropping Viacom from its PlayStation Vue service. AT&T, meanwhile, brought only the best performing Viacom channels into its DirecTV Now offering. Viacom is currently also available on Sling TV.

But Viacom’s core demographic for channels like MTV and Nickelodeon is without a doubt part of the YouTube generation, and spends a lot of time on platforms like Facebook, Instagram and Snapchat, watching videos. So far, Bakish hasn’t set out any clear plans for engaging with these viewers on those platforms. As an aside, Viacom made some headway last year with Snapchat, thanks in part to efforts from Jeff Lucas, who served as the company’s ad sales chief. Lucas has since left Viacom to join Snapchat.

Bakish has said in the past he’s optimistic that the company can be part of an entertainment-only skinny bundle sometime in the future. Though, it should be noted that the first no-sports bundle to come to life, being tested now by Charter Communications, doesn’t at this point include any Viacom channels.
There are two keys to Viacom’s future: formats, and distribution. Both need to be anchored firmly in the present with a face towards the future. Neither should be pinned to the incorrect idea that Viacom’s traditional pay TV business can somehow be magically restored.