Viacom’s New CEO Pursues Turnaround With CBS Out of the Picture

(Bloomberg) -- When Viacom Inc. named Bob Bakish acting chief executive officer on Halloween, it seemed like he’d be gone as quick as you could say boo. Instead, Viacom’s third CEO in four months is settling in.

Viacom named the 52-year-old former head of its international operation as full-time chief Monday -- handing him the tough job of turning around the company’s domestic TV business, including Comedy Central and Spike, and its money-losing Paramount Pictures.

Viacom’s New CEO Pursues Turnaround With CBS Out of the Picture

The appointment frees Bakish to pursue a strategy he articulated on the company’s last earnings call and to investors last week -- working to boost ratings at Viacom’s core TV networks, making its channels more widely available online and improving the finances at Paramount. His appointment follows the announcement earlier Monday that Shari and Sumner Redstone, who control Viacom and CBS Corp., would no longer pursue a merger of the two New York-based media giants companies. 

“I am very excited by the strategy Viacom is pursuing under Bob’s leadership,” Shari Redstone said in a statement. “While there is much work to do, I firmly believe that Viacom has a bright future.”

Not everyone shares that excitement. Viacom has been battling declining viewership at several of its U.S. cable channels networks, including BET, Comedy Central, MTV and Spike, as more young people turn to online options like Netflix and YouTube for entertainment. While two networks, Nick at Nite and Nick Jr., have shown gains in the new TV season, domestic advertising sales at the company have sunk for more than two years.

Deal or No Deal

“Viacom could struggle without a deal,” Barton Crockett, an analyst with FBR & Co., wrote in a research note Monday. “Nobody was better positioned than CBS to get an attractive price for Viacom, given the process that excluded competitive bidders and was supported by the controlling shareholder.” He has a neutral rating on the shares.

Bakish has said he’s got plans to address the company’s problems while continuing to build up the international business. Viacom shares fell 9.4 percent to $34.99 in New York after the Redstones announced their plan to end merger talks. The stock is near the multiyear low of $30.11 touched in February. It traded as high as $89.76 in July 2014.

In one of his first moves, Bakish named Tom Gorke to head distribution for Viacom’s cable networks, some of which have been dropped by some pay-TV providers, including Cable One, and left off new, low-cost Internet-based TV systems, such as Dish Network’s Sling TV and Sony Corp.’s PlayStation Vue. That followed the company’s earlier appointment of Chris McCarthy, who delivered higher audience ratings at the VH1 and Logo TV channels, to oversee those networks and the much-larger MTV business.

Budget Help

Wade Davis, Viacom’s chief financial officer, was dispatched to Paramount Pictures in Hollywood, where he’s been spending half his time helping Chairman Brad Grey on matters such as film financing at the studio, which lost $445 million last year.

“Paramount clearly is in a low point of its performance,” Bakish said at the UBS Global Media & Communications conference Dec. 5. “There’s a lot of potential in that business.”

Some analysts suggest the end of the CBS merger talks could spur Bakish to revive plans to sell all or part of Paramount, a business that could be worth $8 billion. 

“We would become more positive on VIA stock if the company were to decide to bring in a strategic investor in Paramount at an attractive price,” Alan Gould, an analyst at Brean Capital LLC, said in a note.

That’s unlikely, however. It was longtime CEO Philippe Dauman’s plan to sell a stake in the studio, along with the decline in Viacom’s domestic TV business, that led the Redstones to oust him in a boardroom coup earlier this year.

A business school graduate who joined Viacom from consulting firm Booz Allen & Hamilton, Bakish has run Viacom’s international business for the past decade and has been with the company since 1997.

While Viacom’s U.S. TV networks lost viewers to Netflix and YouTube, Bakish expanded the company’s footprint outside the U.S. He created the Paramount Channel, which offers movies and TV shows in Europe, Latin America and Russia, and introduced the cable network Spike to new markets. In fiscal 2016, international ad sales grew 9 percent in local currencies.

He also built up the company’s TV business in India and helped orchestrate the acquisition of U.K. broadcaster Channel 5 and Argentine network Telefe.

Since he took over on an interim basis, Bakish has helped convince Shari Redstone, Viacom’s vice chairman, that the company would be able to grow and increase its valuation as an independent company, especially with further investment overseas.

Mario Gabelli, whose funds collectively hold the second-largest stake in Viacom’s voting shares, after the Redstones, thinks Bakish is making the right moves.

‘He’s got very practical plans for building back the business,” Gabelli said in an interview. “He’s made changes. He’s gonna make a lot more.”