Viacom and CBS today announced that they will merge in a deal worth $36.75 billion, one of the biggest media mergers ever.
But the two media giants have gone about their online strategies very differently to date, making the marriage of the two potentially complicated.
Executives from both companies stressed that the Internet will be important to the combined company, though they did not detail how they plan to integrate the two firms' Internet assets.
"For us, the Internet is not an add-on--it's a major, giant new growth business," Viacom chief executive Sumner Redstone, who also will be chief executive and chairman of the new company, said during a press conference. "That strategy is enhanced when you marry our Internet strategy into their Internet strategy."
Viacom, for its part, has concentrated on building on its offline media brands, such as MTV, VH1, Nickelodeon, and Blockbuster, among others. Last month, as expected, the company formed an Internet music division dubbed MTV Interactive, which will incorporate MTV.com, VH1.com, and SonicNet, along with technology from Imagine Radio, which Viacom acquired in February and has been building upon under an initiative it called the "Buggles Project."
It also has been working on a hub site for children, which will incorporate its Nickelodeon, SimonSaysKids.com, and Noggin properties, among others. The site is code-named Project Nozzle and is scheduled to launch during the fall, the company has said. It plans to spin off both interests.
CBS, on the other hand, has been busy taking minority stakes in a host of Internet companies, including Big Entertainment, Jobs.com, SportsLine, Rx.com, and MarketWatch, among others.
|Viacom properties||CBS holdings|
MTV Interactive: Includes
MTV.com, VHI.com, and SonicNet, plus personalization technology from
"Project Nozzle": Code name for children's hub site. Includes Nickelodeon, Noggin, SimonSaysKids.com, and NickJr.com.
Stake in RioPort, which builds hardware and designs software for music downloading and also operates RioPort.com, a download and information site.
Big Entertainment (30%)
ThirdAge Media (30%)
CBS also has said it plans to take its Net properties public.
In addition, CBS has tried a few strategies for its CBS.com site. It began by trying to differentiate its online news offering from other network TV sites by focusing on localized content. But it has moved away from that effort; now CBS.com resembles other network sites and portals, with content and information about the company's news, sports, and entertainment programming.
Some analysts say the key to success will be centralized leadership. Jordan Rohan, an equity analyst for Wit Capital, said the merger will not derail IPO plans for MTV Interactive and CBS's Internet operations. Instead, it could mean more executive attention will be focused on spinning off those properties.
Rohan added that the merger opens the door for a huge opportunity for Viacom and CBS in distributing music online.
"Ultimately, this company is best positioned to market, promote, and distribute music," he said, noting that the combined company can fuse MTV Interactive with CBS's television, radio and outdoor promotion to drive online music sales.
But some analysts think combining Internet assets into one potential stock spin-off would make more sense than trying to manage two equities. A single Internet division combining all of the new company's sites would create a stronger company than one focusing on a specific market segment, such as music, sports, or financial news, analysts said.
"They're just going to combine them and make [Viacom] bigger and better," said Mark Mooradian, analyst at Jupiter Communications.
CBS chief executive Mel Karmazin added during the press conference that he expects Internet companies hungry for branding to rely even more heavily on broadcast stations to market their services.
"Companies are going public for the purpose of marketing and branding, and they are spending that money with us," he said. "We believe that branding will be even more important into the year 2000 that we want to position assets at Infinity, and at CBS, and Viacom to take advantage of that."
News.com's Beth Lipton contributed to this report.