ViacomCBS/media: pipe up

Investing

When Sumner Redstone passed away, ViacomCBS, the media empire he carefully curated, had an enterprise value of roughly $40bn. Included in the colossus: the CBS broadcast network, film studio Paramount, book publisher Simon & Schuster and cable networks MTV and Comedy Central. Together it contains some of the most successful creative minds in the world.

Meanwhile, user-generated content on smartphone app TikTok has been talked up at a potential $50bn valuation. Instead of movies, publishing and TV, TikTok features teens lip-syncing and dancing for free. User-generated content on Facebook, Twitter and YouTube is also thriving. The likes of ViacomCBS and other legacy media known for high quality and high costs seem to be become less relevant every year.

ViacomCBS shares are down 30 per cent this year. Shares in rival Fox have dipped about the same. Advertising revenue across traditional broadcast and cable networks fell more than 25 per cent in the second quarter, according to research firm MoffettNathanson, as marketers have pulled back spending. Some companies, including ViacomCBS, have tried to pivot to streaming services. High start-up costs and a crowded field dominated by Netflix suggest their prospects are dim.

Consumers still want quality programmes. They just have too many other outlets to choose from. AT&T spent $85bn to buy legacy media company Time Warner. Even with its lustrous network HBO, it has so far failed to break through. AT&T shares are down 23 per cent this year.

Staying out of the content wars and remaining a profitable if dull toll-collector could be the wisest move. Charter Communications, the cable TV and broadband goliath assembled by John Malone, has seen its shares rise 22 per cent this year to hit an enterprise value of $210bn. Cancellation of cable television subscriptions continues but it has managed to keep selling broadband internet to Americans stuck at home. In the second quarter, it added more than 800,000 new internet subscribers — nearly four times the level last year. The winner among legacy media titans could be the dumb pipes.

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