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Money for nothing

4 January 2016 By Jennifer Saba

Things haven’t turned out exactly as planned for Viacom. When Sumner Redstone cleaved his media empire a decade ago, it was primarily to liberate the faster-growing owner of MTV and Nickelodeon from the sleepier CBS broadcast network. Ten years hence, Viacom’s shares have barely budged while those of CBS have nearly doubled.

With a current market capitalization of about $17 billion, Viacom has bought back nearly $21 billion of stock since it started trading on Jan. 3, 2006. It hasn’t exactly found value. Viacom paid an average price of $52.06, according to annual reports, more than one-quarter higher than where the shares closed 2015.

Even after Viacom unexpectedly started paying a dividend in 2010, it has been unable to keep up with peers. The total shareholder return clocks in at just 11 percent over the decade, or about 1 percent annualized, compared to 129 percent for CBS and Time Warner’s 136 percent.

As Chief Executive Philippe Dauman engineered the finances, following a pervasive buyback trend across corporate America, the TV landscape started changing dramatically. Viacom suffered. “Jersey Shore” scored MTV’s highest ratings ever with an average 8 million viewers per episode in 2011. None of its shows since then has captured the zeitgeist similarly.

Kids network Nickelodeon has been a problem child. MoffettNathanson analysts reckon it lost more than a quarter of its most important audience during the 11-month period ending July 2015. Shows like “Paw Patrol” suggest the start of a turnaround, but there’s much work to be done. Comedy Central, meanwhile, is trying to rebuild after recently losing a collection of stars including Stephen Colbert and Jon Stewart.

Dauman, Redstone’s legally minded right-hand man, holds extra and uncommon responsibilities for a CEO. It recently came out in court documents that he will serve as Redstone’s proxy if the ailing 92-year-old can’t make his own healthcare decisions. Dauman, who took the helm at Viacom in September 2006, is also a trustee for Redstone’s business interests.

The broadcasting business is only getting tougher. Netflix and Amazon are spending heavily on original programs as a golden age of TV makes competition for viewers increasingly cutthroat, even as Viacom invests some $3 billion a year in its shows. To compete will take decidedly more creativity than Dauman has applied to the balance sheet.


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