Viacom CEO Bob Bakish; Kevin Mazur/WireImage
Viacom is mostly focused on its current businesses and growing them organically, Chief Executive Officer Bob Bakish said Tuesday, with possible acquisitions likely to be smaller deals that can help it with that strategy.
"There is tremendous value to unlock from these assets" Viacom owns, he said when asked at the 45th annual UBS Global Media and Communications Conference in New York about all the recent industry deal chatter and his interest in acquisitions. "Our overwhelming focus...is on organic execution." Bakish added: "We will look at small opportunities that we can tuck in to use to accelerate our growth strategy."
The Viacom CEO spent much time Tuesday discussing his focus over the past year on stabilizing Viacom's business after becoming interim and then permanent CEO late last year and what is next for the company. "I feel very good about the progress we made," he said, emphasizing that "obviously, we are not done." As the company looks to 2018, he reiterated, management would focus on accelerating business momentum and highlighting the true value of the business.
"This thing is a significant cash machine," he said about the company and its $1.5 billion-$1.7 billion in annual cash flow, adding that "this continues to be an extremely undervalued company." In that context, he cited a $500 million India business that Viacom owns half of and that it doesn't get "any value recognition for." He added that the Paramount studio is also "clearly worth billions and billions of dollars" despite currently having "diminutive" profits.
He said the company has focused on bringing its flagship brands to life more, improving U.S. advertising trends, strengthening distribution relationships and rebuilding Paramount, and the company is continuing to see the benefits.
"The Hollywood community wants to be at Paramount," which is "a very good thing" for a creative company, Bakish said in lauding the early turnaround momentum of the studio under the leadership of Jim Gianopulos.
The Viacom CEO said 2019 will see Paramount get a chance to show off its exciting new slate, including branded MTV, Nickelodeon and BET films, adding that the studio also has an "under-recognized" TV production business, which is key to dampening the volatility of the film business. "There is a lot of great stuff going on" at the studio, he said, predicting improving profitability as "Jim is running the studio better" and there is room for better film performances and cost savings. "I am tremendously excited about what the team is doing."
Asked to go deeper on the TV production business outlook, he said it has already reached about $200 million in annual revenue and "probably doubles from there" as the company continues to look to grow it.
Bakish also argued that people usually think of Viacom as a pay TV company, but he really sees it as "a global content engine" that is active across TV, film and, increasingly, digital content. "If you listen to the conversation around media today, it is about content," he said, and "fundamentally," Viacom is a content company.
Asked about his experience running Viacom's international business, he said it was unprofitable when he took over, but with a focus on recognizable brands and partnering across the company and with other companies, it has become a key growth driver for the firm.
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He again touted the company's approach of developing fresh content and continuing or rebooting franchises, such as via Paramount's recent deal for more Terminator movies with James Cameron, as well as MTV's Jersey Shore reboot Floribama Shore. He also touted Nickelodeon's animated Top Wing, which debuted on the network in November, calling it the next Paw Patrol, which is one of the network's big hits.
Bakish highlighted that he continued to be excited about the prospects for such flagship networks as MTV, BET and Comedy Central. "I'm very excited about what they have to come," he said after mentioning he spent time last week with the Comedy Central programming team, for example,.
Bakish reiterated that Viacom was now going into growth mode via three core strategies, arguing there was "substantial" upside ahead.
The first: taking advantage of next-generation business opportunities in the media networks sector, such as launching on new platforms, striking licensing deals with over-the-top providers and pushing further into direct-to-consumer offers. Bakish has said that the company sees more than 25 percent growth in these areas to about $450 million in fiscal year 2018 with a plan to "deliver more than $1 billion organically by 2020."
Asked about Philo, a recently unveiled service offering sports-free skinny TV bundles, Bakish said that "25-50 percent" of people don’t want to pay for sports content.
The adoption of media products on mobile devices is the "next great growth leg" opportunity for Viacom, Bakish said. In Japan, the company launched a variant of MTV on mobile. Now, it has more users there than on traditional pay TV.
Second is diversifying the company's business beyond media, such as via live events and consumer products, and growing its share and margins. The diversification businesses will bring in $350 million in revenue this fiscal year, with a goal of $500 million-$600 million by 2020, Bakish has said.
The third area is cost savings. "We see considerable opportunity" for $100 million in savings in fiscal year 2018 and hundreds of millions in savings "mostly realized" by fiscal year 2019, he recently said, citing such areas as real estate, automation and procurement.
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Original source: The Hollywood Reporter.
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