Viacom May Split In Two

Media conglomerate Viacom yesterday announced it is considering splitting itself into two companies, a move that would separate CSI network CBS from SpikeTV, the cable network that owns the rerun rights for both CSI: Crime Scene Investigation and CSI: New York.

According to a Reuters report, Viacom thinks it will be able to boost shareholder value by separating fast-growing units like MTV and the other Viacom cable networks from more mature arms like CBS and Viacom's radio stations. A split would also mean Viacom wouldn't have to be concerned anymore about a protracted succession battle once current company head Sumner Redstone steps down, as each of the current two heirs apparent would be put in charge of their own company: Les Moonves at CBS, and Tom Fresnon at MTV.

CBS Productions and CBS Television, the two companies responsible for producing and airing the three CSI shows would all be part of the company run by Les Moonves. However, SpikeTV, the cable network that currently airs daily repeats of the original CSI, will probably end up with Tom Fresnon's cable network company. The split will have no immediate effects for SpikeTV, as its CSI contract is valid for many years to come. However, in the future it may be harder for SpikeTV to get an extension to its contract or obtain the rights to any other CSI series, as it would no longer have the negotiating advantage of being part of the same company as CBS.

Similarly, the split would mean that CSI novel publisher Simon & Schuster and DVD distributor Paramount Home Video would be separated from CBS, and thus might find it harder to extend their CSI licenses when their current contract runs out. But even if these companies would lose the rights to sell CSI merchandise, it would have little practical effect for CSI fans, as the CSI licenses would simply shift to other companies.

The current Viacom media empire has its roots in 1954, when then 31-year-old Sumner Redstone took over his family's movie theater chain. Over the years, he kept buying more entertainment companies, until in the late 1980s he mounted a daring bid to buy a media company known as Viacom, which then included cable networks such as MTV, Showtime and Nickelodeon. The company went forwarded under the Viacom banner, and in 1994 outbid USA Networks to obtain Paramount Pictures - the same year that Blockbuster Video was also added to the mix. But the company's biggest acquisition came in 2000, when Viacom spent $50 billion to obtain the CBS television network.

Initially, the Viacom-CBS merger proved profitable for shareholders, as Viacom stock reached an all-time high of $71.63. But when the economy went into recession and the advertising market took a sharp downturn, Viacom was hit harder than other media companies, and its shares have been trading between $35 and $40 ever since. Last year, the company already spun off Blockbuster Video, and today the New York Times reported investment bankers had been agressively promoting a full Viacom split ever since.

More information on this can be found in the original Reuters report.

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