Breakingviews: Viacom-CBS is the Rip Van Winkle of TV

Rip Van Winkle falls asleep in the British-held territory of America and wakes up 20 years later in an independent country. The CBS-Viacom reunion bears similarities to Washington Irving’s fictional character.

Thirteen years ago, media mogul Sumner Redstone, whose family controls both companies, decided to separate the U.S. broadcaster and the Paramount Pictures owner. CBS was the slower, traditional network while Viacom was home to then zippy cable channels MTV and Nickelodeon. The split was meant to unlock value and, as a side benefit, solve a succession problem between executives Tom Freston and Les Moonves.

That strategy failed. The firm was worth $55 billion in mid-December 2005, shortly before the breakup. Today, the combined companies are worth approximately $32 billion, once the present value of cost savings and a 7% selloff on Wednesday are factored in. The more than $20 billion looks even worse after factoring in the runup in the broader market over the same period. Just tracking the performance of the S&P 500 Index would have left Viacom and CBS worth more than $120 billion between them.

Meanwhile, one of its major peers, $250 billion Walt Disney, has gotten larger in part by gobbling up parts of Rupert Murdoch’s empire Fox. The Mouse House is now getting ready to launch video-streaming services that, while late to the game, will probably be the best challenger to current king Netflix.

That leaves a reunited Viacom and CBS starting way behind. CBS has launched a direct-to-consumer product, but it’s small compared to Hulu, which Disney now controls, let alone Netflix. ViacomCBS Chief Executive Bob Bakish’s plan is to stick with its current streaming offering, while pitching advertisers and selling TV shows and movies to rivals. That may involve scooping up other small to mid-size media companies like Lions Gate Entertainment to build a desirable library of content. That would be the best way to emerge from a decade lost to slumber.

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