ViacomCBS shares plunged after the newly recombined television and film company swung to a loss in its first earnings report after a long-awaited merger.
Viacom, the home to MTV and the Paramount film studio, closed a merger with broadcaster CBS in the final quarter of last year, as smaller media groups huddle together to compete in a crowded, cut-throat entertainment business that has been upended by Netflix.
But the newly remarried ViacomCBS appeared to face the same troubles, as revealed by its income statement in the fourth quarter. The group swung to a $258m loss in the final three months of 2019, or minus 42 cents a share, well off from consensus forecasts for positive earnings of $1.32 a share.
On an adjusted basis, earnings were 97 cents a share, also below the $1.41 analysts were looking for.
Shares in ViacomCBS fell 17.9 per cent on Thursday.
The company said merger expenses weighed on its results, recording $468m in restructuring costs in the quarter, but forecast that the deal would allow it to save $750m this year. Total revenue in the quarter dropped 3 per cent from a year ago to $6.9bn, below analyst expectations for $7.3bn.
Consolidation in the entertainment business has left smaller media groups seeking safety in scale. ViacomCBS, with a market capitalisation of about $18bn, is still a relative minnow in media after the historic consolidation of Disney with Fox, and AT&T with Time Warner.
These media giants are now fighting back against Netflix with their own online video services, as the entire entertainment industry seeks to adapt itself to a digital future.
ViacomCBS for the first time reported precisely how much money it was making from streaming video: $1.6bn in US revenues last year, thanks to 11m US streaming subscribers.
Bob Bakish, the former chief executive of Viacom who now leads ViacomCBS, laid out plans for the coming year, extolling the environment in which “demand for content has never been higher”.
In particular, the company is hoping to grow subscriber numbers by folding CBS All Access, the broadcaster’s existing streaming service, together with programming from Viacom cable channels including MTV, Nickelodeon, Comedy Central and BET. The new “House of Brands” product is set to debut later this year.
Analysts have been unconvinced that recombining Viacom with CBS will be enough to revive their fortunes.
“Nobody understands what this family of brands streaming strategy is,” said Rich Greenfield, partner at LightShed, a research company. “They allude to some unique strategy, but no details.
“Investors are puking because they don’t trust this team or strategy.”
Todd Juenger at Bernstein last month said: “Nothing has happened since the formal recombination to change our view. What has happened in the time since we last updated and opined on CBS and [Viacom]? Nothing good,” noting that cord-cutting and traditional television viewership trends have worsened while the streaming competition has increased.
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