Analysts: Viacom Needs A Merger

Viacom Inc could gain a leg up in negotiations with distributors and ward off declines in U.S. ad revenue and sales by finding a merger partner, analysts said on Friday.

Reuters reports shares of Viacom, which owns MTV and Comedy Central, plunged as much as 13 percent on Friday, a day after it forecast lower sales to U.S. pay-TV companies and streaming video services this quarter.

Bob Bakish

Viacom, like other U.S. television networks, has struggled to retain viewers who prefer to watch shows and movies on tablets and phones, and must also compete with streaming services like Netflix Inc and Amazon.com Inc that are spending billions to create their own content.

Viacom Chief Executive Bob Bakish has taken steps that helped boost ratings, slow the decline of U.S. ad sales and win a key cable distributor back, but analysts and investors expect challenges ahead due to a long-term shift in consumer behavior.

"If you aren't selling, you need to be consolidating and scaling up," said Rich Greenfield, an analyst at BTIG.

Viacom has contemplated deals before. Last year, National Amusements, the privately held movie company through which Shari Redstone and her 94-year-old father Sumner Redstone control Viacom and CBS Corp, urged the two to explore a merger. Those discussions failed over disagreement on price.

Viacom needs to find something that will give it "must-have programming," said Brian Wieser, analyst at Pivotal Research.

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