Last year was a tumultuous one for Viacom, capped off by majority shareholder Sumner Redstone (aged 93 and in poor health) stepping down from the board and the company naming a new CEO. The summer had been marked by a prolonged boardroom battle between members siding with then CEO, Philippe Dauman, and others who stood with Redstone’s daughter, Shari. She had considered merging Viacom with CBS Corporation. Dauman was trying to sell off Hollywood’s storied Paramount Pictures. All of this drama played out against the backdrop of changing viewing habits, declining pay-TV subscribers and the growing popularity of SVOD platforms. By year’s end, Shari Redstone had wrested control of the company and appointed new members to the board. Dauman was ousted, Viacom and CBS did not merge, and Robert Bakish was named Viacom’s president and CEO.
Bakish has been with Viacom since 1997, most recently as president and CEO of Viacom International Media Networks (VIMN). He was very familiar with Viacom’s businesses, its pay-TV channels, their digital and consumer-products extensions, and related theme parks and experiences.
When Bakish took the helm, he was determined to focus on the company’s strengths. The media conglomerate consists of three main groups. First, Viacom Media Networks (VMN), home to BET Networks, the leading provider of content for African Americans; the Music and Entertainment Group, consisting of MTV, Comedy Central, Spike, TV Land, CMT, Logo and VH1; and the Nickelodeon Group. Second, Paramount Pictures, which includes production of motion pictures and television product and a worldwide-distribution arm. The third is VIMN, whose international linear and nonlinear brands reach nearly 4 billion cumulative subscribers in more than 180 countries.
Bakish wanted to break down silos between the various businesses and make sure each division was operating at its fullest potential. He also wanted to address ratings declines at some of the networks. Rather than sell Paramount Pictures, Bakish expanded its purview. He set up Paramount Players, a new unit, and hired AwesomenessTV’s Brian Robbins to run it. It will be producing movies for Viacom’s pay-TV brands. And speaking of the pay-TV brands, Bakish has identified the ones he wants to invest in the most. They are BET, which signed a cross-portfolio deal with Tyler Perry for TV, short-form and film content; Nickelodeon, which continues to be the most-watched kids’ network in the U.S.; MTV, whose audience share has grown in the last year with a renewed focus on youth and unscripted shows; Comedy Central, a global brand for comedy that has seen audience gains in the U.S.; and Paramount Network, which is already distributed internationally and will launch in the U.S. in January.
In response to changing consumer behavior, Viacom will be offering a low-price entertainment pack, a skinny bundle of channels. Bakish sees numerous growth opportunities across all of Viacom, where revenues in 2016 amounted to $12.5 billion. He talks to World Screen about boosting the flagship brands, revitalizing Paramount and continuing to offer viewers the content they want in as many ways as possible.
WS: When you took over as CEO, what was your view of the company, and what have been your priorities?
BAKISH: There was certainly a lot of drama at the time, and what I think got lost in all of that was the strength underlying Viacom: its broad portfolio of assets, the fact that today we still have the largest reach of any media company in the world in terms of television subscribers, which, on a cumulative basis, currently amount to almost 4 billion worldwide. We have the largest share of pay-TV viewing in the U.S., across every demographic we serve, and if you look at on-demand and alternative consumption, over 100 billion hours of our content are viewed annually. We also have a fantastic employee base, not only in the U.S. but worldwide. So while there was a lot of noise, there was a lot to work with that had been underappreciated. My focus was on taking that, building upon it, and as quickly as possible beginning to shift the narrative and maximize our value to realize the company’s full potential.
I got the job in December of ’16, and in early February of this year, we began to articulate a strategy for the company. That’s something that the company hadn’t had in a while. We made a whole series of leadership changes because we didn’t have the right mix of leadership in the company. One criticism that was true was that the company was highly siloed. So we started to work right away to break those silos down. We wanted to begin to operate in a way in which we could provide a more unified offering from Viacom to our key constituencies and partners all over the world.
WS: Were there insights gained during the years you headed VIMN that you were able to apply to other parts of Viacom?
BAKISH: For sure. In the international playbook, a guiding theme is the power of partnerships, both externally and internally. When I first started running what we now call VIMN, it was essentially a confederation of independent nations. What we needed to do was create a multinational media company out of it, where we shared more than just some brands, and had a much more integrated model and could leverage the benefit of our scale. So first, we had to put the right leadership and organizational structure in place to capitalize on that global scale and maximize the power of our brands. That’s on the internal side. On the external side, we needed to spend a lot of time with clients and partners—distributors, advertisers, licensees, creative talent, music industry talent and others—to understand their businesses and challenges so that we could configure our assets to create mutual value.
That’s the way we get the full power of our brands: aligning our extensive, largely owned content offerings, our data and advanced analytic capabilities on the advertising side, our marketing power, and our global footprint, all focused on helping our partners succeed. We chose to do our pre-upfront presentations differently this year. We hosted dinners, with some presentations thrown in, for each of the agency groups, and we brought the brand presidents to those dinners. In two of them, I was pulled aside by the head of the agency who said, “Hey, you’ve done something very interesting here.” And I said, “Thank you. What?” And he said, “You got BET in the room.” I said, “Of course BET is in the room. They’re an integral part of Viacom.” He said, “Yeah, I agree with that, but they weren’t in the room before.” That’s just one example of de-siloing the company and arraying all of our assets in support of our partnership agenda.
Another example would be the deal we announced earlier this year with Altice, a U.S. distributor that owns Optimum. Our deal wasn’t up, but we engaged with them, we extended our Optimum deal, and we got our networks back on Suddenlink, an operator that Altice owns that had dropped Viacom’s product. We did a data- and advanced-advertising partnership where we can implement dynamic ad-insertion into their VOD and local avails—which we can monetize and they can benefit from—and we receive data from them as well. We also licensed Paramount products for their French business. It’s a multifaceted relationship, and it’s an example of how we can array more Viacom assets in support of our partnerships.
WS: You also identified core brands. How did that decision come about?
BAKISH: The rationale behind the flagship brands is twofold: first, I fundamentally believe that we need to increase our original programming investment in areas where we are already making a difference, and we want to make more of a difference; and just by the laws of business math, you can’t increase your investment everywhere, so you have to prioritize. Second, we felt we could have true multiplatform expressions of these flagship brands. Historically—back to the silos—Paramount was run as an island inside of Viacom, and had very little overlap with the pay-TV brands—some projects here and there, but not on a regular basis. We saw an opportunity, and we’re in the middle of bringing that opportunity to life, of making the Paramount theatrical-film business an integral part of our brands as well. Each of the flagship brands will have a portion of the Paramount slate, probably one to two films per year, which will also help bring the brands to life. We also believe each of these flagship brands has a role in live events. That’s something we did a lot of internationally; we hadn’t historically done much of it in the U.S. and we’re starting to. The brands also have a much larger opportunity in in-front-of-the-wall digital and social media, where there’s a lot of consumption. Finally, the flagship brands are all global; they’re not just distributed in the U.S. So the flagship concept was about choosing brands that we wanted to invest in more heavily and then bring to life in a true multiplatform expression, leveraging all the assets Viacom has.
WS: What is your strategy for repositioning Paramount Pictures?
BAKISH: We’ve swung 180 degrees on Paramount. Under prior management, Paramount was going to be divested, but now, in many respects, it’s become a centerpiece of the strategy and an integral part of the company. That manifests itself in two fundamental ways. First, it’s going to have a 24-hour Paramount Network starting in January. We already have Paramount Networks outside the U.S.—that is another piece of the international playbook—and those networks deliver very significant audiences. We also created a label inside the studio called Paramount Players, which is the home of all of our big network-branded films, from MTV Films, Comedy Central, Nickelodeon and BET. It will also be home to some smaller-budget projects. We hired Brian Robbins to lead it. Brian was the founder of AwesomenessTV and, before that, a film-and-television producer; we’ve known him a long time. He’s a great executive to run Paramount Players. And, of course, we got Jim Gianopulos to run the studio and lead the charge of rebuilding that management team and restoring the studio not only to profitability but also to where that iconic brand and operation should be.
WS: Tell us about Paramount Television.
BAKISH: It’s an underappreciated part of the studio probably because it’s relatively new, but it’s a significant bright spot for our business and growing quite quickly. We produced 13 Reasons Why for Netflix, which is now in production of its second season. We also are in second seasons of Berlin Station for EPIX and Shooter for USA and the third season of School of Rock for Nickelodeon. We have a number of first seasons currently in production: The Alienist, based on a best-selling novel, for TNT. We’re doing Tom Clancy’s Jack Ryan, starring John Krasinski, for Amazon. We’re filming Maniac, directed by Cary Fukunaga and starring Emma Stone and Jonah Hill. We’re about to begin production on The Haunting of Hill House with Steven Spielberg’s Amblin TV, and that will be for Netflix. Paramount Television is doing shows for traditional TV networks, pay-TV networks and SVOD players. It’s grown very nicely and is already a profit contributor.
WS: Viacom had made a bid for Scripps Networks Interactive. Are you interested in making acquisitions? And if so, what would you be looking for?
BAKISH: We don’t comment on M&A rumors, but I would say, first of all, that our overwhelming focus is on our organic execution. We continue to see a great opportunity for material value creation from the assets we already own. That is the overwhelming focus of the management team, and examples would be ratings revitalization, which is well on track; pursuing alternative distribution opportunities; and the turnaround at Paramount. We are working to reinvent Viacom to better compete in this shifting landscape that we are all operating in. That landscape delivers some challenges, but we’re seeing growing consumer and partner demand in new places—we need to focus on creating value from them. We see an organic path there, but we also think it’s our responsibility to look broadly. That includes potential partnerships and joint ventures and highly selective M&A opportunities to strengthen our position today and accelerate our transition for the future. We will look at things and, as we do, we’ll consider very carefully if it fits our strategy and if it’s going to create value for our business and our shareholders. Were we to pursue something, we would also be very disciplined, and we have a strong track record of successful integration. On the international side, we did a couple of deals, Channel 5 in the U.K., which turned out great for us, and Telefe in Argentina, which is also tracking ahead of our business plan. We do feel we have a responsibility to look, but we are overwhelmingly focused on organic execution.
WS: How will Telefe help VIMN boost its presence and businesses in Latin America?
BAKISH: A little bit of history: at this point ten years ago, we came upon this idea to play in the general-entertainment space in India and that led to the creation of the joint venture Viacom18, the launch of the channel Colors and the beginning of a great success story. As we did that, we saw the opportunity to have vertical pay networks existing alongside a broader network. About five years ago, we saw the opportunity in the U.K. to acquire Channel 5. Initially, candidly, I wasn’t so sure of that, but the more we dug into it, the more we found it to be interesting. We acquired Channel 5 and we surprised people when we did, but it truly transformed our business in the U.K. and has given us a second English-language production hub [to feed our networks]. Then we said, Wow, this works, we’d like to have a Spanish-language hub. Last year, the opportunity presented itself to acquire Telefe. It is the number one broadcaster in Argentina and produces about 3,000 hours of content each year. We saw an opportunity to use our Channel 5 playbook and integrate general-entertainment networks and pay networks. We have a Telefe show that has additional “After Hours” footage airing on MTV immediately after each episode. We also swapped out Discovery Kids for Nick Jr. on Telefe’s preschool block, just as we put Nick Jr. on Channel 5. Now we are in the early stages of creating value through this Spanish-language cornerstone, where we think there is a path to leveraging Telefe’s content, which includes novelas and formats, for Spanish-language markets. Telefe is ahead of its acquisition plan and, as we expected, has transformed our ad positioning in Latin America. We have done a whole bunch of pay-TV ad deals with clients who didn’t previously spend money with us but who are now. It is going to be another successful local cornerstone that we add to our success in the U.K. with Channel 5 and India with Colors.
WS: And Channel 5 continues to perform well?
BAKISH: When we acquired Channel 5, we saw a couple of opportunities. First, we’d get a larger share of audience and the partnership benefits to that. We also saw a network that was built largely on acquired programming and an opportunity to increase the amount of original programming—which is now about two-thirds of the hours on the network—and use that to age down the network’s demographic and increase its high-income composition. That’s exactly what we did. We also saw opportunities to air programming across pay and free. We grew audience share and made it higher income. We strengthened our ad-market position. Sky Media in the U.K. represents both our pay and free services, and it’s been a great success. We were growing very strong double digits in advertising for a while. Brexit has cooled the U.K. ad market quite a bit. But we are still nicely ahead of our acquisition plan, and I’d do that deal again in a heartbeat.
WS: How are you reaching viewers beyond the traditional linear channels?
BAKISH: The story of Viacom in the new tech space—and we’re in the middle of changing this—is similar to Viacom overall; it’s very siloed and very uneven. You see pockets of strength, but you don’t see consistent deployment. We’re focused on more consistently deploying our brands in the mobile space, and part of that is rolling out our Play Plex product globally, including in the U.S., where initially it will be authenticated TV Everywhere. But it can be deployed in other configurations and is deployed in other configurations outside the U.S. We also are increasing our commitment to front-of-the-wall social media related to our IP. We took our MTV Cribs franchise and we re-created it for Snapchat this year. We produced a bunch of episodes, and the Snapchat people told us that they were the most consumed original premieres they had seen. This gives us the confidence that there is a lot more that we can do in that space. We have also been participating in the OTT market in the U.S. through services like Sling and DIRECTV NOW, outside the U.S. through Sky’s NOW TV and iflix and several others. We are building our leadership in this area and setting up a business unit related to it, which will be coming to life in fiscal 2018.
WS: What is the strategy for providing your brands and content to SVOD services or new emerging platforms?
BAKISH: There will be a soft launch in October of a low-price product we call an entertainment skinny pack. This option largely doesn’t exist in the U.S. right now, and we think that it will be the first of a number of these broadly available products. It’s important because the pricing of the skinny pack is closer to SVOD than it is to traditional pay TV. We think that can be an important way to fill demand that is currently not being unlocked because people don’t want to pay [for large bundles with] sports and broadcast, which are very expensive. We are very committed to the pay-TV ecosystem. We cut back on what we’ve done with Netflix. We cut back on what we’ve done with Hulu. In fact, they wanted to extend a deal early on in my tenure and we decided not to. But we are continuing to monitor that and look at the right way to get consumers our content that ultimately they want to see.
WS: Over the next 12 to 24 months, in which areas do you see the most potential for growth?
BAKISH: The core potential for growth is the flagship brands and the multiplatform opportunities we see for them, which include being packaged at a lower price point to serve some traditional television demand that is not currently served—the entertainment skinny pack. We see broad opportunities as we focus resources and benefit from new leadership to grow audience share and ratings and monetize that in the short term in the ad market and over time in other forms. We see opportunities to continue to expand in the experiential space, which is not super-high margin but is additive to the P&L and certainly additive to the brands. We see opportunities to dramatically increase our participation in the front-of-the-wall space in digital through short-form linked to existing IP and new IP. We see a real turnaround at Paramount. Although the new slate of movies doesn’t come out till 2019, we’ll have a better year in 2018. I feel very good about how we did in the U.S. upfront this year. The last couple of years we had been towards the bottom. This year, we are clearly in the middle of the pack, and that’s even before advertisers saw that our ratings resurgence was real. That, coupled with our leadership position in data-driven television advertising, will continue to help drive growth. Finally, in international, there is plenty of road to run. Ultimately, these assets continue to have a lot of life and potential in them. The management team believes that the notion of partnership is a key, whether partnering with distributors and getting more deals along the lines of what we did with Altice, partnering with key advertisers and bringing to life new models, maybe with the Paramount Network, or with our increases in the digital or experiential spaces. I know people are worried about the media business because of so much change. I believe there is opportunity in change, and we have the right strategy and the right leadership team in place to unlock that opportunity.
WS: What led to the selection of Nickelodeon as one of Viacom’s flagship brands?
BAKISH: It’s pretty clear why we picked Nickelodeon as a flagship: it’s the number one kids’ network by far. In fact, it’s increasing its lead in the U.S. over the number two and three networks, which are Disney Channel and Cartoon Network. Nickelodeon has nine of the top ten shows for kids aged 6 to 11, and four or five of the top ten shows for preschoolers. It also is the furthest ahead in being a multiplatform expression. There have been some Nick films in the past. We’ve been doing an event called SlimeFest internationally and we’re going to bring it to the U.S. next year. We opened our first hotel internationally [in Punta Cana, in the Dominican Republic], and there’s a second one in the pipeline. We’re also increasingly active in the theme-park space. And we’ve got a large consumer-products business.
WS: Where do you see opportunities for growth as you look across pay-TV markets outside the U.S.?
BAKISH: The good news is that we continue to see strong and consistent growth from our brands internationally across geographies. Our international-networks group had its best year ever in 2016, in terms of profitability, and I continue to feel very good about 2017. The opportunity for growth comes from a mix of factors. We’re capitalizing on the growth in linear-TV viewing and pay-TV subscribers that is still happening in many markets. As a result of that, we have continued to grow our footprints; in fact, we launched 12 new networks in fiscal 2017 across a range of brands. But there is also an opportunity to participate, and in some cases experiment, with new and unique distribution models—whether mobile, OTT or some other form of on-demand. We created Viacom Play Plex, which is a mobile streaming platform; we have MTV Play, Comedy Central Play, Nickelodeon Play and others. We’ve deployed that with traditional MVPDs in an authenticated TV Everywhere context. In some markets, like Germany, where Nickelodeon is free to air, we’ve deployed Nick Play in front of the wall. We’ve also started to deploy it with mobile operators. We’re rolling it out for Nick and Nick Jr. in Indonesia with an operator that has 170 million subscribers. Not all 170 million are going to get Play Plex (that’s for their data-tier subscribers), but it’s an interesting incremental opportunity.
We’ve extended MTV in Japan to the mobile space through a series of deals, most recently with Hulu Japan, and as of a few months ago, we have more MTV consumption on mobile than we have on linear. China is an interesting market, we do a lot of business there licensing our content to AVOD platforms, and we also recently did a deal with iQiyi, which is the leading OTT service in China. We are going to create original Chinese animation to premiere on their platform and then we are going to use that animation, at least initially, in a Nick Asian orbit where we think we can export the product from China. We are using it as a bit of a learning market for other forms of AVOD.
We have a venture called Viacom18 in India, which is home to the Colors brand. Last year, Viacom18 launched Voot, which currently has 10 million users and 100 million streams a month, and that’s a free product. We are also working on our My5 product in the U.K., with 2.5 million users and 20 million views a month—still small, but growing. What people miss about international is that they think, Oh, the opportunity is in the less mature markets. Well, no, there’s opportunity across all different types of markets. For example, in the last 18 months or so, we’ve added additional free-to-air services in Italy. First the Paramount Channel, then Spike TV; they are growing our audience share in Italy in a very traditional way.
In our events and experiences businesses, international is leading the way, whether it’s theme parks in China or SlimeFest, which started in Australia, then moved to Spain, Italy, South Africa, and is coming to the U.K. and the U.S. in 2018. On the digital side, we bought the number two YouTube channel in Brazil; it’s called Porta dos Fundos and we’re using it as both a front-of-the-wall business in Brazil and as a creator of formats we are going to replicate and create for other markets. We are also going to expand it into the Spanish-speaking countries. There is a whole range of opportunities organically in international, and that has great growth legs ahead of it.