Feb 27, 2019

Six takeaways from his interview at the Morgan Stanley Technology, Media & Telecom Conference.

The two-year turnaround of Viacom is complete and the focus is now on the company’s evolution. That was the message Viacom CEO Bob Bakish delivered at the Morgan Stanley Technology, Media and Telecom Conference on Tuesday.

He pointed to several key factors in Viacom’s evolution, including its disciplined approach to mergers and acquisitions that spurred the recent Pluto TV acquisition, its investment in a studio production model—which is on track to be a $1 billion business by 2020—and its expanding Advanced Marketing Solutions business. It’s also paid down $4 billion in debt since Bakish took the helm in late 2016.

Here are some highlights from the Q&A:

The acquisition of Pluto TV supports multiple business lines.

“This is the cornerstone of our D2C strategy. This is a 12-to-13 million monthly, active user business today. And of course, it is a free service which means it's a perfect entry point into that ecosystem. But we will upsell targeted D2C products above that, whether that's our NOGGIN product or our Comedy Central product … We have a reality product coming. We have a BET product coming. So think about that as a D2C ecosystem that we can upsell people to.

“It feeds our Advanced Marketing Solutions business, as it adds billions of video impressions per month out of the gate. It feeds our expanding distribution partnerships, as we add a product that can serve the entire subscriber base—not just the video bundle base—but the broadband-only subscribers as well. It's an opportunity to unlock library value … We have a very substantial inventory of content that we can put on Pluto.

“It’s important to note that this is a global opportunity. Pluto today is a U.S.-centric product. Yes, it just launched in Germany and the U.K., but with Viacom, we have an operating footprint that is truly globe-spanning.”

The Pluto TV deal bolsters Viacom’s value proposition to distributors…

“The constraint these companies face in terms of adding platforms is they don't want to commit to fixed costs. At the same time, they know they want to provide more value to their subscribers. So enter Pluto.

“We've already been in conversations with distributors of the highest level both in the wired space and the mobile space. We're going to provide them access to that product on a no-cost basis that they can provide to their broadband-only subscribers and get upside. That upside will be in the form of either a revenue share and or access to inventory.

“I've had conversations with every distributor in the U.S. They all get it and they're all excited about it and you will see some activity very shortly in that regard... It’s a global example as well. We will first focus on the U.S., but we'll also get into U.S. Hispanic and then we'll go to Latin America and we're in the early stages of the building out a plan for the world.”

… and its relationships with advertisers.

“If you look at the ad business in general... we don't have a demand problem; we have a supply problem. This is not something that we woke up and recognized yesterday. We saw this coming and that's why we've embarked on creating the Advanced Marketing Solutions business, which is a business that creates additional pricing and yield at a traditional inventory and a business that allows access to new inventory and we are widely regarded as leaders in that space.

“Pluto is high quality, very TV-like inventory that provides access to a very attractive demographic… High quality means it's overwhelmingly viewed on through smart TVs and it is available in 15- and 30-second spots. So that looks like television to advertisers.

“Pluto today is over 50% unsold and that by the way is a function of a high growth product with a nascent ad sales force that didn't have those kinds of relationships. As we plug that into our ecosystem, we see a tremendously compelling monetization ramp. So it's really exciting to development in that space.”

Under Brian Robbins, Nickelodeon will focus on five key areas.

“The first one being bringing exciting new franchises to the network. So, an example of that is Ryan's Mystery Playdate. Ryan for those of you who don't know him is a YouTube phenomenon [who] gets over 1 billion views a month to his products.

“The second element is to look at other exciting new franchises that are out there. An example of that is a show we're doing with Play-Doh. The third is looking at the Nickelodeon IP and creating new product out of it. Examples of that are a new Blues Clues show, as well as looking at Spongebob as almost a mini-Marvel Universe and spinning characters out of that … the next area he's focused on is the Hispanic market. He believes that's an underserved market. And an example of that is Los Casagrandes which is a spinout of Loud House.

“Finally, big co-viewing opportunities, again, are an underserved segment of the market in the linear television space. An example of that is Are You Smarter Than a Fifth Grader? hosted by John Cena.

“It's really a much more varied slate than you've seen from Nickelodeon in the past decade, and it's getting a great response from the industry and the advertising base.”

MTV’s multiplatform success is an example of a modern Viacom flagship network.

“If you look at [MTV], it has global recognition. It is a tremendously powerful brand. And what Chris McCarthy did was get to work really unlocking that value. … A big part of what Chris did was pivot back to unscripted, which allowed for an increase in the number of fresh hours and hours that fundamentally fits the brand. And so, you saw him revive the Shore franchise as an example. But also create new reality formats as well as import some of them from MTV International. When you put all that together, the linear network has grown ratings in primetime, seven to eight quarters in a row. It’s the fastest growing network on all of television against 18 to 34 and 18 to 49.

“But it's not just about linear television. He's also working on other expressions of the brand, a lot of activity in the digital native space which both brings in new consumers to MTV. A great example of that is the Wild 'N Out franchise with Nick Cannon which is a long been of a successful show on MTV … But now, also has one of the top YouTube channels in the space.”

Studio production is on track to generate $1 billion for Viacom’s bottom-line in 2020.

At Paramount, Viacom has a library of IP that isn’t being leveraged, including “books, scripts, products we picked up that weren't being used for film. So there was a tremendous opportunity to take that and redeploy it or deploy it against the television space. … So, they're taking those properties and we're going to sell a couple to get traction.

“We had hits with Netflix,  Hulu,  Amazon, and with traditional broadcasters… We've really created a very substantial and highly recognized hit factory. We saw a similar recipe that we could deploy elsewhere, using our library IP and creative capabilities. So you see us, for example, with MTV we're doing three versions of the Real World for Facebook. We've announced a number of Nickelodeon properties. We recently announced that we're doing two films of theatrical length but direct to SVOD for Netflix in the form of a Turtles movie and a Loud House movie. Very importantly we're only doing the films with them. The television series product will remain the domain of Nickelodeon. So, we view that as an incremental economic opportunity, an incremental promotional opportunity, and a way that drives value in consumer products as well but won’t cannibalize the TV viewers.

And we also see that recipe outside the United States. We've acquired the broadcaster Telefe, the number one broadcaster in Argentina… And within that was a full-on production studio that was producing 3,000 episodes shows per year but it was only producing them for Argentina. We're now producing 800 to 1,000 hours of Latin programming for use not only in Argentina but across Latin America and globally and that's another element of our studio production business. And know that that network had four shows last year that did over a 45 share. So, that's a hit factory as well.”

 

Comments have been edited and condensed for clarity.

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