After more than a decade apart, CBS and Viacom are reuniting.
In a deal that closed on Wednesday, the CBS Corporation, the company behind the broadcast network CBS and the publisher Simon & Schuster, merged with Viacom, the owner of Paramount Pictures and the cable outlets MTV, Nickelodeon and Comedy Central. The combination brings together a set of businesses that once dominated the media and entertainment industries but are now fighting to stay relevant in an increasingly digital world.
CBS and Viacom were already corporate siblings before the deal, both controlled by National Amusements, a theater company that grew into a major conglomerate under the mogul Sumner M. Redstone, who is ailing at age 96. His daughter, Shari Redstone, emerged as the company’s leader in recent years and had sought a merger since 2016. With the deal, Ms. Redstone cements her role as a trailblazing figure in a male-dominated industry, a woman whose peers now include leaders of media behemoths like Brian Roberts of Comcast and Robert A. Iger of the Walt Disney Company.
Now that Disney has joined Netflix and Amazon as a force in the streaming industry, the merger is meant to make ViacomCBS, as the new company will be called, a bigger player in digital entertainment than the two companies had been as separate entities.
Unlike its streaming rivals — a group that includes Apple, with its new Apple TV Plus streaming service, and AT&T, the owner of HBO Max, scheduled to make its debut in May — ViacomCBS will focus on supplying films and television series to other companies. With an executive team led by Ms. Redstone, the chairwoman of the company’s board, ViacomCBS intends to follow a strategy of selling its wares to the highest bidder as demand for original content increases.
The number of streaming subscribers around the world surpassed the number of cable subscribers for the first time last year, and Netflix, Amazon, Hulu and other platforms are fighting to attract customers who have cut the cord or are one cable technician visit away from doing so.
That has set off a frenzy of activity among the streaming companies, and ViacomCBS has already started to take advantage of the new demand. Paramount’s TV arm, for example, created “Jack Ryan,” a popular series on Amazon Prime Video, and CBS has produced content, like the true-crime drama “Unbelievable” and the comedic thriller “Dead to Me,” that streams exclusively on Netflix. In October, Viacom sold streaming rights to the animated comedy series “South Park” to AT&T’s HBO Max in a deal worth $500 million.
“I actually feel great about this positioning,” Ms. Redstone said at a November event at the Paley Center in Manhattan. She described the combination as a “global content powerhouse” that has an “incredible library.”
Viacom properties include “Mission: Impossible,” “Star Trek” and “SpongeBob SquarePants,” and CBS is home to “NCIS,” “60 Minutes” and “Young Sheldon,” a breakout comedy that is owned by AT&T’s Warner Bros. but has become a durable hit for CBS.
ViacomCBS also has a small toehold in streaming services with CBS All Access and Showtime, which together have more than eight million subscribers and feature originals such as the reboot of “Twilight Zone” and “Star Trek: Picard,” which is scheduled to have a January debut. Viacom’s free, ad-supported streaming service, Pluto, has more than 20 million viewers a month.
From 2000, when National Amusements acquired CBS, until 2006, the two companies were a single entity. Mr. Redstone split them apart when the Viacom properties were growing faster than the CBS broadcast network and radio stations. A reunification was seen as necessary now that television audiences have eroded and the movie business is adjusting to streaming.
The creation of ViacomCBS is a victory for Ms. Redstone, whose efforts to bring about a merger drew opposition from the CBS Corporation board, including its former chief executive Leslie Moonves. Mr. Moonves was pushed out last year after several women accused him of sexual misconduct, charges he has denied.
Some analysts have questioned the deal, saying it may not be enough to fend off the decline in traditional television. Michael Nathanson, an analyst with the Wall Street research firm MoffettNathanson, said ViacomCBS would have to “explain how the combination helps better insulate it” from the current pressures on the cable and satellite business.
The merger seems to be largely a “defense play,” he said. “For the stock to work, they have to prove that their current strategy is either building long-term asset value or generating more attractive” returns, he said. “If they can’t, we remain in purgatory.”
Shares of both CBS and Viacom have dropped about 20 percent since the merger was announced in August.
Viacom’s chief executive, Robert M. Bakish, leads the new company, and Joseph Ianniello, the CBS acting chief executive, remains the head of the CBS unit. The combined company expects to see about $500 million in cost savings, which typically come in the form of layoffs. The deal’s closing is sure to set off several rounds of job cuts over the next few years.
David Nevins, the head of Showtime, has been put in charge of overseeing collaborative efforts between programmers across both CBS and Viacom, reporting to both Mr. Bakish and Mr. Ianniello. Mr. Nevins is directly in charge of programming for CBS, Showtime and BET. He has also developed a close working relationship with Ms. Redstone. This is the first season in decades that CBS programming has come from someone other than Mr. Moonves, who was often credited with the network’s ratings dominance over the past decade.
For this season so far, CBS has lost the crown to NBC, with ratings falling more than 12 percent from last year. The 2019-20 television season could ultimately shake out differently. On a conference call with analysts last month, Mr. Ianniello predicted that CBS would finish the season in May “as America’s most-watched network.”
The deal is the last in the current wave of media megamergers. Two major transactions totaling more than $150 billion closed just last year. AT&T buttoned up its $80 billion acquisition of Time Warner. Shortly thereafter, the Walt Disney Company beat out its rival Comcast to win the majority of Rupert Murdoch’s 21st Century Fox business for $71.3 billion.
But the combination of CBS and Viacom amounts to a fraction of those deals, underscoring the need for such a merger. The equity value of the new business is about $25 billion, putting it far behind rivals like Disney, which also has a theme parks business, and NBCUniversal, which is owned by the cable giant Comcast.
Several key advisers to Ms. Redstone have suggested a bigger deal could come in the future, with ViacomCBS selling to a tech giant, four people familiar with those discussions have said. Even so, Ms. Redstone is not in a rush to sell off a business she has just spent years pulling together, they added.
When asked if ViacomCBS was large enough to compete against its supersize competitors, Ms. Redstone said it would be a mistake to confuse a company’s value with its heft.
“I think people make a mistake and they look at scale as being about market cap,” she said at the Paley Center. “Scale is not about market cap. Scale is about the ability to create the quantity and quality of content that people want to see.”
She went on to make an impassioned defense of the company’s track record: “We have 4.3 billion subscribers around the world. We have 22, almost 23 percent of TV and cable viewership. We’re No. 1 in all key demos in the United States.”
The person conducting the interview at the Paley Center was one of her principal bankers, Aryeh Bourkoff, the head of LionTree Advisors, who helped broker the merger. After her response in defense of the company, he said, “I didn’t mean to offend you by the question,” eliciting laughter in the room.
The deal is an important moment for Ms. Redstone, who has long waited in the shadow of her father, a combative, cantankerous entrepreneur who over decades forged an empire through a series of mergers bankrolled by big loans. He built it only to dangle succession in front of his daughter, creating a caustic relationship that led to one of the most bitter family disputes in corporate America.