Is Viacom Taking Steps To Revive Itself?

As it grapples with declining ratings of its channels, weaker-than-expected results and the subsequent 20% decrease in its stock price,  Viacom’s (NASDAQ:VIA) definitely needs strategic changes to effect a recovery. It appears that the company is taking steps to improve the popularity of its channels starting with MTV, by reviving its erstwhile popular MTV news. The company is setting up a new team which will produce high quality content ranging from podcasts to documentaries as part of MTV news. ^[1]. It has also signed a multi-year deal with the video messaging app Snapchat, which allows the media company to sell advertising on Snapchat’s behalf. ^[2]. Recently, Viacom launched its Paramount Channel in Thailand, marking the network’s entry into Asia.  And it plans to expand this channel into Italy by the end of February. ^[3]. We believe that while the company does appear to be taking strategic initiatives for a turnaround, maintaining subscriber growth in the cord-cutting era will be the most important driver for its revenues in future.

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MTV News Aimed At Creating A New Brand Identity

Viacom’s erstwhile popular channel MTV is now facing a challenging situation with an identity crisis and declining ratings. According to Nielsen’s live-plus-same-day data, Viacom’s MTV registered a 23% decline in prime time ratings for 2015, compared to an average rate of 12% decline for the bigger cable outlets. ^[4]. As it struggles to gain popularity, Viacom is now looking to revive MTV by focusing on its brand identity. According to the company, MTV has always been about elevating musicians, artists and creators popular with young people. It wants to leverage these precepts to make them more relevant for a new generation of viewers. With a new president and an editorial team in place, MTV’s new management is working on a turnaround plan. The company hired Dan Fierman, formerly the editor director of ESPN, to oversee MTV news’ editorial content. ^[1]. According to Fierman, MTV news is trying to charter a new direction to be something that is aspirational, cool and fun. Whether these efforts will improve MTV’s ratings in future remains to be seen.

Closer Ties With Snapchat Can Reduce Dependency on Pay-TV

Viacom stated that it will invest in making its programming geared towards Snapchat and will add two new channels to Snapchat’s “Discover” page where MTV and Comedy Central already have their content. ^[2]. As of May 2015, Snapchat had 100 million active daily users and 30% of U.S. millennial internet users accessed it regularly. ^[5] Advertisers are finding this platform to be an effective way of reaching the younger generation. As Viacom targets a younger audience, its association with Snapchat can become a catalyst for its growth by giving it an alternative platform to stream its content, even as the number of Pay-TV users decline and the company struggles with TV ratings. The ad deal with Snapchat allows Viacom to sell advertisements for its own content on “Discover” and for content owned by Snapchat, which gives Viacom a better bargaining power with advertisers on the growing platform popular with a younger audience. We believe a closer association with Snapchat should give Viacom a new alternative to connect with its audience, as it struggles with Pay-TV subscription renewals.

While Viacom does appear to be looking at ways for a turnaround, a stronger message from the management and a clear strategic direction is key for its future growth and restoring shareholder confidence.

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1. Viacom Reboots MTV News In First Step Toward Reviving Network, Variety, February 11, 2016 [↩] [↩]
2. Viacom To Sell Snapchat Ads in Multiyear Deal, The Wall Street Journal, February 8, 2016 [↩] [↩]
3. Viacom’s Paramount Channel to Launch in Thailand in Entry Into Asia, Hollywood Reporter, February 2016 [↩]
4. 2015 In Review : Cable Ratings Plummet As Live Viewership Dwindles, Advertising Age, December 2015 [↩]
5. By The Numbers : 60 Amazing Snapchat Statistics, DMR, December 2015 [↩]