ViacomCBS looking to sell S&S

[fjtorres]

Consolidation in tradpub continues.
https://www.publishersweekly.com/pw/...-sell-s-s.html

Nearly three months to the day after the completion of the ViacomCBS merger, the mass media company has indicated its intentions to possibly sell Simon & Schuster, one of the U.S.'s Big Five publishers.

Word that ViacomCBS was looking to sell S&S came at a Morgan Stanley investor conference where ViacomCBS CEO Bob Bakish said the publishing house is not a core asset and that the company has received interest in the past from companies about buying S&S. Bakish said when the market stabilizes it will engage in the process of selling the company.

Simon & Schuster's place in ViacomCBS's otherwise film and television–focused portfolio was unclear from the jump, and speculation over the sale has spread in certain circles in the industry since the ViacomCBS merger was approved, let alone completed. Should S&S be sold to another of the Big Five, it would mark the second major merger of the U.S. publishing landscape's biggest publishers in less than a decade, following the merger of Penguin and Random House in 2013.

Some in the industry have guessed at potential buyers already. First among them is News Corp., the Rupert Murdoch-owned mass media and publishing company, which owns HarperCollins, another of the Big Five. HC has a history of making big acquisitions, having bought both Thomas Nelson (2012) and Harlequin (2014). News Corp. CEO Robert Thomson has supported the expansion of HC and HC CEO Brian Murray has said in the past that the company would consider another acquisition if the right deal came along.

Hachette Book Group parent company the Lagardère Group is another corporation that likes the book business. The company has supported a string of acquisitions by HBG, most recently the purchase of 1,200 children's book titles from Disney.

Should S&S be bought and merged with one of the Big Five, the resulting Big Four would only be more proof of consolidation in an industry that had a Big Six only eight years ago. Amazon's rising size as a publisher in its own right complicates the landscape somewhat as well.

More at the source.

Also:

https://variety.com/2020/biz/news/vi...le-1203523803/

iacomCBS CEO Bob Bakish told investors Wednesday that the company is taking a hard look at all operations. Simon & Schuster has generated inquiries from prospective buyers in the past, Bakish said during a Q&A held as part of Morgan Stanley’s annual investor conference in San Francisco.

Simon & Schuster “is not a core asset. It is not video-based. It does not have significant connection for our broader business,” Bakish said. “We have had multiple unsolicited inbound calls about that asset, and so as the market stabilizes, we are going to engage in a process” to examine strategic alternatives. ViacomCBS said publishing revenue in 2019 came to $814 million, down 1.3% from $825 million in the prior year.

Since merging in late 2019, ViacomCBS has examined whether all of its businesses fit well as the company places more emphasis on streaming video and reaching TV viewers in new ways. Already, the company is working to sell Black Rock, the Eero Saarien-designed skyscraper that served as headquarters to CBS Corp. since opening in 1965. Baskish said the company is in talks with “a set of blue-chip buyers who are engaged in the process,” which he expects to wrap this year. Research firm MoffettNathanson has pegged the value of Simon & Schuster at $1 billion to $1.5 billion

Via:

https://the-digital-reader.com/2020/...s-up-for-sale/

This does not come as a surprise. Simon and Schuster is not technically the smallest of the "Big Five" US trade publishers, but it is the most vulnerable. The other four are either significantly larger in their own right or part of larger international publishing conglomerates (Macmillan is owned by Holtzbrink, Hachette is owned by Legardere Publishing, HarperCollins is twice the size of S&S, and PRH is PRH).

Two things come to mind:

First, ViacomCBS is late to the streaming game and it is rushing to reduce its lag behind the leaders, NETFLIX, WARNERMEDIA, AMAZON, and DISNEY. They are even behind laggard NBCUniversal, who are at least launching their streaming strategy next month.

So far Viacom has bought and expanded Pluto, talked vaguely of expanding its limited CBS ALL-ACCESS (3 Million subscriptions, a tenth of Disney's Hulu and a fifth of DISNEY+ five day launch tally), and hinted of maybe doing a combined service. Real. Soon. Now.

Whatever they do is going to cost big money. Or they're going to have to sell out to somebody with big bucks. Speculation has named Google, Amazon, even Apple. For now, selling non-core assets raises cash to retire a bit of debt (it's big) or fund enough new content for a year of their streaming services. Assuming they find a buyer willing to give them a billion. No sure thing.

Second, S&S isn't bringing in much cash these days, generating but 3% of ViacomCBS revenues and much less of net. So cashing it in while it might still fetch some cash to help with their streaming challenge.

Worst case scenario, getting rid of non-video assets and reducing debt would make them more attractive to a buyer down the road. The streaming game is getting very pricey. WARNERMEDIA is looking to spend $4B over the next two years, Netflix has a $16B pipeline in place, and PRIME spent a billion just for the rights to the TOLKIEN series, with another billion budgeted for production.

If ViacomCBS wants to play in that league, they can't afford to hang on to unproductive assets.

Also, S&S is the last big Manhattan publisher still owned by an American conglomerate.
The rest of the big american companies sold out long ago, Disney most recently. Warner before that.

[binaryhermit]

In before it's the big 4?

[fjtorres]

Originally Posted by binaryhermit

In before it's the big 4?

Oh, I doubt it'll sell fast.
If at all.

Even assuming Lagardere wants to add it to their previous purchases of Warner Books and Hyperion these kinds of deals take time and lots and lots of travel, meetings, and hankshakes.
The latter, in particular, are problematic today.

One thing is certain: Reidy is whistling past the graveyard if she really thinks nothing will change. If nothing else, the randy Penguin merger precedent makes it clear there will be lots more freelancers in publishing if a sale does happen.

At least there is little risk of a venture capital firm buying them.

[Quoth]

Yet Netflix STILL doesn't make money.
Amazon has AWS profits, their entire retail and video can now be a hobby for Amazon!

Maybe they'd be better investing in offline content, their own online paper & ebook sales etc than streaming which needs massive infrastructure and they could easily be a minnow in an ocean.
Also the cost of producing or acquiring decent video content is astronomical. It's also much more expensive when you do it wrong. Cats?

They are going for the fashionable, hyped market rather than being logical.

[fjtorres]

Originally Posted by Quoth

Yet Netflix STILL doesn't make money.
Amazon has AWS profits, their entire retail and video can now be a hobby for Amazon!

Really?
Amazon doesn't make money?
That tired myth again?
Netflix doesn't make money?

Look it up:

How much was Amazon worth in 1995? How much is it worth today?
($900B to over a trillion, depending on the day.)
How many buildings, acres of land, factories, and patents does it own today that it didn't in 1995 and how much are they worth?

Yeah, that money grew on trees, right? The billions they spend making award-winning movies and series is just being flushed down a toilet? Or loaded into one of Bezos rockets and blasted into orbit?

Amazon is a money mint, generating oodles of free cash flow to pay employees, buildings, computers, and buying valuable assets the world over. They just spend it as fast as they can and turn cash into assets.

And Netflix has a $150M subscribers paying on average $12 a month. Even factoring in customer churning they are grossing billions a year. And promptly spending it on infrastructure and content. Again, Netflix is worth over a hndred billion is assets. That's not made up Enron money. It's real world value of the movies and series they own, the buildings and data centers they own tge worod over, and the patents and technology they've developed.

Video and streaming are trendy because there is money to be made in that business. Money spent on streaming content is being put to work making even more money.

As of last May, 60% of the US population pays for streaming video.
(Books? about a quarter of the population read at least one book last year. And that includes students and technical workers who are *forced* to read.)
And that 60% of streamers was before Disney+ launched and signed up 15M subscribers in 5 days. Not only is tbere lots of money in streaming, it is *predictable* subscription money, not hit-or-miss bestseller of the week money.

A better example is HBO which also has $150M subscribers, mostly on cable, witg 30M on HBO NOW streaming, and is evolving into HBOMAX streaming with double the original content and a massive on-demand library of everything Warner, Turner, and (classic) MGM. Among others. For tge same price as HBO on cable. Why? Because of the $15 a month the subscribers pay, Warner only sees $9. The other $6 goes to the cablecos.

Warner is looking to convert the majority of those customers to streaming offering more content, more flexibikity and making an extra 40%. To do that they will spend $2-4billion. Each year. Of course, an extra $6 a month times (just) 100million subscribers switched to streaming will move over $7B in added revenue each year over what HBO is already making.

Even at ViacomCBS current level of 20-30 subscribers at HBOMAX/Disney+ prices brings in more net in one year than S&S might bring in over a decade or two.

So yeah, ViacomCBS is going trendy.

And kicking themselves for not doing it in 2011 when Netflix started spending big and Amazon started making its own movies and series. Instead, they are desperately trying to raise money to get into the game before one of the really big players buy *them*. Because they do have a lot of movies and series in their catalog. They just haven't been monetizing it. So tgey are IP-rich and cash poor.

It's all about making big money over decades, not dribbles.

Big isn't what it used to be.

[Quoth]

Originally Posted by fjtorres

Really?
Amazon doesn't make money?
That tired myth again?
Netflix doesn't make money?

No, I said Amazon makes so much from AWS that the retail and streaming can be a hobby. Amazon artificially didn't make profits from retail as they ploughed 100% into AWS and acquisitions.

I have NEVER ANYWHERE EVER suggested Amazon doesn't make money. Absolutely the reverse.
https://en.wikipedia.org/wiki/List_o...ions_by_Amazon
Amazon are in the league of Google/Alphabet and Apple for profitability.
Amazon: Services/Cloud + Retail (AWS is now bulk)
Google: Adverts + Services/Cloud (Adverts massively the main thing)
Apple: Margin on iPhone, iPad, Watch + Services (rising fast). The Mac is almost irrelevant to them for 10 years.

Google's main Advert competitor is Facebook, and for Services is Amazon and Microsoft.

Netflex is not profitable and is a one trick pony. They don't have the long term resources to compete with Amazon and Disney.

My point is that video streaming is now a crowded market and only companies that have big alternate resources and/or content (Amazon, Disney etc) will survive.

[DNSB]

Originally Posted by Quoth

Netflex is not profitable and is a one trick pony. They don't have the long term resources to compete with Amazon and Disney.

My point is that video streaming is now a crowded market and only companies that have big alternate resources and/or content (Amazon, Disney etc) will survive.

The last time I looked at NetFlix's financials, for 2019, their gross revenue was shown as ~$29 billion (North American billion so 9 zeros) with a gross profit of ~$7.7 billion and a net income of ~1.9 billion. You can check at Netflix Financial Statements 2005-2020 | NFLX for more information.

I will have to agree that going forward, NetFlix may be in for trouble considering the number of well-funded and stocked with content competitors joining the market. With the continuing fragmentation in the streaming market, most consumers are going to be looking at using 4 or more streaming services to obtain the same content they are currently enjoying.

[Quoth]

Ah but their debt!

[fjtorres]

Originally Posted by Quoth

No, I said Amazon makes so much from AWS that the retail and streaming can be a hobby.

Those "hobbies" are bigger than the entire US publishing business in gross and net.

There's way more to the Amazon Empire than just AWS.
As is, while everybody is looking at AWS, they are already looking to put their money to work on an even bigger thing. Project Kuiper, for one. Health care is another.

As for Netflix, they are a *global* business.
Already established in over 190 countries. Us revenue is still inchng up but tgeir international business is growing big.

Disney+ came and they still grew their membership. No significant losses.

As Disney and Warner and (maybe) Peacock settle in their share of the total US market will go down but it will take time and, more importantly, the total numbers won't. The near term key for them is that being first mover they are two steps ahead of the studio services. While Disney is rolling out country by country, Netflix is already out there and producing local content in those markets. India alone has over 7000 local titles. Turkey. Latin America. Germany, Italy, Spain, they're all producing content for Netflix.

And Netflix exclusives aren't just the ones they own lock stock and barrel. That's where Forbes and the other Netflix naysayers get it wrong: global streaming is hard to do, let enough do it right. Netflix is already doing it right.
So yeah, they're losing Disney and Warner and NBCU *over time* but that simply frees up the big money they were paying those guys to license otger people's content. And because setting up a streaming service is beyond so many studios, there will still be plenty of content to license from international and smaller American studios. For the US and other markets.

Disney and co will do the same but not now. Just getting a foothold in the US, Europe, etc will take the bulk of their effecorts for years. Meanwhile, Netflix will keep rolling alobg with the strategy they conceived in 2011.

Point to consider: Warner sold itself to AT&T and NBCU to comcast, FOX to Disney because they didn't have the deep pockets for the game. Good moves. But in doing so, they saddled the merged companies with huge debts. Before the new content expenses. ViacomCBS has a similar problem. The merged company today is valued at barely half what the two pieces were last year. Netscape's debt is small compared to their valuation and it all stems from creating new assets.

However the game ends up, they'll still be arond when the disruption stabilizes because *none* of their income comes from cablecos.

The flip side of cordcutting is less money is flowing to the cablecos and tgus to the companies running the live tv channels.

Disney made it clear that shifting from cable to streaming as their primary distribution was going to cost them money in the short term. Warner is in better shape but they are treadung lightly during the transition, but tge AT&T side is hurting. They'll probably end up selling DirecTV. NBCU is in the worst position because the comcast side is deep in live TV over cable and ibternet revenue won't make up for the losses.

The whole sector is in disruption, just as publishing was a decade ago.

Netflix will be fine, along with Prime, Disney and HBO. The rest? time will tell but they too serve who end up as roadkill.

[fjtorres]

Originally Posted by DNSB

The last time I looked at NetFlix's financials, for 2019, their gross revenue was shown as ~$29 billion (North American billion so 9 zeros) with a gross profit of ~$7.7 billion and a net income of ~1.9 billion. You can check at Netflix Financial Statements 2005-2020 | NFLX for more information.

I will have to agree that going forward, NetFlix may be in for trouble considering the number of well-funded and stocked with content competitors joining the market. With the continuing fragmentation in the streaming market, most consumers are going to be looking at using 4 or more streaming services to obtain the same content they are currently enjoying.

Churning is the enemy of streaming.
Sign in for a month, binge "the good stuff", suspend and activate another service.h
Netflix has it factored in. The newcomers are aware of the challenge but are more vulnerable. Fox example:
THE MANDALORIAN did great for Disney. While it ran.
Won't be back until the fall, though. In the meantime people only sighed up for it (me!) go elsewhere. Other big ticket originals (Marvel) aren't due until 2021.
There's a reason Netflix staggers its high profile exclusives so there is something interesting every month for most every one.

Variety had a good piece on Netflix's position a couple months back.

https://variety.com/2020/digital/new...on-1203469237/

A company valued at a hundred billion, with $14.2B in long term debt, spending $11B on content per year (licensed and owned combined), is a pretty healthy company. They are growing is a growing market (streaming) and have zero exposure to the shrinking one (live TV).

In contrast, ViacomCBS is deep into live TV, is vakued at a fraction of Netflix, and has bigger expenses coming. (Plus the movie division hasn't been too hot lately.)

Hence it's bye-bye S&S.
If they find a taker.

[Paperbackstash]

I hope it turns out well because I like the company and don't want us to go from the Big 5 to the Big 4. So much depends on who buys them and what direction is taken.

[Quoth]

I apologise for misrepresenting Netflix. I guess I'm way behind the times.
However my main point is that Viacom-CBS is flogging off something with a long term future for a gamble in a very competitive market that needs very very deep pockets.
I hope someone "sensible" buys S&S and there is still a Big 5 and not 4.

[fjtorres]

Originally Posted by Quoth

I apologise for misrepresenting Netflix. I guess I'm way behind the times.
However my main point is that Viacom-CBS is flogging off something with a long term future for a gamble in a very competitive market that needs very very deep pockets.
I hope someone "sensible" buys S&S and there is still a Big 5 and not 4.

No apologies needed.
It's a very fluid business.
Think ebooks circa 2009-2010, when tradpubs realized there was big mobey in ebooks.
And then discovered ebooks threatened the economics of print.

Substitute ebooks for streaming and print for cable.

Cable is losing customers by the million and looking to make up the lost revenue from internet service. Just as 5G wireless and low latency satellite is starting to come online.

Smaller cable companies are alrrady getting out of live TV.
Bigger changes to come.

As for the S&S sale the main issue is price.
ViacomCBS may be overvaluing S&S if they expect to get $1.5B.
(Recent reports say they tried to sell STAR TREK but the ask was way out of line with its current degraded value.)

Somebody will eventually buy S&S. Lagardere most likely. News corp another suspect. Maybe a smaller international publisher from China or India.
Or maybe nobody.

They're just "exploring" after all.

[Quoth]

Originally Posted by fjtorres

Cable is losing customers by the million and looking to make up the lost revenue from internet service. Just as 5G wireless and low latency satellite is starting to come online.

But 5G is Niche, not broadband. It's mainly for stadiums, race courses or to monetise public WiFi for mobile operators. Mobile / Cellular can never ever deliver broadband unless every other lamp post is a mast.

The only way to have reliable streaming, never mind more than one user in the home or HD or 4K is Fibre or HFC (Cable broadband where the cable goes to a fibre fed street cabinet). To an extent VDSL can deliver streaming, but at 1km you are down to about 20 Mbps or less depending on line quality and crosstalk.

ONE cable Fibre to the Cabinet and coax or twisted pair an average european street has more capacity than satellite for an entire region.

I worked as comms engineer for years and in an ISP's R&D. Mobile no matter what "G" nor satellite can ever compete with 15 year old fibre to the kerb or Cable company HFC, never mind fibre to the premises/home. Basic physics.

The 5G is actually more about allowing seamless switching of VOIP and data between 2G / 3G / 4G masts and also WiFi, rather the RF. The existing bands can only go faster by tripling the mast density (look up how cellular works). The bands below 900MHz are only low capacity and mostly rural, at 700MHz the cells get too big and hard to control size. Above the current 2.1G (Europe 3G and 4G) the bands are larger to allow more speed, but 4G vs 5G makes no difference to speed per MHz. A lightly loaded 3G HSPA is as fast as 4G or 5G per 5MHz. The higher bands are progressively more line of sight and short range.
More speed needs either fewer people on a mast, or more handset power, shorter distance or a wider band. See Shannon-Nyquist information theory and laws.

Satellite is very cheap for DTH broadcast. It's massively expensive and limited in speed per user, if the service is popular. Lower orbit Satellites only solve the latency issue. Two way satellite is brilliant for emergencies or wilderness. It's pointless even in most of Africa, which already is getting the complementary Mobile and Fibre (Cities).

[fjtorres]

Originally Posted by Quoth

Satellite is very cheap for DTH broadcast. It's massively expensive and limited in speed per user, if the service is popular. Lower orbit Satellites only solve the latency issue. Two way satellite is brilliant for emergencies or wilderness. It's pointless even in most of Africa, which already is getting the complementary Mobile and Fibre (Cities).

I have lived for months on end via a 4G LTE router when a storm destroyed local cable. It was a bit more expensive but fine for HD video streaming and gaming.
5G doesn't need to be much better than 4G to replace cable. Because 4G is barely good enough. And locally ATT has been installing 5G all over.

The thing is, streaming isn't terrible bandwidth intensive by today's standards.

As for LEO satellite constellations, it's a different technology than you're used to.
Designed expressly for single users.
It is actually lower latency than fiber.
Plus it goes everywhere, including the hinterlands. Which are the places getting the worst treatment from cablecos and Telcos.
The squeeze from 5G and LEOSATs is already starting to constrain the cablecos.

5G is going up in most urban and suburban areas and there are at least three global constellations at varios levels of implementation. STARLINK, ONEWEB, and KUIPER. All with deep pockets to put up the satellites by the thousand.

The lead belongs to SpaceX STARLINK. They have around 200 satelites in pace, with 120 more going up each month. They expect to have initial operation in the southeast US and the Caribbean by June.
Here's a look at their financial prospects:

https://www.forbes.com/sites/greatsp.../#4da766e1ff87

Here's a tech overview:

https://www.youtube.com/watch?v=giQ8xEWjnBs

The consumer side is pizzabox sized that just needs to be aimed up. Alignment is irrelevant because that satelite train will be close enough for automatic link up.

There is no maybe about this.
The US DOD has tested it and found it an improvement for global drone comms and combat aircraft. And because of the number and speed of the LEOSATs (plus the on-orbit redundant backups) the system is ASAT-resistant.

Cable will have a peak speed advantage but the vast majority of consumers, even 8K streamers, don't need peak speed. Gigabit is possible with this tech but not needed for streaming. So the cheapes levels will do. And cordcutting will follow.

One result is that without their regional wiring monopolies, the cablecos will be constrained in how badly they can gouge consumers. In fact, most cablecos are already starting to lift caps and boosting speeds.

Verizon, for one, is doubling FIOS speeds for free, bringing their network to South Korean spec.

https://www.cordcuttersnews.com/veri...-extra-charge/

So is my local cableco.

Cablecos have long been gouging consumers because of their monopoly grip on service but that is changing. Right now.

They won't go away but their blank check pricing will.
Now they need to sing for their supper.

The consequences are rippling all over resulting in, among other things, less LIVE TV income for ViacomCBS.
Hence their scramble for cash.

Basically, the 21st century caught up with their 20th century practices.
The next decade will bring lots of roadkill.

(And Starship hasn't flown yet. But that's a whole different disruption.)