The media ecosystem is constantly evolving, disaggregating, and consolidating. The following is a lightly edited conversation between William D. Cohan, the longtime journalist and former M&A banker, and Dylan Byers, one of the foremost observers of the evolving tech-entertainment-financial landscape, about what’s really happening inside the industry.
Dylan Byers: So Bill, something happened last week that made me think of you. I was having—I was going to say coffee or drinks, but come to think of it we didn’t have anything except bottled water—with a prominent media executive (P.M.E.) and he tells me he thinks that journalists get it wrong when they state or imply that Shari Redstone is going to sell ViacomCBS.
According to the P.M.E., Redstone is very happy to finally be in charge of the company, she’s enjoying herself, and she’s not looking to offload it. I countered with the usual arguments about scale and consolidation and the reality that ViacomCBS will eventually, and necessarily, one day be acquired by someone: Comcast, Warner Bros Discovery… you name it. And the P.M.E. responds: Oh, totally, but that’s in 4 to 5 years.
The comment made me laugh, because in the world of M&A, 4 to 5 years is essentially tomorrow. Anyway, it made me wonder about your best estimate for when Shari sells and who the potential buyer(s) will be?
William D. Cohan: Well, of course, Dylan, both things can be true. P.M.E. might be exactly right. I am sure Shari is loving being the Big Fromage at ViacomCBS, finally free of her father and all the other nettlesome board members and executives that had little time for her. The director and the management ranks have been purged of all subversives and there is little doubt that she is the absolute monarch. So good for her. But that only takes Shari so far.
At the moment, ViacomCBS has a market value of $21 billion. Redstone may control nearly 80 percent of the voting power of the company—there’s no doubt she has all the reins she’ll ever need—but she has only a net worth of around $2 billion based on her and her family’s ownership of the stock. Don’t get me wrong. That’s plenty of money for anyone, or any family. But it’s largely tied up in her illiquid stake in ViacomCBS. The main reason, in my opinion, that she pushed repeatedly for the re-merger of Viacom and CBS—often over the objection of Les Moonves, the former CBS C.E.O.—was because it would be easier to one day sell her family’s stake in the company and convert the stock in ViacomCBS to cash, or liquidity of some kind. (Bitcoin, Shari?) She can’t do that until she finds a bigger company that will buy ViacomCBS either for cash, which would be a taxable event, or for stock, which would not be taxable until she sells, but which would make it easier to sell without tanking the value of ViacomCBS.
The problem with controlling so much of ViacomCBS is that she is pretty much unable to sell her stock, except through a merger or sale to another company or some other person. (Elon Musk could take it off her hands pretty easily.) So sure, I have no doubt Shari loves being the power behind ViacomCBS and loves getting plenty of attention at the Allen & Company conference. But she’s got three children who I am sure would love to get hold of some of their considerable fortune, in cash, before too long.
Byers: That all sounds right, and on top of it I also just think it’s increasingly hard to play in Hollywood at ViacomCBS’s size. Meanwhile, it’s an obvious acquisition target for any big player still pursuing scale—whether that’s the Discovery-WarnerMedia tie up, or Comcast/NBCUniversal, which is still chafing from losing WarnerMedia to Discovery. It just seems to me that for Shari, there comes a time in the next 4-5 years where someone makes an offer she can’t refuse.
Cohan: Just one quick follow-up here. Do you think Comcast is genuinely interested in buying ViacomCBS, as has been rumored? I can’t see it, especially because it would have to choose between owning NBC and owning CBS, and I don’t know how they make that choice. And then it would have to find someone to buy the one it doesn’t keep. I also don’t know what Comcast would find attractive about most of ViacomCBS’ cable assets, with the exception perhaps of Comedy Central, Showtime, and maybe Nickelodeon, which has underperformed for years but has mineable I.P. for the streaming age.
Byers: So, I think this gets back to time tables. If you’re thinking in terms of the present day, or the next few years, no, ViacomCBS doesn’t make a lot of sense for NBCUniversal. But fast-forward a few more years ahead: it seems like we’re advancing toward a world where only four or five big companies control most of the media, and that includes the likes of Apple and Amazon. NBCUniversal doesn’t get to have a seat at that table without scaling up significantly, and there really isn’t any way for them to get there without adding assets or, more likely, being absorbed by someone else. If that means buying ViacomCBS, getting rid of the CBS brand, and folding CBS entertainment, sports and news assets into NBC, so be it. It’s messy and complicated and it will take a lot of work and maybe some regulatory battles, but it can be done.
Actually, if there’s any real impediment to that deal, it’s that it doesn’t get NBCUniversal enough scale. What’s more likely, I think, is that NBCUniversal—with or without ViacomCBS—one day merges with Warner Bros. Discovery. I know a lot of people think this is impossible: How can MSNBC and CNN be part of the same company, for instance. The answer is that in the grand scheme of history no one cares. As a matter of fact, they’re already obvious bedfellows.
Cohan: So Dylan, speaking of MSNBC… It seems to me the cable channel is a bit of a lost soul these days, for the first time since its founding more than 20 years ago. With the departure of Brian Williams and the shuffling off-center stage of Rachel Maddow, I have got to believe there is quite a bit of concern over at 30 Rock these days. Combine that with the fact that fewer and fewer people are watching the channel now that Trump is gone—for the time being, at least—it seems there is a real existential threat there.
What’s more, I can’t quite get over the irony that people there seem to be pinning their hope for the future on Nicole Wallace, who is hardly a progressive’s dreamboat, having worked in the George W. Bush administration. Don’t get me wrong, Wallace is a force for sure and she’s great at her job. But if the great progressive siren, MSNBC, is pinning its future on a former official in the Bush administration, something can’t be right at 30 Rock. Would love your thoughts on this.
Byers: There is a very real existential threat there. Rachel Maddow defined what MSNBC is in primetime, and they built the entire lineup around her brand of progressive politics. But they never identified an heir to the throne. There are plenty of other liberal hosts at MSNBC, but none of them make for distinctive, let alone great, television. So there’s no obvious successor to Maddow in the way Maddow was an obvious successor to Keith Olbermann. And if you need any evidence of how integral she is to the business, look no further than the fact that they paid her $30 million a year to work less.
But you go to war with the army you have, and in this case the strongest soldier is Nicolle Wallace—because, as one former NBC executive put it, she is “producible,” meaning she at least has the potential to become a star. As for her political history, she has the blessing of MSNBC audiences now because she’s a staunch Never Trump Republican. And anyway, politics are secondary. The first question in television, even in news, even for a politically affiliated network, is always: What makes for the best TV?
But while we’re on NBCUniversal… You’ve written a lot lately about GE, which is the subject of your forthcoming book, Power Failure. What was your biggest takeaway from the company’s ownership of NBC?
Cohan: Believe it or not, a combination of Jack Welch, Bob Wright, Tom Rogers and David Zaslav were the first executives of network TV to recognize that what we now call “linear TV” was, or is, a dying business and that the savior for network TV was in cable. GE almost bought Cox Cable in the late 1970s because Jack believed in the cable business; GE only lost the deal because the Cox family kept jacking up the price of the property after Jack thought he had a deal for it. When Jack decided to walk away from the Cox deal, and had to make that recommendation to the GE board, he feared he had also blown his chance to be C.E.O. But he hadn’t.
History is mysterious. Before GE walked away from the Cox deal, Jack had sent Bob Wright to Atlanta to help manage the Cox properties, assuming GE was about to take control of them. Wright decided to stay at Cox anyway, and remained there for three years before Jack lured him back to GE. That’s where Wright learned the cable business. After GE bought RCA in 1986, Jack installed Wright at the head of NBC; that’s when Wright and Rogers and Zaslav embarked on their ambitious plan to diversify NBC into cable. They created both CNBC and MSNBC, bought Bravo, Telemundo, among many other cable channels. They were real pioneers, along, of course, with John Malone, at TCI. They saw around corners to the future. Sadly, Jack’s successor, Jeff Immelt, ended up believing that GE and NBC Universal weren’t a good fit. He sold NBC Universal to Comcast—alas, too cheaply—during the 2008 financial crisis. GE ran NBC well and many on Wall Street consider Jack’s 1986 acquisition of RCA to be one of the best deals ever.
Cohan: We are living in an age of pitched cable drama. I can’t help but see so much of the Murdoch family saga in Succession, with a twist of the Redstone drama thrown in for good measure. But I would love to get your thoughts about how you see the dynamic playing out between James and Lachlan Murdoch.
Clearly, Lachlan is in control now. But once upon a time he was out and James was in. Now James is out and Lachlan is in. Is this a permanent state of affairs, do you think? Or do you see a way for James to re-enter the family business? Are any of James’ investments that he is making with his own money paying off? Is he just irrelevant now? Or is there any way that James’s cooler rationality can prevail in that mess of a company?
Byers: I don’t have nearly as good of a view into Murdoch-world as I’d like, but from what my sources tell me, I think James is on the outs for good. I don’t think he’s demonstrated any desire to go back into business with his father, and I don’t think his father would let him. The other big mystery to me with them is, when and how do they sell Fox Corp, and does Fox News have a place in that deal? It’s obviously a very lucrative business, but it’s toxic for any major media player that would buy it. So I think whenever the time comes for Fox to sell, Fox News gets spun off and you really just focus on the entertainment and sports assets.
As for James’ investments, you probably have a better perspective on this than I do. What’s his reputation on Wall Street, and among other investors?
Cohan: Even though James has around $2 billion in his kitty, he’s considered pretty much a non-event on Wall Street. Let’s face it, $2 billion ain’t what it used to be. The Harvard-educated Murdoch founded Lupa Systems in 2019 to make his personal investments, which so far have included investments in, among others, Vice Media, Authentic Artists, an A.I. virtual artist platform, the Tribeca Film Festival, and Doubtnut, an Indian education company. We don’t have to worry about James. I’m sure he’ll be just fine. But it must wrankle him to be stuck on the outside looking in, even though he’ll say he’s never been happier. I mean, does Kendall Roy seem all that happy right now?
One last question for you, Dylan. I know there has been talk of Disney selling or spinning out ESPN. But do you ever envision a time when the whole of what used to be known as Cap Cities—i.e. the entire ABC network—gets spun out of Disney? I mean, with digital streaming such a big part of the Disney propositions these days, it’s getting harder and harder to see how ABC fits in with Disney. It’s not as if ABC is a leader in cable channels or streaming, or is even trying to be. Plus, when you add in the personnel scandals that have been prevalent there lately, it all seems very un-Disney-like. Might Bob Chapek ship the whole thing out the door at some point, now that Bob Iger has had his big Brentwood bash and is himself out the door?
Byers: First let me say that, since reporting on Disney’s ESPN spin-off considerations, I am even more bullish on the prospect that they will follow through on that. I think Disney will move it outside and let someone else manage the business, while they continue to draw cash. I’m not 100 percent certain that will happen, but I think it’s more likely than not. Now, can you do the same for ABC? It’s certainly possible. The primary value of Disney’s linear television business right now is in its studios, which produce the content for Disney+ and Hulu. But if they can find a way to keep the studios while offloading the linear assets? Sure, I think that’s very possible.