IF IT ENTERTAINS, VIACOM'S $26B GIANT WILL OFFER IT

By Published on .

Most Popular
If you wanted to design the ideal multimedia entertainment machine to navigate the burgeoning TV superhighway, it would probably look something like the soon to be merged and as yet unnamed Viacom/Blockbuster/Paramount entity.

With an unequaled mix of software and hardware components, the new $26 billion media conglomerate has the flexibility to deliver entertainment media product to consumers in virtually any form, whether it be through a neighborhood retail outlet or a full-service electronic retail channel.

Exactly what new media products will grow from the merger may only be known to Viacom Chairman Sumner Redstone, Viacom President-CEO Frank Biondi and their new partner, H. Wayne Huizenga, chairman of Blockbuster Entertainment Corp. But the blueprint has already been established at Viacom.

When MTV's "Beavis & Butthead" reached cultural icon proportions, it was a natural for Viacom to develop the copyright into a movie, a book, a new interactive videogame and hundreds of other licensed applications.

That model shows the virtually unlimited possibilities for the new company, which has the potential to mine multimedia gold from programming franchises like MTV: Music Television, Nickelodeon, Paramount Pictures Corp., Paramount Television and Spelling Entertainment Group, not to mention five major sports franchises, including the New York Knicks and Miami Dolphins.

"This is a company that is really software driven. They have products and names that are extremely visible to the consumer, and I would expect that you will see an unlimited cross-pollination of product names," said Edward Hatch, analyst at UBS Securities, New York.

"From an advertiser's point of view, it creates opportunities for integration with programming in ways that have never been done before ... to sponsor copyrights from the beginning to the end" of their distribution, said Jack Myers, president of the Myers Reports, Parsippany, N.J.

"Advertisers are increasingly looking to associate themselves with specific programs, as opposed to networks and channels," Mr. Myers explained. "As you look at Viacom's opportunity to expand its program brands via movies, home video and ultimately into a full-service network, it creates opportunities for advertisers to attach themselves to those brands right through the distribution stream."

And potentially, that gives media buyers "the opportunity to do some things from an advertising perspective that we haven't seen before," agreed Betsy Frank, senior VP-director of TV information and new media at Saatchi & Saatchi Advertising, New York.

"We don't know exactly what that may be, but they now have a mechanism for their programming to be distributed via network, cable, syndication and ultimately into home video," Ms. Frank said. "It's an intriguing idea for an advertiser. If there's a hook between the advertiser and the content, it takes you out of the channel of distribution and associates you with the programming."

In turn, the unique combination of programming and media assets could spawn wholly new products.

Among the options, said Bishop Cheen, senior analyst at Paul Kagan Associates, Carmel, Calif., is the logical progression of Blockbuster Video's retail stores into an electronic retail outlet known as the Blockbuster Video-On-Demand Channel, a hypothetical channel that would enable consumers to order any video in the company's extensive program library without going to the video store.

Such an evolution would allow Blockbuster to hedge the home video side of its business and Viacom to develop a unique brand name relative to its existing Showtime, Movie Channel and pay-per-view ventures, said Berge Ayvazian, senior VP at the Boston Group, a market research company.

Meanwhile, the company will be developing other forms of electronic retailing.

"Sumner Redstone has committed Biondi and his troops to establishing an interactive software development team" to create formats for TV shopping by next year, said R. Fulton Macdonald, president and managing director of the consultancy International Business Development.

Indeed, Viacom's MTV Networks unit recently announced plans to develop a home shopping channel in conjunction with Fingerhut, and other forms of electronic retailing are expected to be tested on Viacom and AT&T's interactive TV test.

But Chris Dixon, a media analyst with PaineWebber, sees some more immediate products emerging from the merger, including educational and entertainment CD-ROMs that take advantage of all three companies' strengths.

"The fastest growing segment in interactive media is the development of CD-ROM and cartridge forms," Mr. Dixon said. "Paramount is developing interactive learning products using the databases that exist for their educational publishing" division.

Another project he expects to see emerging from the combined companies: retail stores much like the profitable shops operated by Time Warner and Walt Disney Co. Such stores would sell licensed merchandise based on dozens of characters. But the integration of such assets could depend on Viacom's need to raise capital. Mr. Redstone said he does not plan to sell any of the merged companies' assets, but some Wall Street analysts believe he may not have any choice if Viacom's stock price drops further.

Contributing to this story: Gary Levin, Scott Donaton and Jeffery D. Zbar.

In this article: