Editor's note: Seeking Alpha is proud to welcome Patrick Kroneman as a new contributor. It's easy to become a Seeking Alpha contributor and earn money for your best investment ideas. Active contributors also get free access to SA Essential. Click here to find out more »
Since earlier this month, the boards of both CBS Corporation (CBS) and Viacom (VIA, VIAB) finally decided on the terms of re-merging the two companies. This merger provides a change for CBS shareholders to get Viacom at a discount and achieve cost savings. The new company should perform well in the new media landscape. Since the Redstone family has 80% of both companies voting power via National Amusements, the deal seems set.
Introduction
The business model for media companies is rather straightforward: Have as many eyes and ears pointed at you for as long as possible while charging as much as possible. Next, use this fact to sell interruptions, associations and placements to third parties for as much as possible. Lastly, if possible, license the things people want to see and hear to other media companies for a piece of the action.
Ever since parties such as Netflix (NFLX) and YouTube (GOOG) busted on to the scene, the delivery method has changed significantly. Content is widely available to watch when you want it and where you want it. This has severely reduced the moats of media companies by reducing the power of attracting a lot of views to a limited series of channels with predefined content. This has shifted the balance more to the content side and reduced the distribution power of the traditional channels, even if for now the first movers advantage of OTT platforms gives a temporary edge. For Viacom, for example, this means that viewers who want to watch music videos, don't have to watch MTV and
