The EconomistAugust 17th 2019 Business 492
A
merica’s mediabusiness once lion-
ised boutique firms and their icono-
clastic bosses. No longer. Like so many oth-
er industries, it has come to be dominated
by a few huge companies focused squarely
on achieving economies of scale. Besides
Netflix, a pioneer of video-streaming with
a market capitalisation of $131bn, most of
the giants were created through mergers.
at&t’s acquisition of Time Warner pro-
duced a $250bn behemoth. Disney’s take-
over of 21st Century Fox in March has
created a juggernaut worth just under
$240bn. Verizon, another telecoms titan,
which in 2015 snapped up aol, an online
portal, comes in at $230bn. Just shy of
$200bn, Comcast, a cable company which
last year bought Sky, a British satellite
broadcaster, is the tiddler of the bunch.
Against this supersized backdrop Via-
com, a content provider with a market val-
ue of nearly $11bn, and cbs, a television net-
work worth some $17bn, look like flailing
minnows. But they do control some prime
media properties, including Paramount, a
Hollywood film studio, and tv series such
as “csi” and “South Park”. And this week,
after years of wrangling, the two firms
agreed to merge in an all-share deal engi-
neered by Shari Redstone, daughter of
Sumner Redstone, a legendary tycoon (who
is aged 96 and ailing).
The two firms were once united but Mr
Redstone broke them up in 2006. The Red-
stone family’s investment vehicle still
maintains control of both companies
through its holdings of shares with en-hanced voting rights. Ms Redstone over-
came many foes, including Les Moonves,
the formidable former boss of cbs who was
forced to resign last September following
allegations of sexual harassment, which he
denies. She will chair the combined entity,
which is to be called Viacomcbs. cbs share-
holders will control roughly 61% of the
combined enterprise. Bob Bakish, a Via-
com veteran who is to lead the new firm,
expects yearly revenues to exceed $28bn
and annual savings of $500m within the
next two years.
The deal undeniably enhances the mar-
ket muscle of the two companies. The
merged firm plans to push its own “direct-
to-consumer” streaming services harder.
And it is expected to spend some $15bn on
new content this year, about as much as
Netflix. Added to an extensive library of
popular shows, from cult television pro-
grammes like “Star Trek” and “Big Bang
Theory” to blockbuster movie franchises
such as “Mission Impossible”, this will put
Viacomcbsin a stronger position to nego-
tiate with big distributors.
Energised by her latest success, Ms Red-
stone may in time try to make another ac-
quisition. That is because, as Kerry Fields
of the Marshall Business School at the Uni-
versity of Southern California argues, “the
new firm is still sub-scale”.
Disney is splashing out nearly twice as
much on new shows this year. Despite the
fact that many likely aggressors are still di-
gesting recent acquisitions, there is al-
ready talk in industry circles of an impend-
ing second wave of media mergers.
If the speculations are correct, Ms Red-
stone’s deal, which has long seemed inev-
itable, may also prove an inadequate de-
fence against potential acquirers with a lot
more financial firepower. Indeed, by fat-
tening up cbswith Viacom she may even
have manufactured a firm that will prove
an irresistible prey for one of the industry’s
big guns. 7NEW YORK
After years of bitter wrangling, Viacom
and cbs agree to reuniteMedia mergersTogether again
TikTok, a video-sharing app that, in a first
for a Chinese social-media platform, is all
the rage among Western teens. ByteDance
is also challenging Baidu in search, which
explains some of the latter’s underwhelm-
ing performance. Alibaba still relies on its
e-commerce business for 85% of revenue.
A slowing domestic economy may hurt it,
as it might jd.com. Alibaba’s foray into de-
signing chips for cloud-computing and the
internet of things is at an early stage.
These higher-tech lines of business
promise riches in the future. They are also
more sensitive to geopolitics than are on-
line marketplaces—and the technological
conflict between America and China is not
going to end anytime soon. The 90-day re-
prieve granted to Huawei expires soon. It
might not be extended.
Another threat to China’s companies
may come from within. It could take the
form of (healthy) competition from up-
starts like ByteDance or (less healthily) a
slowing economy. It could also manifest it-
self in Chinese tech’s inward turn in re-
sponse to the trade war. By focusing exclu-
sively on their home market companies
might fall into the trap of cutting them-
selves off from the wider world and the big-
ger ideas it contains.
For the time being, then, China’s tech
companies look well insulated. That virtue
could one day come to haunt them. 7*EstimateWar-tornSources:DatastreamfromRefinitiv;BloombergShare prices,January1st2019=100Revenues,yuanbnJan Feb Mar Apr May Jun Jul Aug
2019406080100120140160
JD.comNASDAQ 100 indexAlibabaTencentBaidu0 30 60 90 120 150
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DianpingQ2 2018 Q2 2019****Huawei ban announced