1. Assess the entertainment content industry. How will this impact the strategy of businesses in this industry? What sources of competitive advantage does Viacom have or not have that will impact their strategy?
2. What corporate level strategies have made Viacom successful? What strategies should it use in the future?
3. Did Sumner Redstone possess characteristics of good strategic leadership?
4. What could Viacom have done to create better synergies in its acquisitions?
Founded in 1970 as a cable service company to comply with regulations set forth by the FCC, Viacom was quickly became one of the largest cable operators in the U.S. As a spin off from CBS, Viacom, as indicated in this case, has transitioned and changed many times throughout its existence. In the 1980s, constrained by regulated cable prices, Viacom entered the content developer business, most significantly by purchasing MTV networks from Warner Brothers. However, it was unable to capitalize on its content properties, and became a takeover target, which led to Sumner Redstone buying it for $3.4 billion. Redstone's takeover of Viacom was fueled by his belief that cable television programming would become the dominant means of providing consumers with their entertainment content in the future. However, the cable industry entered a state of flux as emerging technologies and questions arose about how content would be delivered. With a business model premise that a company needed to be the provider of entertainment to all the different distribution channels, Viacom wrestled with the most cost-effective approach in doing so. As a result, Viacom created a new mission which included acquisitions of companies that could produce unique entertainment programming content for worldwide distribution. The three-way merger of Viacom, Paramount, and Blockbuster Entertainment spawned the need for greater company synergies but also a wave of consolidations and globalization in the media and entertainment industry. Despite realizing the benefits of deregulation, Viacom experienced only temporary success due to continued debt burdens and lack of synergies being achieved by its merger. Taking a turn to focus on providing advertising service throughout its distribution channels, Viacom created new units, continued to make deals, and mergers beginning with a linkage back with CBS. With a comfortable state of mind and the appearance of turnaround, Viacom was newly confronted with Internet technologies that prompted a reconfiguration of their business model. New CEO, Dauman, aimed to create a new business model based on "creative excellence" and focus on strategic movie, TV channel and Internet internal ventures and acquisitions.
Dauman recruited a top management team of media experts to develop hit new shows for its networks, shows that could be made at relatively low cost such as reality programming. Viacom excelled at creating new shows that resulted in major increases in its advertising revenues and profits. At the same time, Dauman was vigilant to protect the value of Viacom's digital content and in 2009 it sued Google because it claimed its YouTube channel was allowing the streaming of thousands of its TV shows and movies. In August 2011, Viacom announced that its 3rd-quarter earnings grew 37% percent, the media company earned $574 million, or 97 cents per share, up 37 percent from $420 million, or 69 cents per share, a year earlier, global advertising revenues grew by 14%, and stock price had increased by 150%.