Good evening, I'm William D. Cohan.

Welcome back to Dry Powder. Today, I'm talking with my colleague Dylan Byers about the ongoing seismic transformations of the media industry—the dynastic politics, M&A battles, and inside conversations that are likely to determine the future of legacy media and cable news.

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Have a great Thanksgiving,

Bill

MSNBC Panic, the Reign of Redstone, and the Murdochs’ ‘Succession’ Drama

Inside the dynastic politics, boardroom dramas, and M&A land-grabs that are reshaping the media-tech-financial landscape.

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...

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