Why Viacom Spent $760 Million on U.K.'s Channel 5

Philippe Dauman
Philippe Dauman
 AP Images

This story first appeared in the May 16 issue of The Hollywood Reporter magazine.

Viacom made history May 1 when the conglomerate unveiled a $760 million acquisition of U.K. broadcaster Channel 5, its largest deal since 2006's CBS Corp. split and the first time a U.S. company has agreed to buy a British free-to-air TV provider.

STORY: Viacom's Big U.K. Bet-- CEO Philippe Dauman Discusses Channel 5 Deal

But the pact was in line with the industry trend of looking abroad for growth, given the mature U.S. media market. Although film studios have focused on China and other emerging markets as growth drivers, their parent companies have shopped for TV networks across the pond. "Europe is a good place to invest as you have a strong dollar to spend in a market that is starting to recover," says Janney Montgomery Scott analyst Tony Wible. "It provides a nice blend of developed and more emerging markets with content that may be easier to export to other Western markets." Adds Maxim Group analyst John Tinker, "European countries allow media companies to operate relatively freely" compared to the likes of China.

With the Channel 5 pact, Viacom joins recent Europhile dealmakers Discovery Communications, which acquired SBS Nordic last year and is taking a majority stake in Eurosport International, and AMC Networks, which now owns international channels business Chellomedia. "Viacom generated 16 percent of its revenue from Europe in 2013, so this acquisition in one of the strongest markets in Europe will help diversify the company's exposure," says ISI analyst Vijay Jayant.

Viacom CEO Philippe Dauman has said his team will use its programming expertise to further boost the ratings of Channel 5, known for the U.K. Big Brother and such U.S. hits as CSI and The Mentalist. And Dauman tells THR that the deal allows Viacom "to invest in more original programming on Channel 5 that can also be exported to our networks outside the U.K., including the U.S."

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