Viacom's Streaming TV "Arms Dealer" Strategy Paying Off (For Now)

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Illustration by: Laemeur

CEO Bob Bakish is carving out a lucrative short-term niche "renting" IP and inking massive deals (like for 'South Park') with streaming platforms desperate for content: "It's not a zero-sum game."

In 2013, Nickelodeon pulled its library from Netflix in an attempt to stem its free-falling linear ratings. Now, Viacom's kid-focused cable network has pivoted in the opposite direction: supplying the streaming giant with new film and TV series, including a SpongeBob SquarePants spinoff, in a Nov. 13 deal valued at north of $200 million. And on Nov. 14, Viacom's Paramount unit licensed its long-gestating Beverly Hills Cop 4 to Netflix rather than risk distributing the Eddie Murphy vehicle itself theatrically.

The deals reflect the new reality for legacy media companies that aren't quite big enough to challenge Netflix or Disney with their own direct-to-consumer platforms. Hence, Viacom's so-called "arms dealer" strategy, which paid off when it sold domestic rights to Comedy Central's South Park to WarnerMedia's HBO Max on Oct. 29 in a deal worth up to $500 million.

"It's not a zero-sum game," Nickelodeon president Brian Robbins tells The Hollywood Reporter of the decision to reserve content for its own internal platforms or sell to third-party competitors. "We look at each piece of content separately and through three different lenses: What's the value of that piece of content and how do you maximize it; second is the relationship with the talent; and third is what does it mean to our own platforms?"

To be sure, Viacom's own streaming strategy must be solidified once the company re-merges with CBS in early December. The $15.4 billion deal will see Viacom add DTC platforms CBS All Access, BET+ and Showtime to pair with ad-supported Pluto TV and younger-focused Noggin and Nick+.

In the interim, Viacom is focused on making sure brands like Nickelodeon live beyond its linear network. Robbins notes that Netflix is "renting" Nick IP, meaning Viacom will eventually get it back. The streaming pact allows Nick to further monetize programming that doesn't fit on its linear network while leveraging the output of its animation studio. Robbins also notes that originals it produces for Netflix will provide lucrative revenue streams from consumer products and live events.

Meanwhile, other media conglomerates like Sony also are leaning away from the direct-to-consumer game. Sony TV chairman Mike Hopkins says that the company's strategic decision to exit the streaming space has allowed the indie studio to benefit from the demand for originals and library content. In September, Sony TV sold global streaming rights to Seinfeld to Netflix in a deal worth $500 million. The studio is now shopping library rights to the Joel McHale comedy Community and soon will shop TV rights to its theatrical films when its current pacts with Starz (for live-action) and Netflix (animation) expire.

"The volume of activity for us increases every week as everyone is ramping up their streaming services," says Hopkins, calling the appetite for content a "gold rush" for the company.

While Sony, as well as fellow streamer-less studios like MGM, are profiting from the demand for content, Viacom's strategy is wide-ranging. The company's key streaming licensing deals include The Real World to Facebook Watch (via MTV Studios); Comedy Central Productions and Trevor Noah producing content for Quibi; and Paramount TV supplying hits 13 Reasons Why to Netflix and Jack Ryan to Amazon, among others.

However, once the ViacomCBS merger closes, Viacom CEO Bob Bakish likely will be pressured to pull back on licensing and supply its internal streamers with originals to better compete with the likes of Netflix, Disney+ and the forthcoming HBO Max and NBCUniversal's Peacock.

"Demand for content from third parties is incredible," Bakish said during a Nov. 14 earnings call. “And the combination of our assets and capabilities with the fact that some of our competitors are pulling back, makes this sector an enormous opportunity for ViacomCBS.”

Viacom CFO Wade Davis added that when the company sells to Netflix, Hulu and the like, "they are underwriting the budget and they are paying us that budget, plus, call it 20 percent." Then, the licensee owns the show for a certain window or geography and Viacom is free to "exploit the rights they don't own," and eventually, all of the IP reverts back to Viacom.

During the same call, analyst Richard Greenfield opined that, if South Park were to have been licensed to Viacom's soon-to-be-owned CBS All Access, it would have been its No. 1 show — though Greenfield added that "I actually prefer that arms dealer strategy" of selling content to the highest bidder.

Bakish's statements represent a change of strategy, as he conceded Feb. 26 that Viacom "took it on the chin" in previous years, leaving money on the table by not licensing bundles of content to Netflix and other streamers. However, he added the previous approach left Viacom with a "warehouse" of rights that went to Pluto TV, the ad-supported service it bought in January for $340 million and now boasts 20 million users.

Still, keeping content in-house or cashing in with third-party deals is an increasingly common dilemma as AMC, for example, gave its Breaking Bad movie El Camino a first window on Netflix rather than airing it exclusively on its own linear network. 

"Many of the smaller content providers, such as Viacom, Discovery, AMC Networks, Sony, tend to be more cautious by pursuing hybrid direct-to-consumer strategies that seek to differentiate their offerings in a cluttered landscape, e.g. based on niche content or demographically targeted audiences," says CFRA Research analyst Tuna Amobi. "Such companies have been focused on leveraging their existing film/TV libraries by embracing licensing, or revenue-sharing, partnerships with third-party aggregators to enhance and/or preserve their upside, as well as mitigate their downside risk."

Adds Nickelodeon's Robbins: "We're living in this feverish time right now that you have to be all in with direct-to-consumer platforms, and if you're not, then you're out. And I'm not sure that's correct."

This story first appeared in the Nov. 25 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.