M+E Connections

CBS COO: Company’s Open To New ‘Skinny’ Bundles, M&As… If They Make Sense

CBS remains open to making its networks part of new “skinny,” over-the-top (OTT) bundles, as long as the “terms and conditions” make sense for the company, according to CBS COO Joseph Ianniello.

There’s “a lot of talk about new entrants coming in” to the “skinny” bundle space, and “we’re in conversations with all of them,” he told the Nomura Media, Telecom & Internet Conference in New York Aug. 16. He pointed out that CBS was already making its networks available to Sony’s PlayStation Vue OTT service.

For one thing, CBS is being careful not to replicate failed business models when considering whether to participate with an OTT service, he said, adding: “If the current model was working, we wouldn’t need any of these bundles.”

“For any one” of the skinny bundles to be successful, “in terms of getting scale, they’re going to need the number one network as part of that package,” and that’s CBS, he boasted.

CBS also has “a growth path that’s not dependent upon sports” for the CBS All Access standalone on-demand service, he said, pointing out “Netflix has 45 million subscribers” and doesn’t offer sports. If there is a deal with the NFL that “makes sense for both parties, we can certainly pursue it,” he said. But CBS All Access is not dependent on any one partnership for success, he said.

He also told the conference that CBS launched its OTT services, including the standalone Showtime service, “in-house” and was able to expand margins.

CBS is also not necessarily opposed to a recombination with former parent company Viacom, he said. It would be “no different than any other transaction,” he said of how CBS would decide whether such a transaction would make sense. “The approach would be the same” as the one that CBS took when deciding recently whether to buy Starz or not, he said. The same “discipline” would be used by the CBS board, he said. But “I don’t know the asset well enough” at this point to gauge if a re-merger with Viacom would make sense, he said, adding that issues to be considered would include what kind of contracts Viacom has in place.

However, “we don’t need any M&A” now, he said, telling the conference that the terms to buy Starz “did not make sense for us to pursue that acquisition.”

The purchase of Starz for $4.4 billion in cash and stock will give Lionsgate a larger presence in the TV sector, Lionsgate Vice Chairman Michael Burns told the conference earlier in the day.

Asked what the purchase of Starz will mean in relation to Lionsgate’s one-third ownership stake in Starz rival Epix, he said that was “unclear at the moment.” Viacom owns about 50% of Epix, while MGM owns about 18% and Lionsgate the rest, he said, predicting the Lionsgate purchase of Starz will be approved by shareholders.

The Starz app now has 2,300 movies and, in the fall, that will grow to more than 4,000 movies, he said. One benefit of the app for subscribers is that users can download movies and watch them at their convenience later without worrying about Wi-Fi access, he said.

Lionsgate profits from its existing TV shows pretty much in year one unless they are running on broadcast networks like the Lionsgate Television-produced “Nashville” that has run on ABC, he also said.

Lionsgate can make a lot of profit from a TV show when it goes into syndication, he said. In comparison, about 70% of Lionsgate’s movies make a profit, he said, adding “we never get killed” on movies because the company has a pre-licensing deal for international partners. “We’ve never lost more than $28 million” on a movie – and that was on one movie, “Warrior,” although that film still generates revenue from packaged media and digital sales, he said. “That’s a disaster for us. That was the worst result we ever had.” But, with a movie, there is the ability to make close to $1 billion, he said, adding: “You don’t have that ability on the television side of the business.”

Another area for potential Lionsgate film business growth is Atom Tickets, a company that it, Disney and Fox recently invested a combined $50 million in. The new dynamic ticketing service for movies is “going right at Fandango,” he said, adding Atom launched recently in New York and is going nationwide this month.