When Sumner M. Redstone's Viacom Inc. bought the CBS television network in 2000, adding its television stations and Infinity Broadcasting radio stations to his movie studio, theme parks and Blockbuster video stores, he said the new company would be a "formidable media giant."
For a time, it was. But now, five years later, bigger may no longer be better, both for Viacom and several of its behemoth media and entertainment peers.
Rupert Murdoch's News Corp. has massive holdings in the media. The company seems to have given up on building a Los Angeles Dodgers-based sports empire and is eyeing the Web and video games.
(Martin Kaplan -- AP)
Viacom has spun off Blockbuster, which was crippled by competition from digital video on demand and services like NetFlix. The company is looking to sell its slow-growth, expensive Paramount theme parks and buy a booming video game company. Finally, last week, Redstone said he would push to split the $60 billion conglomerate into two smaller, more nimble companies, one running CBS and the stations and the other the movie studio and cable channels, such as MTV and Comedy Central.
"We live in a different world today, and you have to be able to respond to the changing world," Redstone said in an interview Friday.
After a decade of growth by acquisition, media conglomerates such as Viacom, Sony Corp. and Time Warner Inc. are beginning to reconfigure, pushed by new technologies and changing consumer habits. At the same time, the 1990s cookie-cutter model of a media giant -- take one television network, add a movie studio, theme parks, music company and maybe a pro sports team -- is falling from favor, as companies settle on their core identity, analysts said.
For instance, "theme parks make sense for Disney," said Legg Mason Wood Walker analyst Blair Levin. "That's part of the Disney DNA," allowing fans to interact with the Disney characters. For Viacom, which has five Paramount theme parks, and NBC Universal Inc., which operates Universal Studios theme parks, he said, theme parks make less sense in the mix.
Sony, which made its name in electronics, has had much greater success in music and movies over the past five years. Its once-trendy home electronics and even its groundbreaking Walkman were bypassed by popular micro-gadgets such as Apple Computer Inc.'s iPod. Poor sales in Sony's electronics division forced the company in January to reduce its projected earnings for the fiscal year ending this month.
Meanwhile, earnings at its movie studios have soared on the strength of hits such as "Spider-Man," and a 2004 merger between its music company and Bertelsmann AG's BMG Entertainment has cut losses in that business unit.
Sir Howard Stringer, head of Sony Corp. of America, was tapped to become Nobuyuki Idei's successor as the company's global chairman and chief executive earlier this month. Days after his ascendance, he rolled out a line of new digital music players, aimed directly at the iPod. Stringer has consistently called for Sony to spin off the U.S. movie and music assets in a separate public company -- similar to Redstone's proposal for Viacom -- but the idea was resisted by Sony's Japanese headquarters. With Stringer now running the entire company, he may refloat the idea, analysts said.
Meanwhile, cable giant Comcast Corp., the nation's largest provider with nearly 22 million customers, has done an about-face in acquisition strategy from this time last year. In February 2004, the company announced an unsolicited takeover bid for the Walt Disney Co., saying it wanted to add content to its delivery system.