That isn't stopping Viacom CEO Bob Bakish, who will lead the combined company, to declare that ViacomCBS will be "one of only a few companies with the breadth and depth of content and reach to shape the future of our industry."
CBS and Viacom, which separated in 2006, announced their long-anticipated reunion Tuesday. Viacom owns the Paramount Pictures movie studio and pay TV channels such as Comedy Central, MTV and BET, while CBS has a broadcast network, television stations, Showtime and a stake in The CW over-the-air network.
CBS was one of the first media companies to launch its own streaming service, CBS All Access. The $6-a-month service now has a new "Star Trek" series, a revival of "The Twilight Zone" and archives of old and current broadcast shows.
Now, Disney, Comcast's NBCUniversal and AT&T's WarnerMedia are jumping in with their own services as well to challenge Netflix, Amazon, Google and other tech companies encroaching into entertainment. To expand its library, Disney bought Fox's entertainment businesses for $71 billion in March, while DirecTV owner AT&T bought Time Warner last year for $81 billion.
Acting CBS CEO Joe Ianniello, who will head the CBS business in the combined company, said in a call with analysts that the company might add content from Nickelodeon, BET, MTV and Comedy Central to CBS All Access and Paramount movies to Showtime. CBS' ad-supported CBSSports HQ and ET Live could be added to Pluto TV.
And the company hopes to beef up its international offerings. "The combined company will have the best of both worlds, premium U.S. programming that seamlessly travels across borders and hundreds of thousands of hours of locally produced international programming, all available with the click of a button," he said.
Once the deal is completed, expected by the end of the year, ViacomCBS will have a combined library with more than 140,000 TV episodes and 3,600 film titles, including franchises such as "Star Trek" and "Mission: Impossible."
The two companies have been major content spenders, having spent more than $13 billion combined in the past year, or close to the estimated $15 billion Netflix is expected to spend on content in 2019. The two companies have more than 750 series currently ordered or in production.
But the combined company will still be small. CBS has a market value of $18 billion and Viacom about $11.7 billion. Disney's is nearly $245 billion and Netflix is at $136 billion. CBS says All Access and its Showtime streaming services have 8 million subscribers combined. That's far less than the 60 million U.S. subscribers that Netflix has, though it's comparable with the estimated number of subscribers to HBO Now, that network's stand-alone streaming service.
And the Paramount movie studio, despite hits like last year's "A Quiet Place" and the latest "Mission: Impossible" sequel, has just 5% of this year's market share at the box office. It hasn't been in the top five since 2011.
Moody's media analyst Neil Begley said ViacomCBS might have to consider other acquisitions to keep up. However, the number of possible targets is dwindling, he said, with what's left mostly smaller companies such as the Discovery and the AMC television networks and the MGM and Lionsgate movie studios.
He said a big question will be whether the new company will focus on subscription offerings, such as CBS All Access and Showtime, or free, ad-supported ones, like the Viacom-owned Pluto TV. Or it may keep doing both.
"If you're going in both directions, you're hedging your bets, but are you pulling your punches on whatever the best strategy might have been?" Begley said. The all-stock deal will give CBS shareholders about 61% of the combined company and Viacom shareholders the rest. The companies say the combined company will have $28 billion in revenue. By combining, the companies say they will save $500 million a year.
CBS and Viacom have had an on-again, off-again relationship. After splitting in 2006, CBS and Viacom both remained controlled by National Amusements. Shari Redstone, daughter of media mogul Sumner Redstone, runs the holding company.
The split was a way to separate Viacom's networks like MTV, Nickelodeon and BET, which were very successful at the time, from the slower growth of the CBS network. But over time, the two companies' fates were reversed. CBS under longtime chief Les Moonves became more profitable and Viacom struggled, hurt by weakness in its Paramount studio and people dropping cable in favor of streaming.
A recombination makes sense now because media companies are bulking up their content offerings to better compete for ad dollars. But Moonves was against the idea, as CBS was stronger and more profitable than Viacom.
Moonves' ouster last year in the face of multiple sexual misconduct allegations changed the dynamic. Under an agreement, Shari Redstone agreed not to push for a reunion for at least two years, but that left open the possibility of CBS itself pushing for it.
Redstone will be chairwoman of the combined company's board. "We will establish a world-class, multiplatform media organization that is well-positioned for growth in a rapidly transforming industry," Redstone said.
Viacom's stock rose 2.4% and CBS 1.4% in trading Tuesday, a reflection of Wall Street having anticipated this deal, especially in recent days. Disney's stock was up 1%, while Netflix gained less than 1%.