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UPDATE: Viacom to Split Media Empire

16 Jun, 2005 By: Jessica Wolf

Viacom Inc. will split its media empire into two separate companies, executives announced last week. The company's board of directors approved the creation of two publicly traded entertainment companies.

Viacom CEO Sumner Redstone, who's been talking up the potential split for the past several months, will serve as chairman and controlling shareholder of both companies, which will be headquartered in New York.

One company will retain the Viacom name and will include Paramount Pictures, Paramount Home Entertainment, MTV Networks (including MTV, VH1, Nickelodeon, Nick at Nite, Comedy Central, CMT: Country Music Television, Spike TV, TV Land and others), BET and Famous Music.

Tom Freston, co-president of Viacom and head of MTV, will lead the new Viacom.

Les Moonves, now head of CBS and co-president of Viacom, will head up the other half of the split in a new company to be called CBS Corp. This will include the CBS and UPN broadcast networks; Viacom Television Stations Group; Infinity Broadcasting; Viacom Outdoor; the CBS, Paramount and King World television production operations; as well as Showtime, Simon & Schuster and Paramount Parks. The split is expected to be complete by the end of the first quarter of 2006.

Paramount Home Entertainment (PHE) executives were unavailable for comment on what the split might mean for the home entertainment arm.

PHE does a healthy business delivering content from the MTV Networks. In fact, for 2004 the supplier held the No. 2 spot in the market share for the TV DVD genre, thanks mostly to programming from this stream, such as surprise hit Chappelle's Show: Season One from the Comedy Channel, which is also PHE's No.2 DVD seller overall from 2000 to date, according to Nielsen VideoScan. And the second season of “Chappelle's Show” is burning up DVD charts for PHE.

Of Paramount's top 20 TV DVD sellers last year, 16 were from the supplier's distribution relationships with cable providers such as Comedy Central (“South Park”) and Nickelodeon (“SpongeBob SquarePants” and “Dora the Explorer”), which will be part of the same company as PHE.

PHE also releases network TV hit shows “CSI” and “CSI Miami.” These shows are produced by CBS Productions, which is now part of the other company in the conglomerate's breakup.

Viacom shareholders will retain stock in both companies as a tax-free proposition, according to the company.

“This transaction is the logical extension of the strategic vision that created Viacom and recognizes the inherent diversity of our assets as well as the changing business environment,” Redstone said in announcing the split.

Viacom's board of directors also named Redstone's daughter, Shari Redstone, to the newly created position of non-executive vice chairman of the board. She has served on the Viacom board since 1994.

Mr. Redstone added that the board formed a special committee that will assist and monitor the process of creating the two companies. Serving on the committee will be Viacom board members Shari Redstone, Frederic Salerno and Philippe Dauman. Mr. Redstone will chair the committee, and Ms. Redstone will serve as vice chairman.

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