The Viacom-CBS merger will create a behemoth of streaming content that spells disaster for Netflix. Source: Shutterstock
By CCN Markets: The long-awaited reunification of CBS Corporation and Viacom has finally arrived. After the two entities were split off from each other several years ago, the Sumner Redstone empire has been reconstituted.
And Netflix has yet another juggernaut of a competitor.
Content is King and Viacom-CBS Has Tons Of It
Sumner Redstone has always said, “content is king”. Indeed it is, and with 140,000 episodes of television and 3,600 films in their combined vaults, ViacomCBS now has a boatload of content to attack Netflix with.
Netflix has substantially reduced the amount of content it licenses from third-parties, as those third-parties have created their own streaming services.
Netflix moved almost exclusively to producing original programming a number of years ago.
Netflix Has Money Problems
However, the declining quality of Netflix’s content, as well as the sheer amount of it, and its loss of classic shows, may be starting to dissuade subscribers. The company lost domestic subscribers for the first time in its most recent quarter and is making large, ill-advised deals with comedians.
Netflix has an even bigger problem because it has limited capital. All of its original programming costs billions of dollars, almost all of which is borrowed money.
Netflix does not generate any free cash flow. It burns cash.
ViacomCBS, on the other hand, is in a far better position.
Ed Butowsky, managing partner of Chapwood Capital Investment Management, tells CCN:
“Netflix cannot compete with ViacomCBS’ capital structure. It has diverse revenue streams,