NEW YORK -- Viacom Inc., owner of the MTV cable channel, and CBS Corp., a radio and TV broadcaster, are expected to combine their estimated $1.5 billion of Internet sites into a separately traded company, analysts said yesterday.
Before Tuesday's announcement that Viacom will buy CBS for $37.7 billion in stock and debt, both companies were focused on developing Internet sites stamped with their respective brands. And both had suggested that they would sell shares of their Internet assets to the public. That would create new stocks, or "currencies," to make Web-related acquisitions and attract options-hungry Internet executives.
Now that the companies have agreed to combine, they would be likely to merge their online businesses, which include Viacom's MTV, VH1 and Nickelodeon sites and CBS's 13 Web sites, including MarketWatch.com Inc. and SportsLine USA Inc.
"We would argue that the combination of both asset groups creates a more diversified, broad-based and compelling Internet service offering," said Jessica Reif Cohen, a media analyst at Merrill Lynch & Co.
Such an Internet combination could take many forms, analysts said. A single company or division could house all the sites, though that does not necessarily mean they would be organized into one Internet hub.
Stand-alone "destination" sites, such as an MTV.com or CBS' MarketWatch.com, "are just as viable and more likely to be profitable more quickly than some monstrous portal," said Josh Bernoff, an analyst at Forrester Research Inc.
Viacom Chairman and Chief Executive Officer Sumner Redstone has long said he plans to succeed on the World Wide Web by exploiting his company's brands and not through the creation or purchase of a big Internet search directory, such as a Lycos Inc. or Yahoo! Inc.
Viacom, which has been criticized for being too slow in establishing itself online, is working to duplicate the success of its cable channels -- MTV, VH1 and Nickelodeon -- on the Internet.
CBS Chief Executive Officer Mel Karmazin also has said he would not buy a big-name portal. Rather, he is establishing an array of CBS-branded sites, each aimed at different niche audiences.
CBS has been busy swapping its marketing muscle -- mainly advertising time on its broadcast properties -- for equity stakes in several nascent Web sites, including online employment service Jobs.com, online automotive parts seller Wrenchead.com and online pharmacy Rx.com.
New York-based CBS also owns all of CBS.com and Country.com, which features news and links related to country music. The company plans to announce similar promotion-for-equity investments in the next couple of months to add to its collection of Internet sites, CBS spokesman Dana McClintock said.
CBS intends to assemble a group of online sites geared to a wide range of consumer needs and interests, such as shopping, health, movie listings, business and sports news, jobs and entertainment.
"Viacom/CBS could end up owning a portfolio of interests in 25 to 40 Internet companies over time," David Londoner, an analyst at Schroder & Co., said in a research report.
"If three or four [of the Internet companies] work big, significant value creation would result," Londoner said. Schroder has an "outperform significantly" rating on CBS and Viacom shares.
Viacom and CBS have not determined how they will join their Internet businesses and strategies, though it is certain that all of the sites will be used in cross-promotion efforts, and it is likely they will create one or more separate Internet companies.
"We expect the combined Internet company to be put into a tracking stock or IPO in the second half of next year," said Jordan Rohan, an online media analyst at Wit Capital.
Pub Date: 9/09/99