What's going on?

Viacom and CBS will not merge together (again) to make a media supergiant � and it means that Viacom will have to find its own path to growth as the traditional cable company struggles in the age of Netflix and Hulu.

What does this mean?

Viacom separated from its then-parent company, CBS, in 2005 with the idea that the high-growth media company, anchored by well-loved channels like Comedy Central and MTV, would thrive as a separate, more nimble entity. But just the opposite occurred: Viacom has floundered since the spinoff, while CBS has been among the best-performing major US media companies.


Earlier this year, National Amusements, the controlling shareholder in both companies, suggested that Viacom could be turned around by a merger with its former parent CBS. But Shari Redstone, the President of National Amusements, backtracked on that plan on Monday, instead putting her hopes in the forward-looking vision of Viacom�s new CEO.

Why should I care?

For markets: CBS didn�t seem enamored with the idea of joining forces with Viacom.
Redstone may have given her public backing to Viacom�s new CEO, but markets aren�t really buying it. It seems more likely that CBS�s CEO, the venerable Les Moonves, balked at letting troubled Viacom back into CBS�s fold. Markets are hinting at the same idea: shares in CBS were flat on Monday, while Viacom�s were down almost 10% � clearly, investors are disappointed that the former golden child won�t be brought back under its parent�s roof.


The bigger picture: A �controlling� shareholder can make the successful management of a large corporation difficult.
Viacom (and to some extent CBS) have been marred in 2016 by a public feud between company executives and the company�s most important shareholder, National Amusements. While National Amusements doesn�t own the majority of the companies� shares, it controls the voting rights (i.e. it is the �controlling shareholder�), which gives it a lot of control over corporate management (such as choosing the CEO). The conflict highlights the downside of shareholders relinquishing their voting rights (which recently took place at Facebook).