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Tuesday, September 7, 1999 Published at 22:58 GMT 23:58 UK

Business: The Company File

CBS and Viacom: Media giants marry

CBS's Mel Karmazin will find a tough boss in Viacom's Sumner Redstone

By New York Business Correspondent Patrick O'Connell

Once again, it is the media that makes the news.

CBS is being bought up by the same firm that owns MTV and Paramount Pictures.

CBS and Viacom formally announced the merger at a Manhattan hotel on Tuesday.

"I have long said content is king," proclaimed Viacom Chairman Sumner Redstone.

"I'm thrilled to say today that the product of our union will be king not just in content but in distribution marketing and packaging. We will be global leaders in virtually every facet of the wonderful diverse media and entertainment industry," Mr Redstone added.

$80bn giant

They certainly will be massive.

Viacom is using some $37bn in stock to create a company worth around $80bn on the market.

The media stable will house thoroughbreds like MTV and the august CBS TV network alongside Paramount Pictures, which was one of the studio forces which powered the film Titanic to the screen.

"Essentially what you're getting is the combination of production assets with broader distribution. Very clearly Murdoch is there, Time Warner is there, Disney is there already," said David Londoner, who tracks the media industry for Schroders.

Mr Londoner said the deal tracks a trend.

"What you're doing is putting two companies together who had some production and some distribution but you're now marrying major production with major distribution," he added.

Deal wows Wall Street

Wall Street likes the deal, since it is a formula for greater profits.

[ image: CBS has been bought before, by Westinghouse in a deal that lasted only three years]
CBS has been bought before, by Westinghouse in a deal that lasted only three years
The media industry, like the technology it uses, has undergone a revolution.

The advent of digital TV, as well as the predicted growth in the use of the Internet, means that intellectual content now has multiple means of distribution.

This deal mirrors others aimed at combining the ownership.

The price paid by Viacom is around twice that Disney paid for ABC in 1995.

Other deals likely

The deal is likely to mean that others will follow. Indeed CBS, like a classic car, has been pre-owned.

Westinghouse Electric, in a deal lasting just three years, bought CBS at around the same time as the ABC deal.

Viacom now gets access to one of the greatest families of radio stations in the US and its TV operations will cover more than 40% of the American viewing audience.

That breaks the current rules and without a change in the law, the new entity may well shed some stations.

If the industry is to follow the technology, in part, as we consumers do, then it is a sure bet that there will be more channel changes ahead.

Now, where did you leave that remote?

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