The genesis of Viacom can be traced back to the year 1971. As a media company, Viacom is known to have a variety of business interests ranging from publishing, advertising, film entertainment, home video rentals as well as radio and television broadcasting. This company has seen tremendous growth since its inception, and more notable in the 1990s owing to some strategies employed in its running. This paper examines some of these approaches, the risks involved in their implementation; and ultimately provides some lessons as a result of diversification and acquisition of companies as was the case of Viacom.
Viacom was not established as a single brand identity. In comparison to other entities like Sony and Walt Disney, Viacom was established through the acquisition of existing media companies. By so doing, the company was shielded from encountering the risks associated with new start-up companies. Investing in companies that were known for excellent growth potential such as Paramount and Blockbuster was one of the principle strategies whose origin dates back to the late 1980s.
The company has also managed to combine software content through purchase of the different companies. Each of the companies owned by Viacom highly complements the nature of each other thereby fitting perfectly into the company’s overall strategy; vertical integration. Combined media content coupled with expanded methods of distribution has guaranteed prowess.
Decentralization of management, for example that of MTV (Music Television Channel) gave the local managers room to develop programming strategies that suited the different market needs. Drawing from language, talent and cultural themes from the local regions; international programming was drawn up and this was fed back into the same regions via satellite. This was a milestone.
Establishing any telecommunication industry is an expensive and high-risk venture. This sobering reality prompted Viacom to seek financing from credit given by world’s leading financial institutions with the hope of paying back after realizing profits. This proved problematic as the company was not able to adequately service the $11.5 billion debt which resulted from the takeover of Paramount Communications and losses by Blockbuster (both acquired in 1994).
Apart from landing an organization into debt, such moves may easily interfere with a company’s long-term view of investment as there are no guarantees. This may culminate in the company selling some of its assets in an attempt to settle the debt as was the case with Viacom that had to sell Madison square garden among other properties to be able to significantly reduce the its debt.
One of the lessons that can be learnt from diversification and acquisition of companies is that it may not be possible to have an overall strategy that would guarantee the integration of all of them. This was discovered when Redstone became Viacom’s chairman. The company was not able to integrate the various media holdings hence diversification may pose an impending challenge to integration.
It is also important to note that the decision to acquire other companies may not pay off as immediate as it may be anticipated. Viacom had hoped that Blockbuster’s stable cash flow would help them service the debt incurred through the acquisition of Paramount Communications. This turned out contrary to their expectations as losses were realized instead.
From the above discussion, it is clear that Viacom was able to rise into a media conglomerate owing to a number of strategies. Some of these strategies were risky but the good news is that many lessons can be drawn from the same and be of importance to other such like entities.