FCC Green-Lights Merger of Viacom & CBS

The Federal Communications Commission has approved the merger of media conglomerate Viacom Inc. and CBS Corporation, one of the "Big Three" television networks. Viacom will acquire CBS in a stock swap; the resulting entity will have one year to unload enough stations to bring it into compliance with regulations limiting its share of the television viewing audience to 35% of the total market. Stations in Los Angeles, Chicago, Dallas–Ft. Worth, Baltimore, and Sacramento may be sold to comply with the restriction. The approval was granted Tuesday, May 2.

Viacom already owns the UPN cable network, Paramount Pictures, Paramount Home Video, Blockbuster Video, and Simon and Schuster publishing. It also owns MTV, Nickelodeon, and the Movie Channel. CBS owns 20 television stations, 162 radio stations, the Nashville Network, and the Country Music networks. Ownership of two networks is a violation of current FCC rules, but that rule may be revoked soon. Several FCC commissioners are said to favor changing it, and executives of Viacom and CBS have expressed hope that they will do so.

The deal was estimated at a worth of approximately $44.4 billion, based on the value of Viacom's stock at the time the merger was approved. The deal was approved quickly, and the two companies have already begun to integrate their operations, according to Viacom CEO Sumner Redstone. "I see this as an advertising juggernaut," Redstone said. "We have a number of platforms across the board—outdoor advertising, radio, cable, 18 of the 20 top markets in television, and the networks. And we are the only company that can offer advertisers every demographic."

The deal was officially closed on Thursday, May 4, with the announcement that Viacom would combine the cable operations of CBS Corp. with its own MTV Networks—the first of what is expected to be several consolidations at the company. Viacom will divest itself of two regional sports channels owned by CBS in Washington and Minneapolis, and will unload satellite distribution unit Group W Network Services. Further consolidations will include combining Viacom and CBS stations and blending the operations of Paramount TV with CBS TV.

The merger was approved by the Justice Department during the last week of April, and encountered little resistance from FCC commissioners, with the exception of Gloria Tristani. She dissented from her colleagues, arguing that the merger would further homogenize the media market, which has seen a number of large-scale takeovers in the past three years. Redstone disagreed, stating that CBS will retain its identity while "enhancing programming on UPN."