Wednesday, November 03, 2010

Viacom's Dauman On Its Strategy

Phillipe Dauman became Viacom CEO in September, 2006. Not long after, I wrote posts, here and here, about the company and Dauman. Here are two relevant passages from those posts,

"From the details of yesterday's Wall Street Journal article, it's not clear what to expect of Viacom going forward. The two cronies that Redstone has re-installed at Viacom, CEO Phillipe Dauman and COO-like Tom Dooley, have a track record of tripling Vicacom's stock price when they last worked with him at the firm. Put that way, it's not clear Freston ever really had a chance. So I wasn't surprised to read that he had been reluctant to take the Viacom CEO job in the first place last year.
Reading further, it sounds unconvincing that Dauman is going to simply "foster innovation within the company," and stress aggressiveness with its "multiplatform" strategy."
"Dauman, Redstone's returning lieutenant, has clearly shaken up the sluggish maneuvering between the two giants on this issue."

I didn't have high expectations for Dauman, and, frankly, from the nearby price chart of Viacom and the S&P500 Index. Judging by the position of the two curves in late 2006, it appears that the company has slightly outperformed the index, which has declined, by remaining flat.

A recent interview with Dauman in the Wall Street Journal provided some insight into his strategy for the firm. I must admit, I was surprised.

The article mentions Dauman's $1B deal to distribute Netflix content through a Viacom cable channel, and the consideration of returning Viacom's own content to Hulu. However, the piece also notes one pundit sensibly wondering why younger viewers would pay twice to see Netflix on television, when so many of them are more likely to subscribe directly via web-connected devices.

At least Dauman has successfully pulled Viacom out of the free YouTube environment, and concentrated on making money selling its content in larger chunks through other avenues of distribution.

Still, judging from the company's performance to date under Dauman, he'll need to do a lot more to make the firm a compelling investment alternative in the years ahead. If he doesn't, it may suggest what so many observers believe about the interplay of technology, old and new media, i.e., that old media has been permanently devalued in the current environment of new media and new online distribution outlets.

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