Analysts speak out on Dauman, Moonves appointments

Philippe Dauman

Analysts have said Viacom is likely to remain on the same strategic course after the appointment of Philippe Dauman as president and executive chairman given Sumner Redstone, the previous chairman, has been ‘substantially less active in recent years’.

Moody’s issued a note on Viacom in the wake of Dauman assuming the new role. While noting a major change in strategy looks unlikely, the credit ratings agency did say that Viacom has underperformed over the last couple of years, unsuccessfully using debt to fund returns to shareholders instead of investing in content and making M&A moves.

“When looking at the company’s performance relative to industry peers, it is pretty clear that Viacom should have allocated a greater portion of its historical free cash flows towards investments in programming and/or earnings accretive acquisitions versus shareholder returns, which didn’t contribute to the long-term growth of the company,” Moody’s noted.

Addressing Dauman’s appointment it added: “While the company may benefit from new oversight from an experienced industry player, we don’t think that there is much room for improvement in the company’s current strategic plans to improve its fortunes.”

Dauman stepped up after Sumner Redstone stepped aside. He did the same at CBS, which was separated from Viacom in 2006. That prompted another major change, with CBS boss Les Moonves taking the chairman role.

Moody’s was broadly positive about his appointment although said the change will not have a material impact on day-to-day operations of the US broadcaster.

“We view the appointment of Mr. Moonves as Chairman to be a positive development for the company,” Moody’s said. “CBS has demonstrated solid operational performance under Mr.  Moonves’s stewardship and we believe the company will continue to benefit from his strategic leadership and vast experience.”

It added: “Mr Moonves led the organisation during the last recession, which was one of the most difficult times for the company, helping it overcome business and financial challenges, rebuilding balance sheet strength and settling liquidity issues. Under his leadership, CBS has made remarkable progress in reducing its exposure to volatile advertising spending from roughly 66% of total revenues in 2008 to around 51% in 2015.”