Unsteady Viacom Reshuffles the Deck

Viacom CEO Philippe Dauman has begun a painful restructuring plan that will split the cable programmer into two divisions and hopefully return the once-proud giant to its former prominence.

The latest move will cleave the company into the Music & Entertainment Group, including MTV, MTV2, VH1, Logo, Comedy Central and Spike TV, headed by Entertainment Group president Doug Herzog. The new Kids and Family Group, which will include Nickelodeon, Nick Jr., TeenNick, Nick at Nite, NickMom and NickToons, TV Land, CMT and CMT Pure Country, will be led by Nickelodeon Group president and 30-year Viacom veteran Cyma Zarghami.

The moves come directly on the heels of two high-profile executive departures — MTV Music & Entertainment chief Van Toffler, who will leave in April, and TV Land president Larry Jones.


Herzog is a Viacom veteran — he helped launch The Daily Show and South Park when he served as president of Comedy Central from 1995-98 — and the restructuring basically adds MTV, MTV2, VH1 and Logo to his oversight. He joined Viacom in 1984 as News Director, Music News at MTV and steadily moved up the ranks, leaving the company between 1998 and 2004 to serve as president of entertainment at Fox Broadcasting Co. and then as president of USA Network before returning to Viacom.

Zarghami has been with Viacom for 30 years, was part of Nick’s original launch team and is a highly respected executive in the industry. But even these two seasoned and valued executives have their work cut out for them in their new positions.

Comedy Central, one of Viacom’s most popular brands with the sought-after young male demo, is facing one of its toughest years ever without two of its most popular stars — The Colbert Report’s Stephen Colbert, who left in December to replace David Letterman on CBS’s Late Show after he retires this year; and The Daily Show’s Jon Stewart, who will be leaving later this year.

And Nickelodeon, which appeared to have recovered from the ratings debacle of March 2012, when it lost the monthly crown for the first time to Disney Channel — which Viacom partly blamed on Nielsen measurement glitches — has started to slide again. According to Sanford Bernstein media analyst Todd Juenger, Nick’s total-day ratings were down 40% in the week ended Feb. 8 compared with the previous year.

In a memo to employees announcing the changes, Dauman said he sees the reorganization as a way to breathe new life into the channels, which have been rocked by ratings declines and sluggish ad revenue. In the fiscal fourth quarter, domestic ad sales at Viacom’s TV networks were down 6%, the second consecutive quarter of declines.

Whether the changes will be enough to right the Viacom ship remains to be seen. Aside from the ad and ratings pressures, the company is increasingly being targeted as an example of out-of-control affiliate-fee increases. Two midsized cable operators have already dropped Viacom’s channels, with what they say is little impact to their subscriber bases.

Cable One, which reported its fourthquarter results recently, lost about 25,000 basic-video customers in the period, more than double its losses before it dropped Viacom on April 1. And Suddenlink Communications, which dropped the networks on Oct. 1, has said in the past that the absence of the channels has not had a material impact.


Dauman realizes that the market is changing and said last month that the programmer was considering launching its own over-the-top version of Nickelodeon — which some analysts said could be a positive as it would address the channel’s core market of techsavvy tweens and teens.

“Our industry is in transition and change does not always come easy, but we have a tremendous amount of talent at Viacom and we are innovating at every level and at every brand,” Dauman said in the memo. “We are working hard to adapt to changing audience behavior, to incorporate new forms of distribution and to better integrate technology into everything we do. … I have great confidence that by working together to embrace the changing landscape and by continuing to bring our best creative work to audiences — we will succeed.”