Media's musical chairs
Viacom has split into two. Will other media firms follow suit with break-ups of their own?
By Paul R. La Monica, senior writer

NEW YORK ( - Viacom has done it. Carl Icahn wants Time Warner to do it. And some think it could make sense for Disney, Sony and General Electric to do it too.

Welcome to Splitsville. Now that Viacom has splintered off into two companies, other big media companies could find themselves facing increased pressure to break up or, at the very least, sell off assets.

Shares of CBS and Viacom have gotten a boost since Viacom split into two. Will other media firms copy Viacom's strategy?
Shares of CBS and Viacom have gotten a boost since Viacom split into two. Will other media firms copy Viacom's strategy?

All the major media firms, News Corp. included, had a rough 2005 as investors fretted about the increased shift of audiences and advertising dollars to the Internet, declining movie attendance for the second straight year and a slowdown in DVD sales.

It used to be that bigger is better but now Wall Street may think that leaner is meaner. Granted, it's been less than a week since Viacom and CBS began trading as separate entities. But Wall Street, so far, seems to like the move.

Shares of CBS (Research), which owns the namesake Eye Network as well as radio and outdoor advertising units, are up more than 5 percent since they began trading Tuesday. Shares of the "new" Viacom (Research), which owns cable channels MTV and Nickelodeon as well as the Paramount movie business, have gained 4.3 percent.

If both stocks continue to do well, it could force other media firms to institute similar plans. After all, the media business is notorious for copycatting, and not just when it comes to content.

Several options for Time Warner, Sony and GE

What could the other major media companies do? Analysts and fund managers have a few suggestions.

Jason Bazinet, an analyst with Citigroup, wrote in a report Friday that Time Warner (Research) might be wise to listen to some of the demands being made by Icahn, who owns a stake in the company and has advocated for a full spin-off of the cable unit. Bazinet wrote that such a move could be a possible catalyst for Time Warner's stock.

Time Warner management, however, has said that it wants to sell just a small portion to the public and retain operating control of the division. Time Warner also owns

Bazinet added that a spin-off of Time Warner's publishing division and AOL's dial-up (but not its content) business could also boost the stock.

James McGlynn, manager of the Summit Everest fund, which owns Time Warner and nearly all the other major media stocks, agreed that a cable spin-off makes sense. And he said that other media companies should also consider asset sales.

For example, Sony (Research) might want to get rid of its struggling film business. "Movies haven't worked for Sony," McGlynn said. "They seem to have their fingers in so many pies that it confuses analysts and fund managers."

He added that he would love to see GE (Research), which owns NBC Universal, spin off this division although he doubts it would happen.

"Ever since GE bought Universal, the NBC network has lost ratings. Being part of a big bureaucracy may be bad so my dream would be for them to spin-off NBC Universal," McGlynn said.

Disney holds steady while News Corp continues to buy?

Disney, for its part, has been trying to get rid of one of its underperforming units but so far has been unsuccessful. The House of Mouse put its radio operations on the selling block last summer but has yet to finalize a deal.

Ted Parrish, co-manager of the Henssler Equity fund, which owns Disney, said that a sale of the radio assets would be good for the stock. But he thinks that the company doesn't need to do any more restructuring.

Unlike Viacom, Disney (Research) has actually taken steps to increase the ties between its network broadcast unit, ABC, and that of its cable operations, most notably ESPN.

"I don't want to see Disney split," Parrish said. "Their businesses complement each other and this year should be the first full year when all the segments will do well together. ABC and ESPN are solid assets and theme parks and motion pictures should improve."

Finally, the one company that probably won't be making any moves to slim down is News Corp (Research)., even though it too has faced some shareholder pressure lately. Liberty Media (Research), the company controlled by mogul John Malone who has a history of forcing change at companies, has taken a bigger stake in News Corp.

Still, News Corp. is currently in the process of building up its Internet operations through an aggressive acquisition strategy and the company has given no indication that it is done buying online assets just yet.

"News Corp. is not ready to get rid of anything," said McGlynn.

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Citigroup has received compensation from Time Warner for non-investment banking business but Bazinet does not own shares of the stock.

The reporter of this story owns shares of Time Warner through his company's 401(k) plan. Top of page

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