One Angry Gamer

Netflix Purchasing ViacomCBS Rumor Seems Like Absolute Fiction

Kevin

Again rumors of a potential ViacomCBS buyout have surfaced. As picked up by Bounding into Comics, this rumor originates from Youtuber Grace Randolph. Who claims the talk around Hollywood is Netflix is potentially preparing to buy out the indebted entertainment giant. Along with the long since debunked Apple-Disney buyout, as reported by the Motley Fool.

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Before delving into why this rumor is entirely fiction, we first need to explore why these rumors continue appearing. By all appearances, the repeated emergence of buyout rumors creates the impression ViacomCBS is looking for buyers. That it is only a matter of time before a buyer emerges to acquire the entire company.

When in reality what is happening is a self-sustaining rumor. Analysts make a prediction that company X “potentially could” buy ViacomCBS, so outlets looking for news to cover report that buyout talks could be in the works. Reading these reports carefully reveals no such talks are underway, and the entire affair is the hypothetical scenario coming from the analyst if it were to happen.

Analysts publish these hypotheses of embattled companies’ buyouts, so if or when a buyout or bankruptcy is on the table, investors, bankers, and other financial players will be inclined to utilize their services; as they have demonstrated working models and prior analysis of the situation.

In short, they’re marketing their services with free information.

Not as exciting is it? The reason ViacomCBS remains the topic of discussion is following the remerger between Viacom and CBS, the company has financial issues. Television, CBS’s prime revenue generator, has been a declining industry for years with 2019 seeing a project 1.6% decline in revenue generation, as reported by Forbes. CBS All Access has been a complete failure with Picard failing to draw in the audience as was boasted. Netflix is strongly rumored to have pulled the plug on Season 4 of Star Trek Discovery and Amazon is strongly rumored to be reconsidering their investment in Picard after poor viewership numbers.

ViacomCBS’s movie production company Paramount saw most of its 2019 lineup critically fail. With the two projected blockbusters Terminator Dark Fate and Gemini Man both bombing at the box office

By all accounts, the company could use an infusion of cash and that is exactly what happened back in March when they took out 2.5 Billion debt offering, as reported by Variety.  With most of the money going to paying for operations and the S4.8 Billion maturing through 2023, with a projected total debt load S20.628 Billion maturing through 2053, as detailed by GuruFocus.

When considering who can buy a company one has to take into consideration the debt obligations said company is going to have to take on. Netflix currently is saddled with $12.43 billion in debt and took out another billion to continue operating and payback of prior debt obligations maturing this year. Netflix’s operations are a financial pyramid scheme. They rely on new debt to pay off their old debt as their subscription income is not enough to cover their $17.552 Billion in yearly operations.

If you’re asking “how is this sustainable?” It isn’t. Even market analysts have begun raising concerns regarding the unsustainable nature of this business model and how long the company can continue taking out debt to pay off prior debt obligations year or year, as recently covered by Market Watch.

By no means can an organization that relies on debt to operating going to be capable of acquiring a company valued between $25-30 Billion dollars that will come with an additional $20.628 Billion in debt. Simply put the FTC only allowed CBS and Viacom to remerge if they had a plan to pay off their debt obligations and under the condition they kept their stock value above a certain threshold. Netflix cannot pay its current debt obligations without taking out more debt, so they are not going to get the same approval.

Neither are either of the remaining candidates. As Amazon and Apple both owe the US government billions in unpaid taxes. Any notion the US government will permit them to merge with ViacomCBS is outright delusional as it would create a massive economic liability were either company to ditch the obligations by moving assets into another company and dumping the debt-laden company.

As for right now, no company is looking to purchase ViacomCBS, nor is ViacomCBS looking for a buyer. What they are doing is re-evaluating their operational parameters, content approval process, and projects in development. If there is any intelligence at the company, they have also learned going woke doesn’t earn you money, but it does earn you a place on the master list.