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PENNIES FROM KEVIN - Paramount's Smarter than Disney!

The Paramount parks will soon leave the Viacom family! Where are they going? And will the move be good for them?

Written by Kevin Baxter
Published: June 25, 2005 at 3:25 PM

While there has been speculation about how long NBC Universal will hold onto their theme parks, Viacom has beaten them to the punch by dumping theirs.

Well, kinda. Viacom has decided to split into two companies, Viacom and CBS. The makeup of each company may seem a bit odd at first glance: Viacom Inc will retain MTV, VH1, BET, Nickelodeon (and other cable channels) and Paramount Studios (the film division); CBS Corp will consist of CBS, UPN, Infinity Broadcasting (radio division), local television stations and the Paramount theme parks. But everything that remains under the Viacom umbrella is considered fast-growing while everything under the new CBS name is seen as cash-rich but slower-growing. So there is a method to this madness.

But what's the point? Viacom stock has languished of late and the board, led by chairman Sumner Redstone, decided to create one company for stockholders looking for fast rewards and one for those looking for long-term stability.

While analysts question the success of this move - many departments will have to double, Viacom's cable channels will lose negotiating muscle without CBS - it does make sense. It was getting to the point where Viacom might've started making questionable moves to bump up the stock.

Sound like another major media company we know? The analysts can say what they want, but check out the moves Disney has made to try to increase stock prices: paying too much for ABC, paying too much for Fox Family, keeping too many inhouse television shows on the ABC schedule, creating questionable US parks, creating questionable overseas parks, going cheap on existing theme parks, "Wal-Marting" the Disney Stores, spending millions on an unnecessary Internet portal, and so on.

And Disney wasn't alone in focusing more on the stockprice than on the health of the company itself. Vivendi Universal was another company that made lots of horrible decisions to help artificially jack up stock prices. And their recent history is even rockier than Disney's, to the point where they were forced - by stockholders - to sell off most of the risky entertainment division.

So will this work? It's too early to tell yet, but history shows that it couldn't be worse than going on a buying spree, or going on a cheapness binge either. Chances are CBS Corp will probably remain a steady business, especially with cash cow CBS leading the way. Viacom will remain the risky venture, which is what many traders want.

How does this affect theme park fans? Well, a stable parent company promises a more stable set of parks. Remember when the Disney parks would suffer due to a bad year at the film studio? Remember when the Universal parks sat ignored during the Vivendi fire sale? The Paramount parks should continue to grow at their current rate, and there couldn't be a better time for that to happen.

Now if only Disney would follow suit! (We'll give NBC Universal a couple years to see if they should also.)


That's my two pennies... gimme yours!

Readers' Opinions

From Ted Heumann on June 27, 2005 at 6:09 PM
This is a bad idea. A large company owes various divisions because of the synenergy that it creates. Now some of the divisions make sense to dump or spin-off. There isn't a lot of synenergy in billboards or even radio with some of these other divisions.
When Disney has a ride (say, Roger Rabbit cartoon spin) and people buy merchandise related to the ride (toys, shirts, DVDS, etc) then Disney owns almost the ENTIRE revenue stream. The own the license, they own the studio that produces the DVD, etc.
Or worse case scenario, you are Knotts Berry Farm and you get stuck with characters (Peanuts) that you don't own and no one (not even the license holder) gives a crap about. And they can't do anything about it because they only own a PORTION of the license.
As to Disney. Disney made BAD decisions, but that didn't have anything to do with the stock price. Disney paid too much for ABC?!??! WHAT?!?! ESPN was worth the price ALONE!!! Disney made some mis-steps with ABC in the beginning, but they are getting it back on track. And ABC is PERFECT synenergy for the Disney company. Did Disney pay too much for FOX Family? ABSOLUTELY!
I think it is a bad idea for Viacom. It was a good idea for Vivendi-Universal because they were involved in many, many businesses that had NOTHING to do with one another, but all of Disney's business and almost all of Viacom's businesses are closely related.
Viacom is doing this for short-term gain and not for long-term health of the company in total. I wouldn't be surprised if someone else gobbled up either one or both of these now separate divisions.
From Kevin Baxter on June 27, 2005 at 11:15 PM
One has nothing to do with the other. Universal Studios is completely unrelated to DreamWorks, but it doesn't keep DreamWorks characters from being in the parks, does it? Just as the Peanuts characters aren't in the same company as Cedar Fair, or the Nick characters in Universal, even though they are owned by rival Paramount. Licensing is nothing but a bit of paperwork.
From TH Creative on June 28, 2005 at 1:47 AM
Mr. Baxter,

Although it is on a much smaller scale, doesn't Mr. Iger's decision to break up the centralization of Disney's strategic planning department -- granting more independence to the different division heads -- embrace the same philosophy Viacom is embracing?

I also find Paramount's decision to be interesting considering what Newsweek reported last regarding Mel Karmizan. Specifically, after Mr. Karmizan resigned as Viacom's president, he was considered to be a potential Disney CEO candidate. While acknowledging that Mr. Karmizan had the chops, Newsweek cautioned that he "can't stand theme parks." I wonder if Mr. Karmizan's attitude is reflective of Viacom's executive hierarchy -- right up to Mr. Redstone.

From Derek Potter on June 28, 2005 at 10:22 PM
Could be....however there has been a lot of emphasis on changing the face of the Paramount Parks lately. If they didn't like the parks now, than they may not have been putting so much effort into revamping their look and appeal. They are slowly but surely turning into the third true theme park chain in the country, even without a park in a major marketplace. With Nickelodeon appearing to be closing up shop at Universal, Paramount Parks now has carte blanche to utilize the characters on their property, and they are gonna use it too. With the Hanna Barbera license running out, look for Nickelodeon to be all over the place in the kids areas. With Viacom at their fingertips, they also have a lot of other networks and entities....Nick at Nite and TV Land, MTV, VH1, and a few others to use, many with attractions that are already on the drawing board.

Two things now have to happen to push Paramount Parks new face over the top....some real hit movies that lend themselves to themed rides (that weren't made 15 years ago), and some money to sink into their properties.

From Kevin Baxter on June 28, 2005 at 11:01 PM
Granting division heads more liberty to make decisions is fine, but basically that's how most companies usually run, so all they have done is let it be known that the micromanaging of the past will remain in the past. That's promising, since we have Rasulo now so there shouldn't be another DCA in the US's future. But it doesn't mean they will get the money they NEED. That still comes from above. As do all the goofy ideas to bump up stock prices, like buying unnecessary movie studios or cable channels.

Not that this is something that would necessarily work if Paramount spun the parks off all by themselves. But would this work splendidly for Disney. Honestly, if the Disney parks went IPO, how fast would they sell all their stock? And how much more would they be able to sell it for, compared to current Disney stock? Disney Dorks would LOVE to own Disney Theme Parks stocks from Day One, wouldn't they?

From Ted Heumann on June 29, 2005 at 12:11 PM
Everyone is ignoring my original point. Paramount Parks won't be able to do ANYTHING without the license-holders permission which is no longer them. When Disney wanted to create a Star Wars attraction, they had to go begging to Lucasfilm and he had veto power over EVERYTHING. When Disney builds a Aladin attraction they don't have to answer to ANYONE because they own the license. Nickelodeon can re up their license deal with Universal if Universal is willing to pay more than the now separate company of Paramount Parks.
In addition if Paramount Parks sells a Sponge Bob Square Pants pencil for $1, they have to pay 20 cents to the manufacturer and NOW have to pay 10 cents to the license holder which NOW is no longer themselves!
From Derek Potter on June 29, 2005 at 6:38 PM
Why would Paramount Parks have to pay a large licensing fee? Viacom is in the family. They would have to pay one, but would the company as a whole really charge Paramount Parks as much as they would say Universal. It just doesn't seem "synergetic" for Viacom to make it difficult for Paramount Parks to license Nickelodeon and others.
From Kevin Baxter on June 29, 2005 at 11:20 PM
Which WAS my point. It's a piece of paper. Nothing more. And I mean that literally. Why would one company gouge the other over this when both are still chaired by the same man?
From ANTHONY EDWARDS on August 27, 2005 at 11:38 AM
I DON'T KNOW A LOT ABOUT VIACOM YET AS FAR AS THEIR COMPLETE RELATIONSHIP WITH NICKELODEON AND IT'S SHARING WITH THE UNIVERSAL ORLANDO RESORT, BUT I HAVE TO AGREE WITH THE OTHER RESPONSES THAT THE CLOSING OF THE NICK STUDIO PROPERTY IN ORLANDO WAS ONE OF THE WORSE MOVES THAT COULD HAVE BEEN PULLED FROM BOTH NICKELODEON AS A COMPANY, FOR UNIVERSAL ORLANDO AND IT'S GUESTS, AND VIACOM AS A WHOLE. THE REASON I SAY IS THAT IT GENERATED BUSINESS FOR UNIVERSAL BY BRINGING IN MORE GUESTS EVERY YEAR FOR IT'S EXPERIENCE IN LIVE PROGRAMING, THEREFORE BRINGING NICKELODEON AND UNIVERSAL NOT ONLY EXPOSURE AND MARKETING OPPORTINUNITES, BUT IN RETURN, MORE GUESTS AND MORE MONEY FOR BOTH NICKELODEON AND UNIVERSAL. THEN IN THE SAME MANNER, IT HURTS VIACOM BECAUSE OF LOSS OF EXPOSURE AND MARKETING AND IN RETURN LOSS OF COMPANY SHARE REVENUE. I HOPE THAT NICKELODEON AND VIACOM COMES TO ITS SENSES AND GET A NEW CONTRACT LEASE BACK WITH UNIVERSAL AND WORK OUT A REVENUE DEAL WITH UNIVERSAL TO DRAW EXPOSURE BACK TO NICK AND UNIVERSAL AND BOOST STOCK SHARES FOR VIACOM!

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