Viacom has suffered through a period of uncertainty caused by concerns about the future of the television business. Those industry-wide problems have been magnified by the bizarre events surrounding a lawsuit regarding the health of majority owner Sumner Redstone.
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The 92-year-old stepped down from his position as executive chair of the company, ceding the job to longtime CEO Philippe Dauman. That ended at least one piece of a major battle over control of the company -- though Redstone's daughter, Shari, a Viacom board member, voted against Dauman's ascension.
Still, despite Shari Redstone's objections, the company has a path forward for the immediate future. That, along with some emerging trends in its core markets, suggest that, after 12 months of moving generally down, the company's stock could be on the way back up.
The company has a clear leader
While Dauman has been CEO since 2006, he always had Redstone to contend with. Even though the two are considered allies, and Dauman is a member of the trust that controls Redstone's assets, the CEO was in an uneasy position where he was never really fully in charge.
Essentially, Dauman was the day-to-day operator, but Redstone had veto power, always keeping himself as the actual person in charge. It was an unwieldy system that perhaps became more complicated in recent years as Redstone's health allegedly declined.
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Now, Viacom has one leader who can move forward without having to look over his shoulder. Yes, Dauman is still responsible to the board and company shareholders; but he can now operate and be evaluated by them much more easily.
Cord-cutting is not a big thing
Giventhat Viacom is a company that consists mostly of cable networks, the idea that consumers may opt out of pay television in favor of streaming services like Netflix , Hulu, and others, loomed as a big problem. But while cord-cutting could accelerate dramatically at some point, it still remained pretty much in check in 2015.
After dropping 150,000 customers in 2014, the cable industry lost another 385,000 in 2015, according to Leichtman Research Group (LRG). That's a tiny amount in a 94-million home industry, and it gives companies, including Viacom, hope that the trend may limp along; but it's not going to quickly accelerate.
Kids are a great market
Even if consumers look to cut the cord completely, or move toward skinny bundles, they still want content, and one market that will always be hungry for top-tier programming is kids. It's easy for a parent to drop pay-TV in favor of Netflix, even if that means denying the parent access to certain shows. It's much harder to do the same to a child -- and it becomes near-impossible with very little kids.
That's good news for Viacom, which owns the Nickelodeon family of channels. Those stations, which are aimed from toddlers through tweens, should prove resilient even as consumers try to cut cable spending. This could mean that those stations will be sought after in a la carte or skinny models. Even streamers like Netflix or Hulu may be willing to pay to license certain shows.
In addition to the the young-kid market, Viacom also serves teens and tweens with its MTV family of channels, and to a lesser extent, Comedy Central. Even if there is a cable-spending pullback, owning such strong assets should help Viacom protect its revenue -- or even grow it -- while owners of less-attractive channels suffer.
The article 3 Reasons Viacom Stock Could Rise originally appeared on Fool.com.
Daniel Kline has no position in any stocks mentioned. He no longer watches MTV. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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