WHEN: Today, Thursday, November 14, 2019
WHERE: CNBC’s “Mad Money w/ Jim Cramer”
The following is the unofficial transcript of a CNBC EXCLUSIVE interview with Viacom CEO Bob Bakish and CNBC’s Jim Cramer on CNBC’s “Mad Money w/ Jim Cramer” (M-F 6PM – 7PM) today, Thursday, November 14th. Video from the interview will be posted on CNBC.com later today.
All references must be sourced to CNBC.
JIM CRAMER: Alright, Bob. Last quarter where it's just Viacom. Next time we see you, it will be ViacomCBS. What does the combination look like? Because that's now more important than what Viacom looked like.
BOB BAKISH: Well look, we just reported our last quarter as an independent company. Our fourth fiscal quarter. Really pleased with it. We returned our domestic ad business to growth. We returned our domestic Philly business to growth. We delivered full year profitability for Paramount. All things we promised the Street at the beginning of the year. So, we're thrilled about that. But it is the road ahead that's so exciting. As you point out, we're going to be merging with Viacom -- with CBS. So, ViacomCBS will–the transaction will close early December, and then we'll be off to the races.
JIM CRAMER: Now, you're an oddity here. Your company is the second lowest PE, price to earnings, ratio in the S&P 500. Only Macy's is less. I look at all the things that you've done in the turnaround. What is Wall Street, or, a lot of our regular mainstream viewers missing?
BOB BAKISH: I think there was uncertainty about the transaction. Again, now we're going to close in early December. There is some speculation about how we're going to operate--are we going to operate as a combined company? I can tell you the road ahead, Jim, is tremendously exciting. We're deep into integration planning. We've already announced, for example, we're going to have one domestic ad sales force here, we're going to have one distribution arm, we're going to have one global product licensing organization. Just those three things, on the commercial basis, bringing all our product together. In the U.S., we're 22% of primetime viewing. 20% of total day. That is an extraordinary place to be. And bringing that to the marketplace in a single point of contact positions us to do great things.
JIM CRAMER: We are now in a world where people are more excited about the unbundle that. Yesterday, Disney. The idea of how much Netflix has to spend. And those are the standalones that the young people like. And that your model is the old model and it won't work. I look at it as that you have a different model, not the old model. Correct?
BOB BAKISH: Absolutely. And we talked about it on our call today. We've been executing, as Viacom, on a strategy where we're serving the widest accessible market. Now, on the one hand, are we in the bundle business? Big bundles, small bill. Yes, absolutely. The majority, significant majority of homes in the U.S. still get television that way. So, of course we're feeding that. At the same time, we're making original product through our studio business for our -- for the streaming clients. And that's a great business for us. We announced a couple of deals recently, including yesterday another deal with Netflix. That was a great piece of business. We're also in the streaming business on an owned and operated basis, both through our Pluto TV product at Viacom, which is the number one free streaming television product in the country. We just announced today, 20 million monthly active users, up from 12 million in January. So, that's 70% growth calendar year to date.
JIM CRAMER: Monetizing.
BOB BAKISH. –that’s on fire.
JIM CRAMER: Monetizing. Okay.
BOB BAKISH: So, usage is growing even faster than users. And monetization is already in the hundreds of millions. So, that thing is a rocket. So, we're playing all segments. And I think that's what makes us different. That gives us a better, more predictable path to growth and a better ability to manage.
JIM CRAMER: So, the naysayers who say, ‘Listen, Jim, you're too bullish down here because they have to spend 5, 6, 7, 8 billion to compete with a Netflix, to compete with a Disney,’ that is not necessarily an accurate depiction what has to happen?
BOB BAKISH: Look, the naysayers said we couldn't return our domestic ad sales business to growth. They were wrong. We proved that today for the second consecutive quarter and for the full year. They said we couldn't return our domestic affiliate business to growth. They were wrong. They said we couldn't return Paramount to profitability. We improved profitably $500 million in three years. So, they say we can't compete in streaming -- they're absolutely wrong. We're bringing a different approach to the marketplace, one that combines free and pay. We’re the leader today in free. We already have, particularly on a Viacom CBS basis, a nice bouquet of pay products. We’ll use those on an integrated basis. And you'll see us prosper in that space as well.
JIM CRAMER: Now, a lot of people might say, they're not well funded versus Google versus Facebook versus Amazon. One of those guys is going to wake up and say, I want to write a check to the NFL, and I am going to take away the principal blue-chip asset that you have. Why won’t that happen?
BOB BAKISH: Well, first of all, we're an investment grade company. So, we have a strong balance sheet. We’re even stronger investment grade as a combination. But to your question on the NFL, CBS has a long-standing partnership with the NFL. And they get some very material value from CBS. One, broadcast carriage. The NFL is a mass market brand in the United States. It needs mass market reach. And broadcast television continues to that. So, that's valuable to them. Second thing the NFL gets is and people don't talk about this very high-quality production. CBS doesn’t produce one game a week for the NFL, they produce multiple games. This is live television, multiple cameras, very complicated production. It's how the U.S., and in some cases the world, see the NFL product. Very important to them. Not easy to do. Now, enter Viacom, two other real sources of value, and I've spoken with the league about this: one is young audiences. Whether it's our linear networks or on-demand product like Pluto, we bring young audiences to the media. And that's important because they too are running that brand for a long time. They need to bring younger consumers in. And lastly, international. Also, as part of a growth strategy, if people want to develop their businesses outside of the U.S. you see the NFL doing that, Viacom has one of the definitive operating footprints x-U.S. in media. That includes broadcast assets in the UK and Latin America. And we serve 170 countries overall. So, we bring four very material things to the table. And that comes on the back of a long-standing highly-productive partnership. So, I feel good going into that.
JIM CRAMER: Some things mystify people. South Park. Unbelievable. You're leasing it away. Why lease a gem?
BOB BAKISH: Look, the content market is very frothy. Let's talk about how we think about whether we use IP for our own platforms or third-party. We really think about three things. One is, we look at the financials. And how does doing a deal impact our ability to deliver our overall financial plan. Second thing is, we look at strategy. How does using a piece of IP, either on an owned and operated platform drive the growth platform or potentially, how does it drive the growth of other businesses, like consumer products, like recreation, like downstream feature film activities. And the third thing we think about is partnership. You know, how does a decision on a piece of IP impact a broader partnership, either on the creative side or on the distribution side.
JIM CRAMER: Opportunistic.
BOB BAKISH: So, we look at the South Park deal. It was an opportunity to ring the register in this frothy market. We’re very happy with the deal. It does, ensure that we have broad reach for the franchise, which we think has other benefits. And both AT&T is a big partner of ours, and the creators are big partners of ours. We have multifaceted relationships. We put it all together. We love the South Park deal.
JIM CRAMER: Alright. One last question, Bob. You--I had the privilege to meet Shari Redstone, a legendary figure. Went out to dinner with her. Thank you so much. We all went out. And she seemed to be very motivated and cannot be happy with a company that sells in five times earnings, a great growth company. What can an individual do in terms of just individual firepower, individual interest as she can, to say, ‘You know what, I’m drawing a line in the sand.’
BOB BAKISH: Look. Management--myself--we're not happy with the valuation of Viacom. Shari also is focused on growing shareholder value. We believe the combination of these two great companies, and our execution path going forward, will really demonstrate the value. You know, there are material synergies here on the cost side. And, more importantly, on the revenue side. And it's the revenue side that -- is the reason you ultimately do the deal. We see ad revenue upside, we see distribution upside, we see upside in global product licensing. We will be one of the biggest dealers on the planet, in a world where there's increasing demand for content and some of our competitors are pulling content off the market. And finally, we see upside on the streaming side through this combination of free and pay. I see that. Shari sees that. We're tremendously excited. We believe the marketplace will see that. And that this is an incredible opportunity today to get involved with a super high-quality company.
JIM CRAMER: Well, people will know who follow me and Action Alerts know that I couldn't agree more. I don't understand the valuation. After listening to you, I still don't understand it, except for the side that the people who were selling are wrong. That's Bob Bakish. He's the President and CEO of Viacom. I hope you now understand why I said it was the most undervalued stock that I follow. And with 499 out of 500. I can't believe it. This is wrong. “Mad Money” is back, after the break.
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