Viacom to Keep the Entertainment at Home

Viacom Inc. (New York) has decided not to spin off its Dallas-based Blockbuster Inc. retail subsidiary after all.

It was like a script from one of the cliff-hanger movies on Blockbuster's shelves. The movie rental unit saved itself at the last minute with a strong recent sales performance and a market share that has jumped to 36 percent. Much of that success has been through the growth of its DVD-rental program. (Margins for DVD rentals are higher than those for videocassettes.)

Viacom, which owns 82 percent of Blockbuster, had been hoping to sell the retail subsidiary once its stock priced reached $20 per share. (Blockbuster closed yesterday at $14.10). But the retailer's strong business performance, coupled with the financial problems of many of its competitors, has caused the parent company to rethink the strategy, if only for now. As one analyst said, Viacom's decision is an endorsement for Blockbuster “but not a ringing endorsement.”

Viacom is the world's Number Three media company (behind AOL Time Warner and Walt Disney). Its entertainment conglomerate includes CBS, Paramount Pictures, the United Paramount Network (UPN), MTV Networks (MTV, VH1, Nickelodeon), Showtime Networks, BET (Black Entertainment Television), and Comedy Central. It also owns 35 CBS and UPN TV stations, publisher Simon & Schuster, dozens of Internet holdings through The MTVi Group and CBS Internet Group and Infinity Broadcasting (with its more than 160 radio stations) plus Blockbuster.