The Kevin Costner-led drama, which aired its season finale last week, is now the most-watched series not only in Paramount Network’s brief history, but also in nearly 15-year run of predecessor network Spike TV. Yellowstone reached an average of 5.1 million viewers weekly throughout its nine-episode first season, garnering the largest audience for an ad-supported new cable series since FX’s The People Vs. O.J. Simpson in 2016 and earning a 1.47 rating among the coveted 18-49 demographic. Among ad-supported cable dramas, only The Walking Dead has attracted a larger audience in 2018.
On the digital front,the summer hit from the seven-month-old network mirrored Viacom’s larger success across digital platforms. Season 1 content generated more than 12 million streams across Paramount owned-and-operated platforms and received over 9 million transactions on video-on-demand — the highest consumption for any Paramount Network series in channel history.
The success proves the newcomer network made a smart decision by recruiting big-name talent such as Oscar-nominee Taylor Sheridan — who wrote and directed the series — to drive its premium scripted lineup.
“When we launched, we wanted to build two nights of scripted entertainment,” Paramount Network President Kevin Kay told The Hollywood Reporter. “Now we know Yellowstone can anchor one of them.”
Yellowstone follows the Oscar- and Emmy-winning Costner as John Dutton, owner of a prominent and enormous Western ranch that has been passed down through generations in the Dutton family while he tackles the obstacles of keeping up with his adult children and making sure his land remains safe.
The finale of Yellowstone brought in 5.4 million viewers (L+7) and ranked as the top ad-supported episode of scripted television since April. The series accounted for 9 of the 10 largest audiences on ad-supported cable this summer (excluding news and sports). Season 2 production is already in the works with a debut set for 2019. Filming will take place in Utah and Montana, with Costner returning in his lead role.
On Tuesday, Viacom President and CEO Bob Bakish sat down with Activision Blizzard Studios Co-President Stacey Sher for a panel moderated by Fortune’s Andrew Nusca at the Fortune Brainstorm Tech Conference in Aspen, Colorado. The topic was “the future of entertainment,” and Bakish delivered a broad overview of how Viacom not only fit into that future, but was actively shaping it with a focused strategy, an invigorated leadership team, and a series of initiatives to broaden and modernize its business.
Here are a few highlights from Bakish’s remarks, emphasizing how Viacom is repositioning itself to thrive as an independent company within a rapidly changing and consolidating industry. You can watch the full remarks below.
Step 1: have a plan
“I was given the opportunity to run Viacom roughly a year and a half ago. I’m a big believer in you have to have a plan. … We rolled out a plan. Plan had number of elements to it, probably central to it, which will relate to our conversation, was this notion of flagship brands. That had to do with prioritization and true multi-platform expression. … The other thing was you need to have a killer management team. It’s another place where the company hadn’t changed much. Made significant changes on the network side of the business, really completely overhauled the Paramount team from the top down, and then we got to work executing. If you look at what’s happened in the quarters since, I describe Viacom as not a light switch, but a story of incremental progress against a destination.”
Step 2: execute
“If you look at our U.S. networks and audience share, you’ll see that we’ve consistently grown audience share. You look at a brand like MTV, which had a ratings decline in the ten percent for five years running. Now, five quarters in, we’ve consistently grown ratings every quarter. That’s a function of a different strategy and a different team and focusing on execution.”
As competition grows, Viacom benefits by building upon its content production expertise – and profiting off this competition by producing their content
Again, with what we call the tech companies coming in, do you have some incremental competition? Yes, you do. But at the same time you have a series of demand that needs to be filmed. Take Paramount Television, which is the television production side of Paramount. It didn’t exist four years ago. Today, or this fiscal year, it’ll do $400 million of revenue and it’s producing hits. It’s producing hits like 13 Reasons Why for Netflix, like The Alienist for the Turner networks, like the upcoming Jack Ryan series for Amazon, which will drop at the end of August. There’s fantastic opportunity to feed that ecosystem. At the same time, we look at our IP that we’re developing in house and we do think about, “Is this better as a linear network show on an owned and operated network, i.e., I don’t know, Nickelodeon, or is it better as a studio production, branded studio production for a third-party platform?”
Continue to drive growth through great content – both with new ideas and iconic IP
… we are mining franchises. Part of it is, sure, we’re creating new product that didn’t exist before. If you look at Paramount as an example, you have a film like A Quiet Place. Different idea, great characters in it, great storytelling, great execution, including focusing on how much it cost to make, and a great result. You also have a film like Mission: Impossible, which premiered in Paris last week, will open in the U.S. in two weeks. It is really an extraordinary film. … Yesterday, we announced that we’re taking the Rugrats franchise. It’s probably a franchise most of you have heard about. Nickelodeon franchise. We’re bringing that back in a new iteration, both for feature film and for episodic video, i.e. television, and we’ll do a whole bunch of digital native stuff. It no doubt will show up in our experiential space as it comes to life. It’s really mining those opportunities, pursuing some different business models, but making sure consumers have access and using that combination to ultimately drive growth, which is at the end of the day what I’m focused on, which is making Viacom once again grow.
Embrace technology to drive growth
At the same time, we’re using an extraordinary amount of technology in the, I’ll call it, monetization space. For example, when you look at advertising sales or what we’ve historically called advertising sales, Viacom is at the forefront of data-driven advertising in television. … Starting a year and a half ago, in every affiliate renewal we did, and we’ve renewed or extended well over half the sub-base in the U.S. by now, we incorporated the provision for dynamic ad insertion. We’re now able to insert dynamically in 90 percent of [video-on-demand] homes in the U.S. and in the two largest cable operators in the U.S. in a portion of the national avails.
Operate at (the appropriate) scale
[In answer to a question from Fortune’s Adam Lashinksky: The conventional wisdom is that Netflix, Apple, Amazon, are spending billions and billions of dollars, and therefore you and others your size can’t compete. Do you think that conventional wisdom is wrong? If so, why or how?]: “Yeah, I think it is wrong. The reason I’ll say that is it’s overly simplistic. Because if you think of scale, which is at the root of a lot of these arguments, there’s plenty of examples of scale where there’s actually no value to the combination. We see that today in some assets that own both media assets and distribution, but there isn’t really a lot of crossover. Look, I’d say is there scale or is there relevant scale. The other thing is, and I learned this because I ran our business outside the U.S. for 10 years … Those are places where we had a one percent share, so we didn’t have scale. We had to figure out how could we act like we had more scale? Those were doing things like partnering and creating ad sales, houses, and the like. That’s creating virtual scale. In a world where, yes, people are spending extraordinary amounts of money … By the way, we spent about five billion dollars on content, so we’re not exactly irrelevant in that regard, and we have relationships with leading creatives in front of the screen, behind the screen, in feature film, in episodic television, and, yes, in digital native. … I think there is an opportunity to be more nimble in this regard and not be vertically integrate and, frankly, serve a lot of different demand.
In an unpredictable, changing landscape, the only thing you can do is execute
[Answering the moderator’s question of whether Viacom would be independent a year from now]: “Who knows what the future will bring? My guess is, yes, we will be independent a year from now. We’re certainly executing in that regard. We definitely have the full support of our board. We’re talking about a number of interesting ideas, both organic and inorganic, but we’ll just have to see how the whole ecosystem plays out.”
Pinky Malinky is an upbeat teenager who has a lot in common with his peers: he posts rabidly on social media, he hangs out nonstop with his two best pals, and he constantly must navigate the social pressures of school and life. But there’s one very important thing that will make Pinky unique among Nickelodeon characters (besides the fact that he’s a talking hotdog): when his show debuts later this year, fans will find him exclusively on Netflix.
But Pinky won’t likely be alone for long – across Viacom’s ecosystem, brands are digging into their vaults to identify intellectual property that could be an ideal fit for a digital or linear programmer outside of Viacom. MTV, under the banner of MTV Studios, is for the first time cracking open its rich, 35-year archive to offer its iconic, youth-centric content – Real World, Daria, Aeon Flux, the Emmy Award-winning Made, just to start – in new or reimagined form on non-Viacom platforms. In addition to strategically tapping the 200 titles in its massive library, MTV Studios will churn out new ones, including, to start, The Valley (working title), about a group of friends growing up in the U.S.-Mexico border town of Nogales, and MTV’s Straight Up Ghosted, in which victims of this mobile-age abandonment will confront their disappearing former intimates.
Similar efforts will follow at other Viacom networks.
This studio model – under which Viacom will license and produce new episodes of fully owned content for third parties – will present an enormous growth opportunity, as the company’s brands increasingly feed the insatiable global demand for premium content.
Viacom is uniquely positioned to do this. The company’s voluminous original content libraries house an enormous number of beloved properties that speak deeply to their fans. Its archives stretch back decades – and, in the case of Paramount Pictures, more than a century. Its properties resonate deeply with high-value audiences: kids (Nickelodeon), African-Americans (BET), youth (MTV), the LGBTQ community (Logo), and more. Viacom’s global footprint means that those audiences stretch across cultures and borders. As the first port-of-call for creatives pitching shows tailor-made for these audiences, Viacom’s brands are keenly aware of what is in the market. Its production expertise is second to none.
The possibilities for third-party licensing and production are practically limitless. Pinky Malinky – which will feature Nick branding at the show open and embodies Nickelodeon’s patented spirit of fun and surprising stories and characters – is just the first of up to a dozen properties that the brand is positioning for reboots or co-productions this year alone.
“Proliferating distribution platforms create incremental demand for VIAB’s [Viacom’s] content because high-quality branded content is one of the most valuable forms of differentiation for competing distribution platforms,” Needham declared in a bullish March analysis of the company’s stock. “VIAB’s film and television libraries represent differentiated, globally scalable, long-lived content.”
Take, for example, Jack Ryan, the Tom Clancy action hero who fought his way through five Paramount Pictures films, starting with 1990’s The Hunt for Red October. The quintuplet of movies grossed hundreds of millions of dollars and still carries strong brand recognition and a built-in fanbase. But while there is no obvious basecamp for Ryan within Viacom’s current brand archipelago, his bulletproof vest is a perfect fit for Amazon Video, which will debut the 10-part Jack Ryan series in August.
This branching out into third-party content production has been subtly underway for some time, both in the United States and abroad. Paramount Television, the production arm of Paramount Pictures that is producing Jack Ryan, has quietly built a $400 million-per-year business from scratch by producing premium content like Netflix’s 13 Reasons Why and USA Network’s Shooter.
In May, Viacom International Studios (VIS) united the extensive production capabilities of wholly Viacom-owned Argentinian broadcaster Telefe and majority-owned Brazilian comedy brand Porta dos Fundos with Viacom’s Miami-based production operations, creating a multi-lingual machine that will develop, produce and distribute original content around the world. A matrix of SVOD, pay TV and free-to-air distribution deals will place VIS-produced long-form series (Borges on Netflix in Latin America), cinematic adaptations (Telefe’s Animal on Fox Networks’ platforms in Latin America), telenovelas (Vikki RPM on Caracol Televisión in Colombia), and co-productions (Club 57 on Rainbow Group in Italy and Nickelodeon elsewhere) in diverse markets and maximize the potential of formerly regional or local properties.
These licensing deals will therefore sprinkle tastes of Nickelodeon and MTV and Telefe and other Viacom properties throughout the global content ecosystem, while segmenting the full brand experience for consumers who subscribe to a Viacom linear or digital distributor. Even so, this nascent third-party production is already acting as a powerful growth driver as Viacom diversifies outside of its core television business under President and CEO Bob Bakish.
“Building on the success of Paramount Television and Telefe’s quickly growing production business, we’re going to much more aggressively tap into the huge demand for content and unlock more of our IP and production and creative capabilities to drive incremental revenues from third-party platforms,” Bakish said on Viacom’s second-quarter 2018 earnings call in April. “This isn’t just an idea. … there is a lot of interest from SVOD partners in licensing library properties from MTV and Nickelodeon IP for brand-new interpretations. At the same time, we’re also developing new IP for the sector and have already closed deals for brand-new original Nick IP and animation with third parties and we see more in the pipeline.”
Viacom’s rapidly growing international division has united two Latin American content powerhouses with its Viacom International Studios (VIS) production unit, transforming the studio into a global content machine with development, production and distribution capabilities. A number of SVOD, pay TV and free-to-air distribution deals will accompany the expansion, which complements and bolsters Viacom’s burgeoning premium content business.
The combination folds the production capabilities of wholly Viacom-owned Argentinian giant Telefe and majority-owned Brazilian comedy brand Porta dos Fundos under the same umbrella as the Miami-based studios that churn out Latin American content for Nickelodeon, MTV, Comedy Central and other Viacom brands.
“Since combining our production and sales forces last year after the acquisitions of Telefe and Porta dos Fundos, our focus has been on creating the highest-quality Spanish- and Portuguese-language content and expanding our distribution beyond Latin America, making the new Viacom International Studios a true global player in Latin American original content,” said VIMN Americas President Pierluigi Gazzolo. “With more than a decade of producing original, hit content for the Viacom brands, and expertise and content delivered through our acquisition of Telefe and investment in Porta dos Fundos, we are growing the reach of our product and client base with SVOD players, MVPDs and broadcast partners around the world. These partnerships are testament to the power of our brands and strength of our original productions.”
Viacom International Studios held a preview of upcoming content for new clients in May, shortly after Viacom announced the formation of the upgraded entity.
The reformulated VIS will inject global scale into many formerly regional properties, unlocking potential for high-quality content to reach a far larger audience. Fox Networks Latin America, for example, will distribute Telefe’s thriller movie Animal (from Oscar-winning screenwriter Armando Bo), on digital and linear platforms across the region, while Netflix will air the Comedy Central-Porta dos Fundos co-produced Borges in Latin America. Nickelodeon and Italy’s Rainbow Group will co-produce the 60-episode Club 57 time-travel epic, with VIS handling global distribution and Rainbow Group retaining rights in their home country.
“But those local cornerstones are not only about our strength in those particular markets, but they’re also content engines more broadly, and one of the things you’re going to see that you haven’t really seen yet is our Telefe asset becoming a major producer of novela product for the world,” he said. “We’re going to be distributing about 700 hours globally, that’s not something that Telefe used to do. It’s something I’m very excited about.”
This ramping up of Spanish- and Portuguese-language content production with studios in Miami, Buenos Aires and Rio de Janeiro will act as a powerful international complement to Viacom’s burgeoning premium content capabilities under Paramount Pictures’ Paramount Television production studio. Behind hits such as USA Network’s Shooter, Netflix’s 13 Reasons Why, and TNT’s The Alienist, Paramount Television has grown from nothing just a few years ago into a sought-after production hub with anticipated revenues of $400 million in 2018 alone.
Paramount Network launches tonight with a special edition of smash hit Lip Sync Battle, propelling Viacom into the premium content universe and building on the century-long storytelling tradition of fellow Viacom property Paramount Pictures.
The launch marks an important business milestone for Viacom, fulfilling a key pillar of CEO Bob Bakish’s strategic plan and cracking open potential for new marketing and advertising partnerships behind a star-studded slate that blends the best of the retiring Spike network with high-quality scripted programming.
Paramount Network completes CEO Bob Bakish’s flagship six strategy
The Paramount Network launch culminates a monumental yearlong effort to reorient Viacom under CEO Bob Bakish, consolidating resources under the company’s most iconic brands. The focus around six flagships – Nickelodeon, Nick Jr., MTV, Comedy Central, BET and Paramount Network – is a strategy Bakish had successfully implemented in his decade-long run as head of Viacom International Media Networks.
“There’s no better way to better encapsulate Viacom’s strategy change under Bob Bakish than to look at the creation and launch of the Paramount Network,” notes TBI Vision.
Paramount Network launches Viacom into the premium content game, with big stars and great stories
Paramount Network’s premium scripted content will launch Jan. 22, when Waco, co-starring Michael Shannon and Taylor Kitsch, debuts. Yellowstonestarring Kevin Costner, American Woman starring Alicia Silverstone and Mena Suvari, and a re-imagining of the 80s classic Heatherswill follow later this year.
“The audience has an expectation that there are going to be big names, big stars, great storytelling, great characters, and I think that’s what we have to focus on,” Paramount Network President Kevin Kay told Variety.
Paramount Network opens up tremendous partnership opportunities
The combination of captivating content, huge talent and high production generates enormous interest not just from fans, but also from advertising, distribution and creative partners who want to do business with Viacom.
“All the groups together went out and presented to both the movie studios, to our agency clients, and then to our distributors as well,” recalled Kay when asked how partners have been processing the rebrand. “People understood why we are rebranding Spike as Paramount Network, they’re excited to work with us, and the biggest thing I think that came both on the distribution side and on the ad-sales side was that clients said, ‘we want to be your partners.’”
The best of Spike is coming along
When the tribute to the King of Pop ticks to life tonight, the long-running Spike network will cease to be in the United States, gifting to Paramount Network its top unscripted programs – Ink Master, Bar Rescue, and Lip Sync Battle – plus Bellator MMA.
This mix of legacy unscripted programming establishes the net’s impressive versatility and provides a stable complement to Paramount Network’s still-evolving scripted slate.
“We’ve got scripted dramas, non-scripted in a big premium way, we’ve got scripted comedies, we’ve got docuseries, and we’ve got Mixed Martial Arts,” Kay told Deadline. “If you look around at the broadcast networks, that’s not a bad model to me. On the broadcast networks, you’ve got drama nights, you’ve got comedy nights, you’ve got sports nights. You’ve got a lot of variety for different viewers across a very broad audience. I feel that’s where we want to be.”
Nobodies will also migrate to Paramount Network, from Viacom’s TV Land. There are more original concepts in development, including sketch comedy series Browntown in collaboration with leading Latino-focused digital media brand mitú.
Paramount Network builds on Paramount Picture’s century-long legacy
Paramount Network takes its name from the rich DNA of Viacom’s Paramount Pictures, the 105-year-old Hollywood icon whose deep catalogue houses some of the most memorable films ever made, including Titanic, Forrest Gump, and the Godfather films. While Paramount Network and Paramount Pictures will operate separately, their relationship will mirror that of other Viacom properties under Bakish, in which the brands collaborate with the movie studio to maximize the reach of intellectual property.
“There’s a real big need, and there’s a want, a desire, for us all to work together really closely, to both exploit [Paramount Pictures’] library and then to help promote the movies, and then to potentially create some great programs for Paramount Network,” Kay explained.
Paramount Pictures also owns the Paramount Television production studio, which tripled its revenue in 2017 through a steady stream of high-quality content, including the Netflix sensation 13 Reasons Why, Epix’s Berlin Station, and Shooter on USA.
“There is incredible demand for high-quality television content and the reality is, there are not that many places that you can get it,” Bakish said at the at the UBS Global Media and Communications Conference in December, underscoring the importance of Paramount Television.
The Paramount name resonates globally – Viacom offers a network called Paramount Channel in select markets outside of the United States. According to Bakish, it is the largest ad-supported movie channel in the world.