Thanks to CBS' strength in television programming, it may be a more lucrative acquisition target for another media or technology company. The diversity of CBS' portfolio, which includes sports, news and other tentpole events, also makes it much more appealing to cable and digital distribution partners, as well as advertisers.
But Viacom is currently in a more precarious situation, given its declining ratings. A Bloomberg report from July showed ratings at Viacom's top networks have declined double digits. MTV's flagship Video Music Awards only drew in 6.5 million viewers, 34 percent down from 2016's 9.8 million viewers. MTV president Sean Atkins, who unveiled a robust strategy to bring back music programming to the network during the advertiser upfront presentation this year, left the network in October.
National Amusements, which controls CBS Corporation and Viacom, sent a message to the boards of the companies declining the deal. The two organizations had begun preliminary talks, but CBS had not made a formal bid for Viacom.
"Over the past few months, after careful assessment and meetings with the leadership of both companies, we have concluded that this is not the right time to merge the companies," the message said. "Following the management changes that the Viacom Board put in place, we have been very impressed with the forward-looking thinking and strategic plan being pursued under Bob Bakish's leadership."
Viacom, which owns Paramount Pictures as well as networks including MTV, Comedy Central and Nickelodeon, started as a television syndicate division of CBS in 1971. The two split into separate companies in 2006.
The deal broke down because Shari Redstone, who is vice chair of the board for both media companies, wants Viacom to remain on its own, sources told CNBC. Redstone believed in a strategy put forth by CEO Bob Bakish that Viacom can regain its position in the media industry.
Viacom did not respond to requests for comment. CBS declined to comment
Viacom could have benefited from having a strong "storyteller" like CBS CEO Les Moonves at the helm, said Scott Singer, managing director for innovation consultancy DDG. He was surprised the hesitancy came from the Viacom side.
"For CBS to take on basic cable networks that are in decline is something that I would find difficult to imagine would be of interest," Singer said.
CBS has also made more moves toward expanding digital distribution, including its CBS All Access streaming offering, while Viacom is lagging behind, eMarketer senior analyst Paul Verna added. While MTV may have been the place for innovation years ago, it's no longer seen as that in the industry. Companies like AT&T and Verizon are seeking content to put in their digital distribution packages, and networks without shows with huge draws may find themselves floundering.
"Viacom in particular has more of an attrition problem in their ratings and their film division has not been hot," said Verna. "I think it's going to pursue a strategy of trying to strengthen its core, but also they do need to look really hard at digital opportunities."
However, it's unclear if CBS wants — even needs to — to sell to anyone. But Verna can see companies like Amazon, who are expanding as content creators, looking into acquiring the company. Verizon has reportedly expressed interest in CBS, according to sources.