The new king of the Viacom Inc. media empire was named to replace ailing founder Sumner Redstone, but the move exposed a boardroom rift that could play out in the ultimate struggle for control of prized assets that include Nickelodeon, MTV and the legendary Paramount Pictures.
The Viacom board voted 10 to 1 Thursday to name Chief Executive Philippe Dauman, 61, as chairman of the media company, resolving for the moment the question of who would replace Redstone, the 92-year-old controlling shareholder.
The lone vote against Dauman came from Redstone's daughter, Shari Redstone, the board's vice chair. That puts Shari Redstone, 61, at odds with the new chairman, her fellow board members and even her father, who backed his loyal lieutenant.
"It's going to be a bumpy road," predicted Brian Wieser, a senior analyst with Pivotal Research Group. "The story still has to play out, but it feels like the long-awaited changes at Viacom are going to happen sooner rather than later."
How the fissures in Viacom's boardroom will unfold remains a Hollywood guessing game, but some investors already were expressing unhappiness with Dauman's appointment.
"This is an unfortunate turn of events," said Jason Ader, chief executive of SpringOwl Asset Management, an activist investor. "This doesn't bode well for change — and change is warranted at Viacom. We wanted someone to come in right now and take a fresh look at the company. "
Some investors had been hoping that the underperforming New York media company would take more dramatic action by putting itself on the auction block, reuniting with its former corporate sibling CBS Corp., which Redstone also controls, or selling pieces of the company.
Viacom's stock value has plummeted more than 40% in the last two years — although shares rallied when the markets opened on Thursday as investors cheered the prospect of dramatic changes. However, the gains were short-lived. The stock dropped back down after Dauman was named chairman. Viacom shares ended the trading day up 48 cents, or 1%, to $45.15.
"Viacom's stock has been underperforming," said Mark Rogers, chief executive of chief executive of BoardProspects.com, an online recruitment network for board members. "I feel that the company now really needs an overhaul of the board to right the ship. It cannot sustain itself with the status quo. And the ones who are hurt by all of this are the shareholders."
Even before Thursday's board vote, Viacom's second-largest voting shareholder, Mario Gabelli, had been agitating for a sale of Paramount Pictures, the struggling Melrose Avenue movie studio behind the "Transformers" and "Zoolander" film franchises. Gabelli on Thursday renewed those calls during an appearance on CNBC.
The Los Angeles studio has lagged well behind its rivals that have more robust film slates and have taken bigger swings in their film choices. Dauman even has acknowledged that Paramount missed the mark last year by not lining up enough films in its pipeline to support its operations.
"Paramount's profitability level is just unacceptable," prominent media analyst Michael Nathanson said in a recent interview. He noted that Paramount produced about $100 million in profit last year, which is less than one-tenth of the amount generated in 2015 by the larger Universal Pictures or Walt Disney Co.'s studio.
"Paramount has got to be fixed," Nathanson said. "Paramount has not done a good job innovating, and the studio would have more value if it were in someone else's hands."
Viacom's TV networks, including MTV, Nickelodeon and Comedy Central, have struggled to reverse multi-year audience declines amid changes in viewer behavior. No longer ratings powerhouses, Viacom's channels have become more vulnerable in an era when pay-TV companies are looking to pare the number of channels they offer customers in an effort to keep a lid on rising programming costs.