Menaces Fended Off, Viacom May Start to Get Back to Business

Viacom International, preoccupied for more than two years with menacing corporate raiders, leveraged buyout bids and hostile takeover attempts, may be settling down to business.

The entertainment and communications firm’s plans began to unfold last week as it announced the choice of a new top officer, Coca-Cola Television Chief Executive Frank J. Biondi. Meanwhile, Viacom’s new owner is exploring ways to pay off the debt it took on in the $3.5-billion buyout announced in March and is already thinking about expansion of its TV syndication and production, cable and cable-network operations.

“We’re up and running,” says Sumner M. Redstone, the Boston theater-chain owner who is chairman and largest shareholder in the company. “We’re a $1-billion company, but we will soon be a multibillion one.”

The choice of Biondi was central to the new strategy. The executive, who was chairman of Time Inc.’s HBO pay-TV service before taking over Coca-Cola’s diverse television production operations, will come to his job with experience in cable, pay-TV and programming businesses.

“The company’s mix of assets makes it really perfect for me,” Biondi said in an interview last week.

There has also been wide speculation that Winston Cox, who was a Biondi colleague at Time Inc., has been asked to join Viacom’s new team. Redstone would not confirm that Cox has agreed to join the company, but said he “would not be at all disappointed” if Cox accepted an offer.

Biondi is reputed to be a skillful negotiator, and that skill may be vital if he is to breathe new life into Viacom’s weakest link, Showtime/The Movie Channel, its pay-television service. The service suffered a setback last month, when its larger competitor, HBO, signed a five-year contract that will give it exclusive pay-TV rights to the movies of top-rated Paramount Pictures.

As of the end of last year, Showtime/The Movie Channel had about 13% of the pay-TV market, while HBO led with a 42% share.

But Redstone insisted that the deal does not seriously damage the pay service’s prospects because Viacom can still sign exclusive contracts with MCA’s Universal Studios, Twentieth Century Fox, or perhaps Coca-Cola’s Columbia. Viacom already has the cable rights to such films as “Top Gun,” “Beverly Hills Cop,” “Beverly Hills Cop II” and “The Untouchables,” and will have exclusive rights to Paramount films that are released through the first five months of next year, he noted.

He pointed out that Viacom already has contracts with Walt Disney’s Touchstone Films, Orion Pictures and De Laurentiis Entertainment Group, adding that the networks have added nearly 500,000 subscribers to their business this year, bringing the networks’ combined subscribership to at least 8.4 million.

“We would have liked that Paramount contract, but it was by no means our only opportunity,” Redstone said.

He said both the studios and cable operators have good reason to look favorably on Showtime/The Movie Channel, lest they otherwise be stuck selling their products to only one pay service. “They know they have to think about their long-term as well as short-term economic interests,” he said.

Networks Division Profitable

Viacom’s networks division, which also includes MTV Networks and a part-interest in the Lifetime network, earned $37 million last year on $510 million in revenue. A source close to the company said Showtime/The Movie Channel earned $22 million of that; the service is expected to bring profit to $29 million next year, according to the source.

Viacom has been distracted by the threat of takeover since 1985. The company paid investor Carl C. Icahn $200 million in “greenmail” to defuse the threat he posed.

A management-led investor group proposed a leveraged buyout last year, but Redstone mounted a hostile bid that successfully challenged that effort.

Redstone said the company hopes to reduce its debt by having other companies purchase minority stakes in its assets. For example, he said some cable companies “have shown a real interest” in purchasing stakes in the pay services.

He said the company does not intend to sell off any major assets, but rather expects to expand them, particularly the television production and distribution business.

“I’ve been an expansive type all my life, and I’m not going to start liquidating things now,” he said. While the company’s cable operations, its radio and television stations are vital interests, television production and syndication “is where the real excitement is,” he said.

Viacom owns eight radio and five TV stations, as well as a nationwide collection of cable systems.

Redstone noted that, under its takeover deal, Viacom does not start paying off its debts for 18 months after the takeover is completed. “We’re under no pressure to start making deals left and right,” he said. “We can take our time and find the best solution.”