Media Moguls Create Disorder in the Court

The courtroom spectacle between MCA Inc. and Viacom Inc. currently underway in Delaware illustrates why powerful and influential entertainment moguls would do well to settle their business disputes before they get an embarrassing public airing.

When forced to testify under the tough questioning of killer lawyers and the eager eye of the news media, it’s hard for these high-profile individuals to keep their cool, let alone their carefully crafted public images in tact.

In the MCA-Viacom case, nobody has come off well. Either Viacom honcho Sumner Redstone is being deceitful in his testimony or MCA chief Edgar Bronfman is. Neither can be telling the whole truth and nothing but the truth.

Therefore, both are suspect.

“They both look like fools,” says a prominent industry player who’s following the case closely.

Whether it’s Bronfman facing off against Redstone or Ted Turner duking it out in the public eye with Rupert Murdoch as News Corp. went to war with Time Warner over carriage of the Fox news channel, “they look like a bunch of big, rich babies, and it’s one more thing that reinforces that this business is full of over-inflated egos,” says an industry observer.

When they wound up in court, Bronfman and Redstone not only contradicted each other on the stand but at times themselves.

MCA is suing Viacom for breach of contract, alleging that the launch of Viacom’s new cable network, TV Land, violated their USA partnership that seemingly prohibits either company from independently starting other cable networks.

In his testimony, Redstone at times appeared crafty and mean-spirited. As one source put it, “he came across like who he is--a bull in a china shop who hammers you with litigation.”

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Bronfman, meanwhile, came off as vacillating and naive--which is somewhat understandable given the newness of his mogul-dom but unsettling given his apparent savvy and powerful position.

Redstone, known as a tough cookie, showed how condescending he could be.

At one point in his testimony, Redstone said of Bronfman, “Edgar, this is not like you have to be a genius. . . . This is a very simple agreement, and this man runs Seagram.”

In his third day of testimony, Redstone demeaned one of his own employees, TV Land President Richard Cronin, who made the mistake of writing notes that proved inconvenient to Redstone’s court case. Redstone called him a “middle-to-lower management person who is a gung-ho guy who wants to run a channel.”

Redstone admitted he was embarrassed by a series of notes written by Cronin--which MCA introduced as evidence--that said TV Land would try to take viewers away from rivals such as USA Network. “I am aware that he wrote this stuff but it doesn’t represent, never has, corporate policy,” said Redstone.

Industry observers were appalled at Redstone’s put-down of Cronin, who is credited with building Nick at Nite and spinning off TV Land.

Redstone, who himself is a lawyer and has experience as a corporate litigator, did not easily accept the role of witness in the case. Daily Variety reported that MCA lead counsel Herbert Wachtell’s cross-examination of Redstone became “a marathon nit-picking argument between two veteran lawyers.” With Redstone trying to act as his own attorney and basically arguing the premise of nearly every question Wachtell lobbed at him, at one point Wachtell said, “Mr. Redstone, you could confuse anybody.”

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Wachtell complained to the hearing judge, Vice Chancellor Myron Steele, “I find it very difficult to get this witness to focus on a particular question.”

During his day in court, Bronfman fared just as poorly. For one, he admitted flip-flopping on several issues.

Just days after out-of-court settlement talks broke down in which MCA had agreed to sell its USA share to Viacom for $1.7 billion, Bronfman told the court that MCA would be “strategically disadvantaged” if it sold its stake in the cable venture.

“It’s always been my preference that MCA buy USA and Sci-Fi,” said Bronfman. Under questioning by Wachtell, Bronfman said for MCA to sell its interest in USA “would leave us with no cable networks whatsoever,” and that owning a cable network “is important for a company producing large amounts of programming.”

Presumably when Redstone offered $1.7 billion, it was a deal he couldn’t refuse, but ultimately he did when he found out MCA couldn’t get Viacom to share the huge capital-gains tax required by the sale.

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In what had to be a somewhat embarrassing admission, Bronfman acknowledged that “in retrospect” he was wrong not to have listened to a warning from outside MCA counsel Ron Olson shortly before Seagram Co. completed its MCA acquisition that all was not well between MCA and Viacom in their USA partnership.

Bronfman said he was too distracted with management problems at MCA and Wall Street’s criticism of the deal to focus on Olson’s advice.

Bronfman testified that he didn’t believe MCA needed to own a broadcast network, yet shortly after Seagram bought MCA, he began pursuing a potential bid for CBS. He admitted taking credit for the idea that MCA and Viacom should use USA as a vehicle to bid for CBS when it was in fact his good friend Barry Diller who proposed it. “Barry said to me, ‘Please don’t tell Sumner it was my idea because Sumner doesn’t like me, and he will reject the idea if he knows it came from me,’ ” said Bronfman. “So, I took the credit for it.”

Bronfman also admitted he was naive in thinking that Redstone wouldn’t ask for any concessions in releasing one-time Viacom Chief Executive Frank Biondi from a noncompete clause in his contract so MCA could hire him.

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Redstone testified that in a meeting in February, Bronfman agreed that MCA would waive legal claims about all of Viacom’s cable networks, including MTV, if Viacom would release Biondi but that Bronfman changed his mind when final documents were drafted, saying he never agreed to the MTV Networks waiver.

Bronfman admitted that during the negotiations for Biondi’s release, he thought Viacom Deputy Chairman Philippe Dauman inadvertently substituted “MTV” for “TV Land,” not realizing MTV was the umbrella group for all Viacom cable channels.

“Nobody likes to watch this procession of problems and suits,” said Wall Street analyst Harold Vogel, of Cowen & Co. “It should never get to this point. It’s bad for everybody, including shareholders. This airing of dirty laundry in public, throws a bad light on both parties and makes it that much more difficult to settle important issues.”

It’s hard to believe that such ugly legal battles won’t leave some lasting wounds on Bronfman and Redstone and strain other partnership arrangements between MCA and Viacom.

“I think it’s hurting all these companies,” said an investor source. “All these companies are so intertwined as they get into each other’s businesses and become more vertically integrated--it’s a big mess.”

Two prominent entertainment figures who may be closely watching the goings-on in this case are DreamWorks partner Jeffrey Katzenberg and his former longtime Disney boss, Michael Eisner. The two are heading to court in what would undoubtedly prove to be the ugliest--if not most entertaining--legal battle Hollywood has ever recorded.

Katzenberg is suing Disney for $250 million he contends is owed him by his former company. At this juncture, neither side is budging. Stay tuned.