Viacom Inc. Chairman Sumner Redstone, who turns 75 next month and shows no signs of slowing down, controls one of the world’s largest entertainment companies and is still regarded as one of the industry’s shrewdest and most aggressive media moguls.
A Harvard-educated lawyer, Redstone took over his family’s Boston-based movie theater business in the mid-1950s, building it into the largest privately held chain in America, with more than 1,110 screens worldwide. In 1987, at an age when other executives might spend much of their time golfing, Redstone used his then-400-screen National Amusements to launch a $3.2-billion takeover of Viacom.
Since then, Redstone--who was born in a Boston tenement and today is worth more than $3 billion--has transformed Viacom into a diversified enterprise with such assets as Paramount Pictures; Blockbuster Entertainment; TV stations; and cable networks that include MTV, Nickelodeon and Showtime. Viacom also controls Spelling Entertainment and has a half-interest in Comedy Central and UPN, a start-up broadcast network jointly owned with Chris-Craft Industries Inc.
After several years of sagging stock caused by heavy debt and problems at Blockbuster, the New York-based company is seeing cash flow rising in several of its businesses. Viacom also has been reducing debt and is selling the bulk of its Simon & Shuster publishing division.
And thanks to Paramount’s partnership with 20th Century Fox on Jim Cameron’s “Titanic,” Viacom could earn more than $200 million in profit from what has become the highest-grossing movie of all time.
Viacom’s more actively traded Class B shares rose $2 to close at $56.06 on the American Stock Exchange on Tuesday, just shy of the 52-week high of $56.19.
In a wide-ranging interview at Viacom’s Times Square headquarters, Redstone spoke with boyish enthusiasm about his company, the entertainment industry and his grandchildren, who, “along with Viacom, are the most important thing in my life.”
Q: Has there been any phenomenon since you’ve been in the exhibition business that resembled “Titanic”?
A: No. I’ve never seen anything like it. It’s almost unbelievable. It’s not a movie, it’s history.
Q: What impact, if any, do you think “Titanic” will have on the movie business?
Q: The fact that this movie not only cost $200 million but went 100% over its original budget--isn’t that a wonderful story of a creative genius prevailing over the unthinking corporate suits?
A: If you expect to convince me that that’s a good thing, forget it. I admire Cameron. I think what he did on the screen is really a phenomenon of great artistic creativity and an economic phenomenon. Will it affect the way we think at Paramount? Not at all. If anybody else wants to go and make $200- and $300-million pictures, and they’re looking for a partner on an equal basis, not a limited basis, forget Paramount.
Q: Paramount has adopted a very risk-averse movie strategy. When you have a success like “Titanic,” that means you leave money on the table.
A: Not necessarily. . . . If you went back over all the pictures we’ve had financial partners on and you eliminated them, you would find we would not have done as well economically as we have.
We believe that creativity and making good movies can live side by side with discipline. . . . The studios ought to learn to say no. And there should be . . . the proper mix of pictures so that you don’t only have large-budget pictures, you have pictures with small and moderate budgets. We have a big edge at Paramount because of the MTV and Nickelodeon [movie units]. When you can make the kind of pictures we’re making with budgets of under $10 million, it really gives the studio a big lift.
Q: We’re curious about your personal taste in movies. You mentioned the MTV movies as being a great opportunity for Viacom, and one of those was “Beavis and Butt-head.”
A: The way I feel about “Beavis and Butt-head” is that it’s our contribution to Western culture.
Q: You’re a little bit out of the demographics for that film. Did you personally like it?
A: You know, I saw the entertainment value of it. But would I rather see that than “Titanic”? Of course not.
Q: What are your favorite movies?
A: Well, having said that the Paramount films are the best, I also enjoyed “Good Will Hunting” and “As Good as It Gets.” But I don’t want to spend too much time on that.
Q: How much do you get involved with discussions about specific films Paramount makes?
A: I’m known as a hands-on manager and I always will be. I believe that’s my job. [But] I don’t have to be intrusive, because [Viacom Entertainment Group Chairman] Jon Dolgen is on the phone with me almost every day, and occasionally [Paramount movie Chairwoman] Sherry Lansing. Usually my answer is, “If that’s what you think, go.” So the answer is yes, I’m heavily involved, but I’m not intrusive.
Q: Do you ever read a script?
A: Yes, occasionally. Sherry knows my point of view: “Sherry, don’t make a movie unless you have a great script.” Sometimes it’s true that studios are under pressure because of the windows of opportunity with particular talent [to start] when the script isn’t finished. But more often than not, that’s a dangerous course. The script is it. The play is the thing.
Q: What was the last script that you read?
A: I think I read the script of “The Saint” because I was a little concerned about it.
Q: You recently gave a speech that was very bullish on the entertainment business.
A: I keep reading all these dour assessments . . . and it’s absurd. We have a juggernaut in the entertainment industry, and it’s going to move ahead aggressively, and people who don’t recognize it are going to be losers. We have a great business. It requires some restraint, though. [At Viacom] we’re very fortunate because what we have done is marry the most powerful group of cable networks to a great studio.
Q: Time Warner might argue that point.
A: Well, I’ll take you on on that. Part of my vision is making our company the preeminent software company in the world, and to do that we acquired Paramount. When we made that marriage, I think we got there.
Yes, [Time Warner Chairman] Jerry Levin did try to copy us. But he did it in reverse. He had a great studio [Warner Bros.] and he acquired Turner. And I have a great deal of respect for [Ted] Turner and for Jerry. And I also have respect for the networks, like TBS, TNT and CNN. But don’t begin to compare them to MTV, Nickelodeon, VH-1, Nick at Night, TV Land and Comedy Central.
Q: Hasn’t MTV lost ratings?
A: It lost some ratings at the beginning of last year, but by the end of the year it had recovered. It has 20 pilots out, and we’ve got a new creative team, and MTV is recovering.
Q: Do you ever watch MTV?
A: Sure. I love the sensuality and excitement of MTV. You think that I’m too old to watch MTV? Forget it.
Q: Has the strategic role of the movie business within the entertainment industry changed at all over the period you have owned Paramount? [Viacom paid $10 billion for the studio in 1994.]
A: I don’t really think so. I do think that as diversified companies like Viacom have developed . . . they don’t stand alone [in the movie business]. I have the greatest admiration for [DreamWorks founders David] Geffen and Jeffrey [Katzenberg] and for [Steven] Spielberg. They’re great. But it’s a tough job to operate only a studio. I think diversification is the name of the game in the industry in which we live today. I think the same is true of MGM.
The requirement for diversification I think is greater today than ever. One of my proudest achievements is we’ve got a group of television stations that were maybe worth $600 or $700 million, and we affiliated them with UPN, and today there’s not an analyst who wouldn’t value them at less than $2 billion.
Q: Although you have invested a fair amount in UPN to make that happen.
A: Yes, it is costing us a fair amount of money, but you have to remember two things. Until very recently we had nothing to say about the programming at UPN. There was a lady there [Lucie Salhany] who ran it who didn’t see the world exactly as we do. We now have Dean Valentine, who we brought in from Disney, who’s . . . going to make a great difference.
Q: So you’re not going to cut your losses and--
A: Oh, come on. Look at what people have spent for CBS. When we look at the economics of UPN, we have to look at the economics of that station group, which is making plenty of money and which has risen so much in value.
Q: What’s your top priority?
A: Right now the focus is reducing debt. We reduced our debt by 21% last year, and when we get done [selling] Simon & Shuster, we’re going to reduce debt significantly. We know that we could have a company, if we wanted, with a free cash flow of over $1 billion and growing. At that time we could think about growing our business, primarily by internal growth and also possibly by transactions.
Q: As you look ahead to that time, what businesses do you like?
A: We would be focusing on the true entertainment businesses--the businesses that we know so well, that we’ve done well with. And, yes, of course, among those is television.
Q: What about music?
A: We’re not going to buy Thorn/EMI. . . . I figure [music] is not nearly as good a business as it once was. You can see the difficulties that some of the studios are having in that business, so we’re not turned on by it. So I don’t see that as a major agenda for Viacom. But, you know, things could change.
Q: A broadcast network?
A: We are not, not, not, interested in buying CBS. You know CBS is trading for about--I’m not knocking it, but 30 times cash flow. Give us that multiple.
Q: It doesn’t sound like you have any regrets about acquiring Paramount.
A: You realize we got Paramount for nothing, don’t you? Write it down. Simon & Shuster at $5 billion. We sold Madison Square Garden for $1.075 billion. Our parks are worth, by any account, $1.3 billion to $1.5 billion. Our television operations are generally accorded a value of about $2.3 billion. Our theaters in Canada are worth $400 million. I’m giving you figures that analysts would agree with. Our Famous Music is worth $300 million to $500 million. I haven’t mentioned the theaters we have overseas with Universal. I should be up to about $11 billion, very close to it. I have not mentioned the studio, the television operations, the library, which is what we wanted, and we got it for nothing.
Q: But you overpaid for Blockbuster.
A: In the first place, everybody says we paid over $8 billion for Blockbuster. However, Blockbuster included Spelling, so let’s knock off $1 billion. When we bought Blockbuster, we extinguished $1.25 billion that Viacom owed Blockbuster, so the actual cost was about $5.75 billion. And we’ll show that Blockbuster is worth at least that. So we did not overpay for Blockbuster, and yet we did get Paramount for nothing.
Q: Why has it taken so long to fix Blockbuster?
A: Actually, the time was relatively short. . . . Everything was wrong. Distribution was bad. Marketing was bad. The television advertising was bad. It was a total loss of focus on what our business was. Our stores were cluttered with retail merchandise that even if you sold it there was no margin on it. It took us about a week to figure that out and we fixed it. But, if I may say so, we figured something else out. And that was there was a basic flaw in the entire business plan. Unlike any other retail kind of a business, nobody expected to get what they came for when they went into a store. Think about going into Burger King and asking for a hamburger and being told they only had French fries.
The first thing I did was try to sell the studios on trying to do things differently so that there could be enough tapes in the store to supply customer demand. Now practically the entire industry is on revenue-sharing or some other kind of hybrid deal, which results in more inventory at the store.
Q: Why sell Simon & Shuster?
A: One of my jobs--not my only one--is to maximize value for our shareholders. And we concluded that the only way we could really get the value of Simon & Shuster up for the stockholders of Viacom was by selling it. Now, I also realize that since our industry is not a retail business essentially, I realize that no matter how good a job we do with Blockbuster, its value will never be reflected in the stock of Viacom.
Q: Viacom stock has been going up. How high will it go?
A: All I can tell you is I’m not going to project the price of our stock, except that I would be surprised if it isn’t higher a year from now than it is today.
Q: And what would you be happy with?
A: My answer is twofold. I will never be happy, wherever it is, and wherever it is, we would buy it.
On the Competition
Q: Whom do you consider your fiercest competitor? Michael Eisner? Rupert Murdoch? Ted Turner?
A: Oh, they’re all friends. You don’t think I’m going to fall for that, do you?
Q: Turner made a big splash last year by donating $1 billion to the U.N.
A: We’re not in the splash mood. I don’t want to say any more about that, but you have to remember that most of my--virtually all of my wealth--is in the stock of a company called Viacom, because we have never taken money out of it. We own 100 million shares or so of Viacom. And at $55, that equals something like $5.5 billion. Do you think we’re going to sell a share of that? Not a chance.
Q: What about buying a sports team, like Mr. Murdoch?
A: He’s a big swinger. . . . I think what I won’t do that others have done--I won’t risk Viacom. I’ll take a lot of risks, but I never could take it to the point where Viacom is at risk.
Q: Can you explain the major consolidations taking place in the exhibition business?
A: I’m not sure. First, if anyone thinks that it’s motivated by leveraging the studios, forget it. That’s not going to happen. This has been a great cash-flow business but . . . historically it has limited growth.
Q: Do you still make the calls on Friday to find out the grosses at individual theaters?
A: Yes. I do it all the time. I can’t get that out of my blood. There are times at 2 or 3 o’clock in the morning that I know how a Paramount picture has done before Jon Dolgen.
Q: One of the issues for you is succession.
A: I don’t think anybody has a passion for a company more than I do for Viacom. I love what I’m doing, and I know I’m good at it. When the day comes, and I will know it, that I don’t feel that I can contribute as much as I should to Viacom, somebody else will have the job of CEO.
Q: Would you want your successor to be within your family?
A: I have two highly qualified kids. I guess kids is not the right word for people in their 40s. But management will come from the present managers of this company.
Q: What do you get the biggest charge from?
A: Winning. I’m not saying we’ll always win, but we will always strive. . . . I can’t help that. I have a strong, obsessive, inexorable competitive urge, and I love what we’re doing.
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Quotable: Sumner Redstone
“I have a strong, obsessive, inexorable competitive urge, and I love what we’re doing...I love the sensuality and excitement of MTV. You think that I’m too old to watch MTV? Forget it.”
“The way I feel about ‘Beavis and Butt-head’ is that it’s our contribution to Western culture.”
“I don’t think anybody has a passion for a company more than I do for Viacom. I love what I’m doing, and I know I’m good at it.”