COMPANY TOWN: Creating a Media Giant : THE LEADERS : Shared Vision, Contrasting Styles : Viacom’s Sumner Redstone is an empire builder who basks in the limelight, CBS’ Mel Karmazin a skilled salesman who avoids publicity.
Viacom Inc. Chairman Sumner Redstone could not keep it bottled up: Just as Mel Karmazin, chief executive of CBS Corp., was describing his strategic vision for the merged CBS and Viacom for a national television audience, Redstone blurted out:
“I’m in control! Remember--I’m in control!”
The moment provided a near-perfect illustration of the differing styles of the two men behind the largest media merger in history--two men with almost identical business visions but very different personalities and backgrounds.
The $37-billion deal brings together Redstone, a Harvard-educated Bostonian, and Karmazin, the son of a Queens, N.Y., cabdriver. The former is a firm-handed corporate empire builder whom Forbes magazine ranks as one of the 10 wealthiest Americans, the latter a gifted salesman who only recently managed his businesses to the forefront of industry. Redstone also is a relentless egoist who has ensured that his family’s control of Viacom will survive him, while Karmazin is a behind-the-scenes manager who forbid his most famous employee, shock jock Howard Stern, to criticize him on the air.
For all that, both men proclaimed Tuesday’s deal as a “merger of equals” in which Karmazin becomes the managerial heir apparent to Redstone. There is no question that Redstone considers himself Viacom’s monarch, as he told the TV audience.
As holder of 67% of Viacom’s voting stock, Redstone would indeed remain in control of the merged organization. After his death that control would be vested in a family trust.
“Viacom is me,” he lectured Fortune Magazine earlier this year. “I’m Viacom. That marriage is eternal, forever.”
The 76-year-old Redstone, who built his family’s chain of movie theaters into an entertainment conglomerate that includes Paramount Pictures and the Nickelodeon and MTV cable channels, can’t abide being out of the limelight.
Karmazin, 56, who came into the television business after three decades as a radio executive, once boasted of never having held a news conference until 1996.
“Sumner always has to claim credit for everything that happens in his company, and Mel has always shied away from the press,” said an executive who knows both men.
What they do share are driven business personalities and a penchant for building their companies through aggressive acquisitions and by offering their audience the most popular entertainment content.
“Sumner and Mel are two guys who look at the world in exactly the same way,” says Peter Dekom, a former Los Angeles entertainment attorney.
Redstone was born to a Boston nightclub owner named Michael Rothstein (who changed the family name) in 1923. After receiving his undergraduate and law degrees from Harvard, he joined his father’s theater business and began investing in Hollywood studios.
In 1987, he launched a hostile debt-financed bid for Viacom, a cable and syndication company that had been spun off, as it happens, from CBS many years earlier. In 1993, he acquired Paramount for $10 billion, following a bruising takeover battle in which he was forced to outbid rival Barry Diller by $2 billion.
Redstone also acquired a well-deserved reputation for parsimony. He aggressively shed Paramount and Viacom assets, including Madison Square Garden, and kept a tight rein on costs, including those at a movie studio that had been accustomed to lavish spending. Among other things, he insisted on shared financing of big-budget films--including “Titanic,” on which Paramount’s potential costs were capped at $65 million while its partner, 20th Century Fox, shouldered more than $100 million in cost overruns.
He also survived personal and business setbacks that would have finished off less-determined individuals. He narrowly escaped death in 1979 by climbing out onto a ledge and hanging by one hand while fire raged through Boston’s Copley Plaza Hotel. (The mark of that episode remains his gnarled right hand.) In 1996, his entire empire, which by then included Blockbuster Video, was reeling from financial reversals; two years later, he and his executive team had nursed it back to health.
To this day, Redstone resents the headline Business Week put on a 1996 article about his business nadir: “Sumner’s Last Stand.”
Karmazin was born in 1944 to a Queens, N.Y., cab driver. After graduating from New York’s Pace University, he joined the cutthroat world of radio advertising, where his sales skills caught the attention of radio mogul John Kluge, who eventually placed him in charge of his two New York flagship stations.
In 1981 Karmazin joined the fledgling Infinity Broadcasting. In time, he built it into the nation’s most powerful radio chain by paying top dollar for big-city radio stations and staffing them with the leading voices in the business--most notably Howard Stern, who had just been fired by New York’s WNBC in 1985 when Karmazin put him back on the air. Karmazin subsequently helped build Stern into one of radio’s few nationally syndicated stars.
That success led to Karmazin’s next big step: The acquisition of Infinity by CBS in 1996 made Karmazin the broadcast company’s largest single shareholder and gave him the clout to manage its TV properties as well as its radio network. Karmazin reached into his own past to rebuild the moribund TV properties, stressing aggressive ad sales.
“He’d walk into a sales office where there’d be a bunch of salesmen sitting around,” recalls one long-term associate. “He’d say, ‘You, you and you are fired and the rest of you are all on commission.’ ”
That helped jump-start revenue and operating profit at CBS’ 15 owned-and-operated stations, although the network itself remains saddled by poor demographics: an audience whose average age is as much as 10 years older than those of ABC and NBC, and therefore less desirable to advertisers.
To skew those demographics more toward younger males, Karmazin last year paid the astonishing price of $500 million a year for an eight-year contract to broadcast the American Football Conference games of the National Football League--a rich price that might cut against Redstone’s stingier grain.
But some executives who have worked with both men say that, if there are clashes, they will result not from differences in business philosophies, but from Redstone’s aversion to sharing the limelight.
“If Wall Street gives Mel a lot of credit [for developments at Viacom], that’s going to bother Sumner,” said one executive.
Others familiar with the companies believe that Redstone appreciates Karmazin’s broadcast management skills. That could be particularly important if the merged company retains its interest in the under-performing United Paramount Network. (Under federal rules, Viacom may have to divest that small TV network.)
“If they run the UPN stations like Karmazin runs CBS,” says one investment professional, “you’d have spectacular profit margins there.”
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The Big Four
Viacom’s proposed $34.9-billion purchase of CBS would be the largest media deal ever. If approved, it would place the combined company in an elite group of entertainment giants that control many of the industry’s prime assets.
How the industry’s four entertainment giants stack up:
Company, market valuation and CEO: Time Warner, $80.5 billion, Gerald Levin
Broadcast (TV/radio): WB network (owns no TV stations)
Cable: CNN, HBO, TNT, Cartoon Network, TBS Superstation, Turner Classic Movies, Time Warner Cable (operates systems that reach 12 million customers)
Content: Warner Bros. pictures, Warner Bros. TV, New Line Cinema, Time Inc. (People, Time, Fortune, Life), Castle Rock Entertainment, Warner Music
Other: Atlanta Braves. Internet: Co-owns. Road Runner high-speed online service
Company, market valuation and CEO: Viacom/CBS, $68.5 billion, Sumner Redstone
Broadcast (TV/radio): CBS network, 50% of UPN, 35 TV stations, infinity Broadcasting’s, 163 radio stations
Cable: MTV,VH1 Nickelodeon, Showtime Networks, Movie Channel, Country Music Television, Nashville Network
Content: Paramount Pictures, Paramount TV, Simon & Schuster, CBS Television, Spelling Television, King World Productions
Other: Blockbuster, Paramount Parks, Viacom Consumer Products. Internet: Stakes in Big Entertainment, Jobs.com, Medscape
Company, market valuation and CEO: Disney, $59.2 billion, Michael Eisner
Broadcast (TV/radio): ABC network, 10 TV stations; ABC Radio, 30 stations
Cable: ESPN, Disney Channel, stakes in Lifetime, A&E;, History Channel, E!
Content: Buena Vista, Motion Pictures Group, Miramax, Walt Disney, Feature Animation, Hyperion books, Buena Vista TV, Buena Vista Music Group
Other: Theme parks, Disney stores, cruise line. Internet: Go Network, Infoseek
Company, market valuation and CEO: News Corp., $29.5 billion, Rupert Murdoch
Broadcast (TV/radio): Fox network, 23 TV stations
Cable: Fox Sports Net, Fox News Channel, Fox Family Channel, Fox Health Channel, FX
Content: 20th Century Fox pictures, 20th Century Fox TV, Fox Animation Studios, Newspapers (Times of London, Sun, News of the World, New York Post), HarperCollins, 50% of TV Guide
Other: Dodgers, stakes in BSkyB, Star TV, Sky Latin America, Echostar. Internet: News America Digital Publishing.
Sources: Company reports
The Merger Makers
Acquaintances of Viacom Chief Executive Sumner Redstone and CBS Chief Executive Mel Karmazin say they have complementary management skills. Short resumes for each:
* Age: 76
* Position: Chairman of the board and chief executive of Viacom Inc.
* Management style: Aggressive deal maker who likes to claim credit for successes
* Career highlights: Joined National Amusements, his family’s theater chain, in 1954; became president and chief executive at National Amusements in 1967; became chairman of the board in 1986; became chairman of the board of Viacom when National Amusements acquired a controlling interest in the company in 1987; became chief executive of Viacom in 1996.
* Age: 56
* Position: CBS chief executive
* Management style: Operations wizard who shies away from the press
* Career highlights: Station manager at CBS radio, 1960-70; general manager at Metromedia Inc., 1970-81; president and chief executive at Infinity Broadcasting Corp., 1981-96; chief executive at CBS Station Group, 1996 to present.
Source: Who’s Who in America
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