Viacom Executive Gets in a Dig at Disney and Eisner

Mel Karmazin, Viacom Inc.’s chief operating officer, took a swipe at Walt Disney Co.’s plans to cut 4,000 jobs at a Hollywood luncheon Wednesday, telling the 750 or so entertainment executives in attendance, “That’s not how you should run a business.”

Karmazin, who is in charge of the nation’s second-largest media giant, opened an address at the Hollywood Radio and Television Society’s luncheon in Beverly Hills on Wednesday by poking at Disney.

“I’ll never understand how a company finds themselves in a position to have 4,000 people to cut,” he said of the job reduction Disney announced Tuesday.

Karmazin, a feisty and confrontational manager, said the memo that Disney Chairman Michael Eisner and President Robert Iger sent to employees also puzzled him.

“I can’t imagine sending any of these people a note telling them how they should run their business,” said Karmazin, motioning to the dais behind him filled with 13 of Viacom’s top executives, including CBS Television Chief Executive Leslie Moonves and Viacom Entertainment Group Chairman Jonathan Dolgen.

“I’m not hands-on in doing what they are supposed to be doing,” he said.

“There has never been anything from my office like that. I don’t freeze salaries or cut jobs.”

Some in the audience interpreted that as another dig at Eisner, who has a reputation as a micro-manager and recently boasted to ABC affiliates that he had a hand in choosing Kathie Lee Gifford’s successor.

Disney spokesman John Dreyer said Karmazin’s criticisms of the layoffs could “come back to haunt him.” He said Karmazin must not have read the news reports very carefully. “These decisions were made with our business heads,” he said, suggesting that Eisner did not make the call alone. “We don’t shove tough business responsibilities down the ladder.”

During the luncheon at the Regent Beverly Wilshire Hotel, Karmazin responded to questions posed by ABC News analyst and former White House senior advisor George Stephanopoulos about a wide range of topics, including the economic slowdown and the possible writers’ strike.

Karmazin predicted there would be strikes by Hollywood writers and actors this spring.

“It’s more probable than less probable that there’s going to be a strike,” Karmazin said. “CBS and UPN are what I’m most concerned about. The programming we will be forced to put on will not be as good as what we would put on without a strike. The long-term impact . . . is it drives viewers away.”

He acknowledged that Viacom would be able to pick up some of those viewers on its cable networks.

Karmazin, who rarely grants interviews, said he believed the advertising downturn would be short-lived.

“We’re not seeing any real signs of a recession,” said Karmazin, whose company is among the entertainment industry’s most reliant on advertising revenue because of its ownership of billboards, radio and television stations, the CBS and UPN broadcast networks and cable channels, including MTV, BET and Nickelodeon. Viacom also owns Paramount Pictures and Blockbuster Inc.

He said media companies are facing tough comparisons with last year’s first two quarters. He said advertising revenue in Los Angeles soared 40% in the first quarter last year, for example, compared with the typical 8% growth.

He said the climate will change toward the end of the year, “when we get past these tough comparables.”

Though he acknowledged that AOL Time Warner Inc., the world’s largest media company, is a mighty rival, Karmazin proclaimed that newspapers are Viacom’s biggest competitors because they control the dominant share of the $250-billion-a-year advertising pie.

He said he is in favor of eliminating Federal Communications Commission restrictions on media ownership.

Karmazin thinks companies should be able to own a newspaper and a TV station in the same market, as Tribune Co. does in Los Angeles with the Los Angeles Times and KTLA. Federal rules prohibit such cross-ownership, which could be a factor when KTLA’s broadcast license comes up for renewal in several years.

He thinks broadcasters such as Viacom should not face limits such as the one that prevents them from owning stations reaching more than 35% of the nation’s viewers. He also said one company should be able to own more than one broadcast network, as Viacom does with CBS and UPN, a situation under review.

He said the 4 million URL addresses makes the Internet hopelessly fragmented for advertisers. Karmazin, who started his career selling radio advertising, said he was not sure the subscription model would work forever either.

“The money to be made is by the efficiencies it allows,” he said, pointing to such possibilities as distributing Paramount movies directly to consumers one day using the Internet.

“The Internet just may be like the telephone,” he said, adding that everyone has one but that there’s not much money to be made selling the service.