All of Hollywood, it seems, is asking the same question: What will Mel do next?
Much of the interest in trying to lure the 59-year-old Karmazin to another company stems from his track record. Karmazin's reputation as a tough-minded, results-oriented manager has made him a favorite on Wall Street. Viacom has handily outperformed rivals in the economic downturn to become the most valuable of media stocks.
But it's not just a matter of whether Karmazin can be pulled into a new job. There may be a little pushing involved as well.
A drawn-out power struggle with Viacom founder and Chief Executive Sumner Redstone, 79, has kept speculation rampant about whether Karmazin will leave when his contract expires at the end of the year.
Karmazin was unavailable to comment.
Last fall, investors were optimistic that a deal would be struck to retain Karmazin. But as negotiations to renew Karmazin's contract have dragged on, doubts have grown. Sources say the issue must be resolved in the next few weeks to prepare proxy materials for the May shareholders meeting.
Until then, says Merrill Lynch analyst Jessica Reif Cohen, Viacom's "key near-term risk" is the uncertainty over Karmazin's tenure. Despite the company's strong fundamentals, Reif Cohen wrote last week, "we believe the stock could trade sideways until a clear resolution is made."
Should Viacom's stock stagnate, no one would suffer more than Redstone, whose 69% controlling stake in the entertainment giant is worth about $8 billion. Analysts predict that Viacom's stock would take at least a short-term hit if Karmazin made his exit.
If Karmazin were staying, many observers believe, Viacom would have put the speculation to rest by announcing a deal by now. They blame Redstone's inability to share power and the limelight for the continued tug-of-war.
Yet company officials maintain that they are on track with negotiations, pointing out that when friction between Redstone and Karmazin erupted last January, the two executives agreed to set aside the issue until the end of last year.
"A lot of people on Wall Street didn't hear what Mel and I said: that we wouldn't even discuss the matter until the end of the year," Redstone said in an interview Sunday. "We're only two weeks into January."
Redstone vowed to "move forward as fast as I can" with the contract talks.
However, sources close to Viacom say a committee of the board appointed last summer to renew Karmazin's contract was racing to finish an agreement for the October board meeting when it hit a snag that continues to hamper negotiations.
At the heart of the tensions are broad powers that Karmazin negotiated as part of a merger of Viacom and CBS Corp. in 2000. Karmazin, the former chief executive of CBS, has authority to hire and fire executives without Redstone's approval and cannot be ousted without a two-thirds vote of the board. Viacom's board consists of an equal number of directors from the former CBS and Viacom.
Under the merger agreement, however, the three-year term for all the CBS board members ends in May, as do the provisions spelling out Karmazin's authority -- his "superpowers," as Redstone calls them.
Redstone said he has asked all the CBS directors, including Karmazin, to stay on the board. But Redstone made clear that he has no intention of reinstating any of Karmazin's special powers in a new contract.
"I made a sacrifice to get CBS," he said. "I gave up a lot of power and I didn't like it. Why would I? I built the company from nothing."
At the same time, Redstone said he is "leaning over backwards to keep Mel." He added that chances are good he'll stay. "Most of his fortune is tied up in Viacom," Redstone said. "The friction was always overstated. We're good friends.... Besides, there's no room for him at AOL or Disney."
Sources close to Karmazin note that he would leave millions of dollars in options on the table by not renewing his contract. He also would walk away from businesses he cherishes and built from scratch, such as Infinity Broadcasting, the nation's second-largest radio operator.
Yet those familiar with Karmazin's thinking also point out that he may have less incentive to stay, once Redstone has more say over the direction of the company.
Clearly bolstering Karmazin's leverage is the instability at rival media companies over the last year. Last summer, his name surfaced as a replacement for Disney Chairman Michael Eisner, who was criticized for a sagging stock price and the cronyism on his board of directors. In a not-so-veiled attempt to reduce Karmazin's clout, Redstone went out of his way to praise Eisner's skills as an executive to investors and the press.
Though the din about changes at Disney has died, the buzz about Karmazin heated up again last week after Steve Case resigned as chairman at AOL Time Warner. Merrill Lynch's Reif Cohen said the departure "conceivably would open the door for strong outside management to enter the picture, such as Mel Karmazin as CEO."
After the analyst's report came out, AOL Time Warner named CEO Richard Parsons to the additional role of chairman. But some analysts said that doesn't preclude the company from hiring Karmazin as CEO if he becomes available next year.
In the meantime, Redstone continues to hammer home to investors the strength of Viacom's divisional management team, hoping to blunt any repercussions on the stock should Karmazin leave. Even Reif Cohen, one of Karmazin's biggest fans on Wall Street, has softened her predictions on the dire effect on Viacom's stock, saying it could fall 15% to 20% but then recover if he departed.