Media Firms Will Need Moguls Who Can Succeed

It’s hard to find a good media mogul these days.

That’s the predicament faced by three of the big five media conglomerates, a vacuum highlighted by Tuesday’s resignation of Viacom Inc. President Mel Karmazin and the graying of the industry’s entrenched titans.

Viacom Chief Executive Sumner Redstone -- who battled with Karmazin over control -- is 81. Rupert Murdoch, chairman of News Corp., is 73. And although Walt Disney Co. Chief Executive Michael Eisner is only 62, his contract expires in two years and dissident shareholders have been calling for him to leave sooner.

“This is a real challenge for these very diversified media companies,” said Lowell Singer, a media analyst at investment banking firm SG Cowen. “There are very few executives with experience in the myriad of businesses that these companies now compete in. There’s not a long list of executives” positioned to replace the incumbents.

The top job is particularly hard to fill, industry observers say, because a successful executive must be adept at navigating two vastly different worlds: the insular and ego-driven environment of Hollywood and the bottom-line-obsessed culture of Wall Street.

“How they resolve the succession issue is going to shape the strategic direction of the industry,” longtime entertainment industry analyst Harold Vogel said. “Do we move toward more acquisitions? Do we do more international business? ... That will depend on whoever is selected to run these companies.”

To be sure, not every media giant is being roiled by questions of succession. Bob Wright, chairman and chief executive of General Electric Co.’s newly formed NBC Universal unit, is 61 and says he’s not going anywhere anytime soon. At Time Warner Inc., veteran media executive Jeffrey Bewkes, 54, is considered by many to be the eventual heir apparent to CEO Richard D. Parsons, 56.

As for Viacom, the race is on there between two men: CBS Chairman Leslie Moonves, 53, and MTV Networks Chairman Tom Freston, 58. Both were named co-chief operating officer of the parent company Tuesday, setting the stage for a competition to eventually replace Redstone, who pledged to step down in three years.

Also poised to play a prominent part at Viacom is Redstone’s 50-year-old daughter, Shari. On Tuesday, Redstone said his daughter would not assume an operational role at the company.

But many, noting that Redstone and his family control about 70% of Viacom’s voting shares, believe that she could wind up as chairwoman of the board.

It’s a far different scenario at News Corp., where Murdoch has been grooming his sons to ultimately run the company.

Lachlan Murdoch, 32, is now the third-ranking executive of News Corp. -- deputy chief operating officer.

James Murdoch, 31, was last year named chief executive of News Corp.’s BSkyB satellite television operation in Britain despite grumblings of nepotism from influential investors.

This suggests that News Corp. President and Chief Operating Officer Peter Chernin, 53, will ultimately be left out in the cold. Sources say he’s been negotiating a new contract for months -- but hasn’t yet signed anything because he wants an escape clause that would let him leave News Corp. to run a rival company, should the opportunity arise.

For his part, Rupert Murdoch downplayed the idea that there was any friction with Chernin. The contract talks, he told reporters last month, were “very far advanced, and it’s now in the hands of the lawyers.”

Besides, Murdoch is quick to point out that he’s not about to head for the exits. He has survived prostate cancer, eats healthfully and regularly works out, a regimen that includes boxing.

He has two children under the age of 3.

“I intend to be around as long as my brain holds out, and my mother is doing very well at 95,” Murdoch told BusinessWeek this year.

Meanwhile, succession continues to be a particularly hot-button issue at Disney.

The board has been under pressure to name a successor to Eisner since shareholders, unhappy with his leadership and the company’s long-term financial results, withheld 45% of the votes cast during his reelection to the board this year.

Eisner was stripped of his chairman’s title after that backlash.

On Tuesday, former Disney board members Roy Disney and Stanley Gold, who have spearheaded a campaign to oust Eisner, embraced the notion of Karmazin becoming the company’s next CEO. They called the 60-year-old Karmazin “a world-class executive who has both the right credentials and experience” and said “he should definitely be on the Disney board’s short list.”

But Disney quickly slammed the door on the notion that Karmazin would replace Eisner -- at least right now. In a statement, Disney Chairman George J. Mitchell asserted that the board “has complete confidence in the current management.”

That said, Disney’s board has begun compiling a list of internal and external candidates to succeed Eisner one day. A source close to the situation said that Karmazin was on the list, along with Chernin.

Of course, whether Karmazin would be a good fit for Disney -- or any other major media company -- is a matter of debate.

Some say Karmazin -- a former radio advertising salesman -- represents a bygone era when ad revenue was the engine that drove the growth of media companies. Today, in an age of TiVo-like personal video recorders, executives are struggling to find new sources of income to help pay for the high cost of content.

In addition, Karmazin’s star on Wall Street has diminished during the last year as Viacom shares have lost 17% of their value.

That performance has been blamed in part on the company’s radio division, which has struggled with revenue growth.

“I don’t think he’d work at Disney,” said David Joyce, a media analyst with Miami-based investment banking firm Guzman & Co.

“He’s much more of an ad sales executive, which is important for about one-third of Disney’s revenue. It takes much more creative decision making there.”

Jordan Rohan, a media analyst with Schwab SoundView, agreed.

“Karmazin is a meat-and-potatoes guy,” Rohan said. “He’s never attempted to run the largest animated film studio in the world or a theme park unit with over 70,000 employees in the world.”

Although it remains unclear who ultimately will be tapped to replace Eisner or the other media moguls, this much is certain: They won’t surrender their power easily. Said Jeffrey Sonnenfeld, associate dean of the Yale School of Management, “They’re never in a hurry to hand over the reins.”

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Waiting in the wings

Who will take the reins at three of the five biggest media companies?

Viacom Inc.

Current chief: Sumner Redstone, 81 Possible successors: Tom Freston, Leslie Moonves The speculation: After the resignation of Viacom President Mel Karmazin, Redstone set the stage for a competition by naming Tom Freston and Leslie Moonves as co-presidents and co-chief operating officers.

News Corp.

Current chief: Rupert Murdoch, 73 Possible successors: Lachlan Murdoch, James Murdoch, Peter Chernin The speculation: Peter Chernin is second-in-command, but few see him as a likely successor because Rupert Murdoch is positioning one of his sons to eventually run the media empire.

Walt Disney Co.

Current chief: Michael Eisner, 62 Possible successors: Peter Chernin, Mel Karmazin The speculation: Unclear. Eisner’s contract runs through September 2006, although some dissidents hope to replace him sooner. Karmazin’s name has been floated as a possible candidate, as has Chernin’s.

Source: Times research