Leslie Moonves holds the keys to the Redstone family's $40-billion kingdom.
The charismatic chairman and chief executive of CBS Corp. has emerged as the choice of controlling shareholders Shari and Sumner Redstone to lead a reunified CBS and Viacom Inc. — should the companies agree to merge.
But can Moonves fix what ails Viacom, which is wrestling with falling ratings at its cable channels MTV and Comedy Central and box-office duds from Paramount Pictures? The 67-year-old executive has strong credentials: an illustrious career in broadcast television, a forceful personality and a track record of reviving struggling businesses. But industry analysts note that even someone of Moonves' pedigree might find it tough to turn around Viacom at a time of upheaval in the media industry.
"Les and his team can do it, but it will be a daunting task," said Laura Martin, a managing director of Needham & Co. "And Wall Street is underestimating the amount of time it will take to clean up the breadth of the mess at Viacom."
Since late September, when the Redstones asked the boards of CBS and Viacom to explore a consolidation, executives and financial advisors have been working to determine the value of each company and sort through logistics. One hurdle is structuring a deal that does not punish rank-and-file shareholders of CBS, which is the more prosperous company. A decision on whether to go forward with a merger is expected by early November.
Because the Redstone family controls nearly 80% of the voting stock of CBS and Viacom, observers anticipate that a deal could happen in the next few months — with Moonves calling the shots.
The conversations probably will revolve around corporate structure — rather than money. Moonves already is among the most handsomely rewarded executives in America. His 2015 compensation package totaled $56.8 million.
Moonves declined to be interviewed for this story. But he has already made it clear that, should he run the combined entity, he would require ample autonomy by serving as chairman and chief executive of CBS/Viacom and have a board of directors with whom he feels comfortable, according to people familiar with the situation who were not authorized to comment.
"He has the skill set. He has good people skills, he has corporate leadership skills, he's a risk taker and he has a flair for programming and content," said Mario Gabelli, whose investment funds make up the second-largest voting shareholder group in CBS and Viacom.
Gabelli wondered whether the Redstone family, as a sweetener for a deal, would grant Moonves some of the family's voting stock, which would give him even greater clout. "The big question mark is: If I'm Shari Redstone, and I'm trying to do a deal with Les, then what does the pre-nup look like?" Gabelli said.
Wall Street recognizes Moonves' track record of turning around lagging assets. In the late 1990s, Moonves transformed CBS network from a perennial cellar dweller to the top of the television heap. CBS has finished first among viewers for 13 of the last 14 TV seasons, with such juggernauts as "NCIS," "Survivor" and "The Big Bang Theory."
He is respected in Hollywood for his creative chops, and for exceeding expectations by aggressively building the small CBS corporation, which includes TV stations and Showtime Networks, into a lean and profitable operation.
It is a reversal of fortunes from 2006 when Sumner Redstone split his company in half. At that time, Moonves openly grumbled that he had been saddled with the pedestrian assets — billboards, radio stations and the workhorse CBS television network. Then, Wall Street was smitten with fast-growing cable TV channels, which throw off tons of cash, and Viacom's younger-skewing networks were particularly attractive. Times have changed. Today, investors are wary of cable channels because of the increasing threat of consumer cord cutting.
That hasn't been an issue for CBS, which has few cable channels. Moonves has doggedly worked to position CBS for the future. He dabbled in digital media, increased CBS' TV production capabilities, demanded ownership of the prime-time shows that run on the network and extended its NFL partnership. He also extracted hefty fees from pay-TV distributors for the right to retransmit CBS station signals — a coup that resulted in more than $1 billion a year in revenue. CBS projects that it will generate more than $2.5 billion annually by 2020 in retransmission fees.
In 2014, CBS spun the billboard division into a separate company and it now is considering whether to jettison CBS Radio through a public offering.
CBS is valued at nearly $25 billion, while Viacom's market capitalization is $14.2 billion.
"Viacom's long-term growth outlook could improve under CBS management, which possesses best-in-class programming acumen in our view," Goldman Sachs media analyst Drew Borst wrote in a recent report.
As CBS has soared, Viacom has stumbled. Under former Viacom CEO Philippe Dauman, the company was known for its budget-conscious approach. Rather than investing heavily in new shows or digital properties, Viacom relied on its aging programs, including the animated kids show "SpongeBob SquarePants." The company's decision to spend $15 billion to buy back its own stock at prices inflated from current trading levels added to its financial woes.
Viacom now is grappling with more than $12 billion in debt and its stock has fallen 50% in the last two years.
Analysts say that Viacom — which has two dozen cable channels -- might have to shutter or sell low-rated channels and instead focus on its stronger brands — MTV, VH1, Comedy Central, BET, TV Land and Nickelodeon.
"MTV was the Facebook or YouTube of the '90s," one former Viacom executive said. "It's never going to be that again. You have to play where your strengths are -- that's Nickelodeon. Nickelodeon is a great asset."
While few doubt Moonves has the chops to revitalize Viacom's TV assets, he will face a different set of hurdles at Paramount Pictures.
Despite his limited experience in film, Moonves has long wanted to run a major movie studio, according to people who have spoken with him. He launched CBS Films from scratch in 2007, but Wall Street howled when Moonves wanted to build the boutique studio into a major player. After a shaky start, CBS Films now nurtures a small slate of modestly budgeted films for grownups.
Meanwhile, Viacom's Paramount Pictures' output has dwindled and the studio has released more duds than hits in recent years. It lost an estimated $400 million in the just-ended fiscal year, according to analysts. And, last month, Viacom made the startling disclosure that it was taking a $115-million write-down for "Monster Trucks," a movie that rolls into theaters in January.
"The Paramount issue might just be one of management," Martin said. "They need to fire the managers."
Studio boss Brad Grey remains in charge, but last month Paramount ousted its second-in-command Rob Moore.
Though some CBS investors have been nervous about combining with Viacom, both companies could benefit from a union. Analysts say they would expect $400 million to $600 million in savings by merging the two companies. There could be other synergies, such as combining Viacom's premium movie channel, Epix, with the more successful Showtime, which CBS owns. More content from the cable-TV channels would enable CBS to bulk up its streaming service, CBS All Access, making it a more vibrant competitor to Hulu, which is owned by rival media companies Walt Disney Co., 21st Century Fox and NBCUniversal. Joining with Viacom would also enable Moonves to expand CBS globally.
"He hasn't done that yet, but Viacom would give him the platform to have an international business," Gabelli said.
Moonves might also help raise the sagging morale at Viacom, which has been roiled by months of boardroom battles. Years ago, Viacom sported a free-wheeling corporate culture — emblematic of the once hip MTV — but much of that attitude dissipated during the decade of Dauman's buttoned-down management.
CBS, meanwhile, has long operated in what some describe as "the cult of Les." Executives are respectful of his authority and almost never speak out of school. Moonves is famous for his fierce competitive streak, taking pleasure in trouncing his rivals such as NBC, while touting the virtues of CBS.
Some analysts have speculated that Moonves might not want to risk tarnishing his legacy by taking on Viacom. But Moonves has never shirked a challenge.
"I'm very competitive — I like to win," he told The Times this year. "I'm not a good loser."