Dauman vs. Moonves: Inside the Battle for Sumner Redstone's Empire (Analysis)

5:00 AM PST 10/24/2012 by Kim Masters
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The Viacom and CBS chiefs jockey for position as their 89-year-old boss' succession plan raises big questions for Hollywood.

This story first appeared in the Nov. 2 issue of The Hollywood Reporter magazine.

Despite his assurances to the contrary, it seems a safe bet Viacom executive chairman Sumner Redstone is mortal. And recent jostling for position suggests that the heads of his two media companies -- Viacom's Philippe Dauman and CBS' Leslie Moonves -- are preparing for the day the frail 89-year-old mogul shuffles off this mortal coil.

One sign came Sept. 22, when The New York Times ran an article about Dauman with the headline, "The Man Who Would Be Redstone." It described the 58-year-old president and CEO of Viacom as "the son Sumner wishes he had." But the words that resonated (or rankled) the most came from Redstone: "I can't say what will happen after I'm gone -- which will be never. But everyone understands, I think, that Philippe will be my successor."

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That landed like a brick with certain executives at CBS who see Moonves as that rarest of treasures -- an entertainment executive who actually can run a big entertainment company -- and regard Dauman as a suit whose strongest skill is currying the boss' favor. "The day Les will report to Philippe is the 12th of never," snaps one. And if Dauman is so sure he's got the succession thing all locked up, asks this person, why would it be necessary to bruit that in The Times?

Perhaps by sheer coincidence, soon after the Times article came an Oct. 15 announcement from CBS that Moonves, 63, had extended his deal through 2017. This despite the fact that his previous contract didn't expire until 2015. By that standard, Disney already should have named a replacement for CEO Bob Iger, who's leaving in 2015, and Time Warner is years late in announcing a successor to Barry Meyer, who's out at the end of 2013.

Moonves not only re-upped in a deal that could give him a $22 million salary bump but also seems to have done all he can to erect an unbreachable wall between himself and Dauman. Under his previous deal, Moonves reported to Redstone until the chairman's death and then only to the CBS board (which includes several allies). That's still true, and it is said Moonves has strengthened provisions that allow him to leave with a fat payout if his board is altered in ways that don't suit him.

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Although some Redstone observers think Dauman has locked up control of the empire, there is a hint of ambiguity. Redstone's spokesman, Carl Folta, emphasizes that the boards of Viacom and CBS will determine who -- if anyone -- succeeds Redstone. So the question is, who will control the boards?

The stakes are high for Hollywood: Viacom includes such cable channels as Nickelodeon, MTV and Comedy Central as well as Paramount Pictures, while CBS' businesses include the broadcast network, Showtime and a TV studio that generates top programs like NCIS. Redstone controls CBS and Viacom through National Amusements Inc., a company founded by his father, Michael, in 1936. Redstone owns 80 percent of National Amusements, and his daughter Shari holds the remaining 20 percent. Once the elder Redstone no longer is in the picture, a trust will control his voting shares in CBS and Viacom. It's not clear who will make up the trust, though apparently several people will be involved, including Shari Redstone and Dauman -- but not Moonves.

A source says Redstone has ensured an orderly transition and that no one person will control the trust or, by extension, the shares. Despite that, says one Viacom veteran, "My guess is most of those people [in the trust] would defer to Philippe." (Shari Redstone, oft-estranged from her dad, might be an exception.) In that case, Dauman effectively would run both Viacom and CBS and could alter the latter's board if it suited him.

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Dauman elicits praise from some Wall Street analysts. The company's stock hit an all-time high in October -- thanks in part to buybacks -- and he is promising to stem ratings erosion at Nickelodeon. But others think he is tone-deaf when it comes to the creativity that makes media companies flourish, and they believe his outward success masks serious problems. Todd Juenger of Sanford C. Bernstein & Co. argues, for example, that Viacom not only has issues at Nickelodeon (episodes of the aging SpongeBob SquarePants make up more than 40 percent of its schedule) but also faces trouble at MTV, where ratings were down 32 percent in the third quarter.

Several observers say that if Dauman assumes control of National Amusements, he has no reason to interfere with Moonves. But a Viacom veteran says human nature must be factored in. "The seeds of trouble would come if Les continues to be successful and Viacom continues to slide," he says. At that point, "the pressure would build on Philippe, and he's got enough of an ego that he'd want to do something about it."

Another insider recalls that Viacom abandoned Paramount's deal with CBS' Showtime in 2008, instead choosing to launch the Epix premium channel. "It's a crazy thing that happened because of the egos of those guys, primarily Philippe," says this person. "Philippe wasn't going to bend to Les' demands. That's a good indication of how they're going to get along."

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