Michael Wolff on Viacom and CBS Post-Sumner Redstone: The Succession Scramble
The 91-year-old mogul missed an earnings call Jan. 29, as his declining health (despite a new baby) raise questions about CBS, MTV, Leslie Moonves, Philippe Dauman and even Rupert Murdoch.
This story first appeared in the Feb. 13 issue of The Hollywood Reporter magazine.
Donald Rumsfeld, parsing issues during the Iraq War, once defined the difference among known knowns, known unknowns and unknown unknowns. Quite the same variables are at play in the fate of Sumner Redstone's media empire.
For at least a decade, a consistent theme — and a fallback for media reporters — has been the apres-Sumner question. As he failed to take his usual role Jan. 29 in a Viacom earnings call, there was a spike in Sumner-CBS-Viacom Kremlinology.
This is a known unknown: At 91, he is near his end. But many have bet on that date before — including Mel Karmazin, who ran CBS when it was acquired by Redstone in 1999 and figured he'd get to run the company after Sumner's demise — and been snookered. Carl Folta, Viacom's PR chief, who often acts as a spokesman for Redstone, long has assured that his boss is "sharp as a tack." Other people in the empire give backdoor assurances that he's completely non compos mentis. His most direct competitor and generational cohort (albeit eight years younger), Rupert Murdoch, has a favorite routine of imitating Sumner walking into walls.
In fact, Redstone mostly has been housebound since early fall and seen by very few. Still, unlike Murdoch, whose absence from the daily job would be a sure signal, Redstone — more dealmaker than manager — never has been Johnny on the job. His lack of presence does not make for a known known. As another Sumner watcher puts it, referencing The Great Gatsby, "That organism can beat on ceaselessly into the past."
The known knowns about his holdings are that they consist of Viacom, now largely a cable programming company, which has experienced recent worrisome ratings declines, and CBS, largely a TV broadcast company, now among the strongest in the media business. Control of these two independent public companies (Redstone split them in 2006) resides with a third company, National Amusements, which in turn is governed by a trust controlled by … a known unknown, or even an unknown unknown.
Through the years, Redstone executives and family members have fallen in and out of favor, so control has been something of a game of musical chairs. For a while, the smart-money speculation has been that the ultimate vote lies with Philippe Dauman, Redstone's longtime lawyer and the CEO of Viacom (often said to be his executor, a designation that may or may not be true). But Dauman, 60, sold a $140 million stake in the company at the end of 2014, raising the possibility that ultimate control has shifted — possibly back to Redstone's daughter, Shari, who has held it before. Or, possibly, to yet another party — that unknown unknown. Shari, 60, and her brother, Brent, neither involved in the management of Viacom or CBS, might logically be inclined to sell the family's vast media position (especially as the industry moves deeper into known unknown waters) and craft a sensibly diversified portfolio. Dauman, who presumably likes his job — his board gave him a 19 percent raise in fiscal 2014 to $44.3 million, even as ad revenue is declining — probably would maintain the holdings as is if he has control.
Curiously, Redstone, alive or dead, does not change the operational picture very much. Unlike, say, if Murdoch were to die, there would not be a power vacuum at Viacom or CBS. Both have run for many years largely without Redstone's day-to-day involvement. It is more the unknown unknowns that haunt the future of these companies. Voting control — one with quite a small ownership stake — is an odd circumstance when you can't even be certain who's voting.
Indeed, Redstone, at this point, may well be estranged from his family, close friends and executives — the very people theoretically in control of the trust. A legal battle has provided a peek into a world in which he seems to be closely protected by his current companion, 43-year-old Sydney Holland (who adopted a baby last year), who is suing a former Redstone girlfriend, Heather Naylor, who in turn has countersued and accused Holland of controlling the mogul's life and the people who see him. (A lawyer for Holland stresses that "under no circumstances does she control Mr. Redstone's life or act as a gatekeeper.)
There is, in other words, the possibility here not only for unknown unknowns but also operatic ones.
While there are detailed and varied estate scenarios favored by either side, as the end draws nearer, both Viacom and CBS insiders seem always to repeat, with careful enunciation or in capital letters in emails, NOBODY KNOWS WHAT WILL HAPPEN. Predictability, of course, is the highest business state, so having no idea as to the outcome is rather spookily existential. Likewise, not knowing what will happen works to the advantage of everyone trying to make something happen.
On the cusp of what many believe will be the next great media consolidation, any acquisition of the Redstone assets could realign the industry. There is the scenario — mostly emanating from Murdoch's New York Post — of the recombination of a lagging Viacom and a robust CBS. But, even given that Viacom through Dauman may hold ultimate voting control over CBS, a recombination would mean Viacom would have to come up with a mountain of cash to satisfy CBS shareholders. Indeed, this scenario likely is being prompted by Viacom shareholders hoping to pump up a share price that has fallen during the past year. Or, possibly, as often is the case in the Post's business pages, it comes from Murdoch himself, who, still smarting about his loss of Time Warner, has considered a Viacom hookup. As much, Murdoch would be sorely unhappy if there ever came to pass the more logical merger (than Fox with Time Warner or Viacom with CBS) of CBS and Time Warner.
A known known is the stature of CBS CEO Leslie Moonves in the business. Moonves, 65, and Disney's Robert Iger, 63, are the current media executive gold standards. Apres Sumner may be an opportunity for CBS to get out from under a decrepit and dysfunctional voting-share structure that might seem to limit Moonves' known unknown potential. (Time Warner could buy CBS, elevating TW CEO Jeffrey Bewkes to chairman and, in a move that might provide the kick to Time Warner shares Bewkes has been seeking, give Moonves the CEO role.) But this most likely would depend on the trust's inclination to sell rather than hold the assets.
In another scenario, a Redstone family-controlled trust might hold the prospering CBS and diversify its portfolio by selling the more problematic Viacom. (Amid much recent gloomy press, including coming layoffs, Viacom actually reported steady earnings Jan. 29.) That's the Murdoch move, a tasty one not only because it would give him pleasure to triumph over even a dead Redstone, but because he believes the continuing strength of cable lies in consolidation. At the same time, Comcast is also said to be interested in combining NBCUniversal with Viacom. Murdoch dislikes the Roberts family, which controls Comcast, even more than he dislikes Redstone — the known kind of enmity and old-fashioned media rivalry that could send Viacom's value to unknown heights.
In a media world that theoretically has been rationalized and indeed made more profitable by technicians and managers, there does seem to be one more seismic chapter left in which the ambitions, dreams and personal foibles, known and unknown, of the mogul set may yet again transform the business, even from the grave. Except, of course, nobody knows when.
Michael Wolff writes frequently about the media business, including a recent book about Rupert Murdoch.
Update: This story has been updated to reflect that Redstone did not legally adopt a baby with Holland and it adds a statement from her lawyer.