Michael Wolff: What Will Happen When Sumner Redstone’s Empire Goes Up for Grabs
In 2016, a scramble for control of Viacom Inc. and CBS Corp. could lead to a sale of one or both companies and new power for daughter Shari Redstone.
This story first appeared in the Dec. 25 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.
In 2016, 92-year-old Sumner Redstone — whose health, depending on whose court documents you read, is either considerably or overwhelmingly impaired — may die. If that comes to pass, the dramas of his operatic final years, arguably even more extreme than in all the years of dynastic, legal, personal and business dramas that preceded them, will, in the view of many, hardly come to an end.
Over poached salmon with a scented broth the other day at New York's Four Seasons Grill Room, where Redstone once often dined (and which, with the termination of its lease, will come to its own end in 2016), another Redstone-era mogul told me, "Sumner's game is control, of dominating everybody around him. I doubt he'll want to give that up just because he's died."
The particulars of the game are Viacom Inc. and CBS Corp. — representing $40 billion on a not-so-good day (now) and almost twice that on a better day (earlier this year). Both companies are controlled by Redstone through National Amusements Inc., a theater chain started by Redstone's father and now owned by Redstone and, with a minority stake, his daughter, Shari, whom he has periodically shunned. (His other child, Brent, took a buyout of his interests after suing his father.) The question in the game is what happens to these companies in a post-Sumner life. For spectators, the fun of the game, and for insiders the sadistic element, is that nobody knows.
What's known is that there is a trust for the benefit of his grandchildren that has seven members, including his daughter and her son, Tyler Korff. Redstone's family is outnumbered by outsiders, among them Philippe Dauman, the CEO of Viacom, and various of Redstone's longtime lawyer friends. Beyond the built-in tensions between family and outsider votes and uncertainly about where anybody's loyalties truly lie, the future of the companies may be clouded by key provisions of the trust that yet remain private. It is, to boot, unclear what, if any, changes in Redstone's estate planning might have occurred during the last few years of his domestic turmoil, including divorce, multiple girlfriends and more recently litigation over who should oversee his health care needs.
The trust's most obvious approach, after Redstone's death, might be to diversify holdings that are now wholly concentrated in media assets — at a time of great uncertainty and volatility in this business — into a broader portfolio of investments. But that might be complicated both by the personal ambitions of the trust's members, the media market, special provisions of the trust and, of course, taxes.
It is, for instance, unclear if Shari Redstone, 61, wants to reach for control, appointing herself chairman, or cash out, or if Dauman, 61, wants to stay put (he made $44 million last year) or move on.
Dauman is, according to some, looking for vindication in a Viacom sale. Right now he's widely thought to be the most hapless victim of the transformation of the TV business (shorthand: cord-cutting), failing to anticipate the apocalypse. But in the outlier view, the company is at the forefront of aggressively managing the transformation, bucking Nielsen and, in an effort led by marketer Ross Martin and data-strategy guru Kern Schireson, building the most sophisticated sales package in the industry.
Within Viacom, there is a strong belief that Liberty's John Malone — the cable pioneer who has stealthily re-established his position in the media business with his control of Discovery and the forthcoming Charter-Time Warner Cable merger — is the logical buyer of its stable, including MTV, Nickelodeon, Comedy Central and Paramount Pictures, or, more tax-efficiently, of all of National Amusements.
But a sale of Viacom might be at odds with the insider's game at CBS. If Viacom is considered by many to be the worst managed company in the television business, CBS is considered by as many to be one of the best run, with CEO Leslie Moonves, 66, among the industry's last-men-standing-and-still-smiling figures. That might make CBS the more logical asset to sell — or, really, to set free. Analysts speculate that among the most tax efficient ways for National Amusements to sell CBS would be for CBS to buy itself back, that is, to spin off a new company with cash in it that National Amusements could, in a tax-free transaction, merge with.
Analysts think CBS is keeping cash on hand for just this purpose, while Viacom has been using its cash to buy back its own shares. Still, playing the tax game, Viacom could merge with National Amusements, which could then be sold in an efficient way to Malone.
Shedding CBS and selling Viacom, the biggest movement of media assets since the 1980s, would, in 2016, remake the media and entertainment landscape. Indeed, a world that many people believe will be dependent on two elements, the pricing power of valuable content franchises and the ability to use that leverage to achieve well-negotiated deals, is something of an ideal Leslie Moonves and John Malone world.
Unless it remains a Sumner Redstone world.
Redstone — whether entirely non compos mentis, as Manuela Herzer, his former girlfriend and later companion, claims in a lawsuit seeking to have him declared incompetent and put in her care, or merely physically devastated but alert, as Viacom officials insist, having ejected Herzer from the Redstone home — yet remains at the center of his empire, effectively controlling it by not having the wherewithal to control it. Nothing really can happen while Redstone survives — and remember, he once promised to live forever. On Dec. 2, the company's second-largest shareholder, Mario Gabelli, called for greater disclosure about Redstone's condition — no doubt recognizing that he needs Redstone out of the way and the companies sold (or at least not paralyzed) to realize a premium for his voting shares.
"It's insanity, but I wouldn't put it past Sumner to have made it way too difficult to sell either Viacom or CBS. If you don't own, you don't control, alive or dead," said my lunchtime Grill Room companion before jumping up to greet other moguls, all of a certain age and all likely taking a moment to consider, with some awe, the last days, however many, of Sumner Redstone, one of the most indomitable of their kind.
Michael Wolff writes frequently about the media. His most recent book is Television Is the New Television.
Viacom's value has sunk 41 percent this year while CBS has fallen 16 percent. An outright acquisition of either company would require the assumption of debt, minus the cash on hand, an economic measure known as "enterprise value." By that metric, the two companies controlled by Sumner Redstone are similarly valued, give or take a half billion dollars.