What New Viacom CEO Tom Dooley Must Do

Tom Dooley -Viacom - Publicity-SQ 2016
Courtesy of Dario Acosta/Viacom

"While some investors may view Dooley as an extension of Dauman, we think he will be more aggressive around putting the business on a better track and have a favorable view," says one analyst.

With Philippe Dauman out as CEO of Viacom, his longtime lieutenant Tom Dooley, 59, has taken over, at least on an interim basis, and industry watchers say he will need to put all his financial, technological and people skills to use in an attempt to help turn around the company.

Dooley has in the past been happy to work in the shadow of big personalities like Dauman and controlling shareholder Sumner Redstone, along with daughter Shari Redstone, but he will now take center stage. His immediate tasks will include boosting employee morale, strengthening investor sentiment and ensuring the support of the Redstone family, according to Wall Street observers. Beyond that, analysts look for Viacom to shore up its content investments, re-energize its cable networks and studio, and decide on a possible partial sale of Paramount Pictures.

Viacom's stock rose 1.5 percent on Friday when it became clear that Dooley — who is well liked inside the company and on Wall Street and known to be very personable, collaborative and enthusiastic about his work and the company — would replace Dauman. (On Monday, Nasdaq didn't report premarket activity for the stock.)

"We view the removal of Mr. Dauman as a positive first step toward righting a ship that has drifted far off course over the past decade," Guggenheim Securities analyst Michael Morris said on Monday.

As COO of Viacom since 2010, Dooley has overseen all financial functions, corporate development, M&A, the operational functions for Viacom Media Networks (ad sales, strategic insights and research, as well as global digital media) and more. The Brooklyn native has spearheaded the company's data program, designed to provide audience insight beyond traditional ratings and let advertisers target viewers more precisely. He has also worked on reimagining company workspaces, which resulted in the decision to move Viacom Media Networks to Hollywood, a move that is expected to happen later this year, as well as the redesign of spaces at the Viacom headquarters in New York's Times Square with a focus on creativity and collaboration.

Sources say Dooley has been particularly technology-focused and likes to roll up his sleeves. Importantly, he has long had Sumner Redstone's trust due to his role the acquisitions of the likes of Paramount Pictures, Blockbuster and CBS Corp. According to the Wall Street Journal, Shari Redstone told Dooley that she and her father had faith in him to “get Viacom back to where it needs to be."

The interim CEO is expected to start meetings with employees, investors and board members this week as he formulates a turnaround strategy, expected to be presented to the board in September. The board will then likely decide whether Dooley should remain in place beyond the end of September or if a different CEO is needed.

“I love the place. I’ll do anything I can to make the company better,” Dooley told the Journal. “I get a lot of feedback from people at the company. I know the frustration. We have a lot to do.”

Some say that Dooley, who earned a bachelor of science degree from St. John’s University in 1978 and an MBA from the New York University Graduate School of Business in 1984, is also necessarily associated with Dauman and high compensation. "We wonder how much of an agent of change can he be?" MoffettNathanson analyst Michael Nathanson wrote in a report.

Others don't see that holding him back. Shareholders gave his reelection to the company's board more support than any other board member at the conglomerate's annual meeting earlier this year. Several observers said his ability to work with a wide range of people — which Dauman was seen lacking — will be much needed and could help him get things done that Dauman couldn't. "While some investors may view Dooley as an extension of Dauman, we think he will be more aggressive around putting the business on a better track and have a favorable view," said Jefferies & Co. analyst John Janedis.

"In our experience, investors have preferred Dooley's more direct, operations-focused communication style to Mr. Dauman's more nebulous buzzword speak, though the bar is admittedly low," echoed Morris. "We have little evidence that Mr. Dooley has been a repressed visionary, but we believe investors (and analysts) would be open-minded should he come to market with a renewed plan. We expect it will be clear over the next couple of weeks whether he has a true opportunity to win the permanent role or whether the board considers him a short-term caretaker."

Wall Street has started discussing moves they would like to see from Dooley and listing some of the big decisions facing the company, including a possible shutdown of smaller cable networks, increased content investment, a recombination with CBS Corp. (also controlled by Redstone), and whether to sell a minority stake in, or maybe even all of, Paramount Pictures, whose profitability has been taking a hit amid a smaller number of releases and some flops.

"We think Dooley will be more open to more options for Viacom than his predecessor," Janedis wrote in a report. "In addition to the ongoing Paramount sale [discussion], these would potentially include 1) selling off non-core networks, 2) potentially shuttering or merging networks, 3) moving more aggressively to OTT platforms and 4) investing in more talent."

Several analysts said closing down smaller networks and cutting cost could free up money for more programming investments. Nathanson in that context called on Dooley to "reassess Viacom’s programming talent," adding: "This is where Viacom has failed the most. The company needs to hire a cable networks CEO to oversee the entire network division. That person should have proven success as a cable programmer and be aggressive in seeking to change the culture. However, it might be impossible to recruit anyone good to take that job given the instability at the top."

He argued that "while we have started to see returns to growth at Nick and other key networks, MTV and Comedy Central have bled viewers longer and deeper than anyone could have ever expect."

Nathanson also called the state of Paramount "truly shocking," highlighting that the studio is on track to lose $350 million-plus during this fiscal year, which ends in September. "Short of firing the entire Paramount leadership team, there is little a new CEO could do quickly to improve its film pipeline," he said. "As such, the best Tom Dooley can do is sell 100 percent of Paramount to the highest bidder."

While many say a sale of a 49 percent stake in Paramount, which Dauman will be allowed to pitch to the board, won't turn around the studio on its own, it would help the company reduce debt and get new money for content investments. But it would require unanimous board approval. "Any, albeit unlikely, rethink on Redstone opposition to a Paramount minority sale after Dauman departure would be a positive," said Wunderlich Securities analyst Matthew Harrigan. "Although the initiative, while desirable, smacks of more financial engineering fixation, a 49 percent sale to China's Dalian Wanda at a $4 billion-plus minority share valuation would constitute a major positive."

Some have also called for a dividend reduction. That alone "would not be sufficient to hold the current rating," Moody's Investors Service analyst Neil Begley wrote earlier this month in reducing his ratings outlook for Viacom's debt to "negative," meaning he could downgrade his rating. "But it would certainly help preserve liquidity and reduce debt more rapidly as the company continues to align its operations to withstand risks from changes in the traditional media ecosystem."

What does Dooley's ascension mean for a possible recombination of Viacom and CBS Corp.? While sources have said such a deal isn't a focus for the Redstones, and CBS Corp. chairman and CEO Leslie Moonves is understood to have expressed his doubts about it, some on the Street say putting Viacom on stronger footing could help a deal down the line as the Redstones could assess a merger after a caretaker period under Dooley.?

"While [a combination] may ultimately be the outcome, we think a credible plan from Dooley has the potential to create more value for Viacom shareholders in the near to intermediate term than a combination with CBS," Janedis said.

Harrigan argued Dooley could lay the path to a combination down the line. "We view him as a credible replacement through an interregnum phase where the company can embark on a continued recovery," he said in an investor note. "A merger becomes much more tenable with a demonstration that Viacom's franchises remain highly relevant — achieved through a continuation of ratings stabilization and advertising initiatives, along with emphasis on mobile and social media short-form content."

With Dooley being a financials-focused executive, not a creative, FBR & Co. analyst Barton Crockett echoed: "Keeping Dooley in the CEO role ... would make sense if the thought is that one potential outcome is a merger" with CBS. He said CBS would likely end up "keeping some assets, divesting others and cutting costs — and putting a proven talent at picking TV shows in charge of the combined entity, to the Redstone family's/National Amusements' benefit, which controls both CBS and Viacom."

Meanwhile, Brean Capital analyst Alan Gould in a report said that he has "great respect" for Dooley and believes "the change is positive for Viacom," calling him "a top candidate for the permanent CEO position." But he added: "In our view, it will still take substantial time and investment to turn around both the media networks and Paramount. We continue to believe there is a 50/50 chance that National Amusements recombines Viacom with CBS, which we view as near-term accretive, but long-term dilutive for CBS shareholders."

Dooley has served on Viacom’s board since January 2006, when the company and CBS Corp. split. In September of that year, he was also named senior executive vp and chief administrative officer, adding the role of CFO in 2007, serving in that capacity until 2010.

He also used to work at the company before its 2000 acquisition of CBS. Dooley first joined Viacom in 1980 and over the years held various divisional and corporate positions, including senior vp corporate development, president of interactive television, and vp finance and treasurer. He also served as a member of the former Viacom board from 1996 to 2000 and was its deputy chairman.

It was during those days that Viacom controlling shareholder Sumner Redstone, Dauman and Dooley became known as a triumvirate of leaders that could work together, and Dooley became a go-to guy for Redstone when businesses needed fixing. After the company acquired Blockbuster and Paramount, Dooley focused on integrating those businesses. In the Blockbuster case, when the company after the acquisition seemed to hit a wall, which hurt Viacom's stock, Dooley moved down to Dallas, where the video rental firm had its headquarters, at Redstone’s request to help revive the business.

When the CBS deal happened, Dauman and Dooley decided to leave Viacom and launch DND Capital Partners, a private equity firm specializing in media and telecommunications investments. But Redstone wrote in his autobiography that Dauman told him at the time: "We'll both be around anytime you want us." Redstone called them back into the fold when he fired then-Viacom CEO Tom Freston.

Dooley, described by several people as a family man, has long been able to navigate his relationship with Sumner Redstone, according to sources. While less is known about his relationship with Shari Redstone, he is understood to have had good conversations with her.

"He has been very adroit over decades in working with Sumner," says Harrigan of Dooley.

In a 2012 New York Times profile of Dauman, Dooley recalled a business trip to Europe with Redstone in the late 1990s. On the way to a meeting, the mogul reached for his cell phone, but realized he had brought along a TV remote instead. Dooley said he and Dauman joked that Redstone should try to make a call. “He went into a rage and threw the remote against the window,” Dooley told the Times. “If you can laugh it off, he’s quite hilarious to be around.”

Harrigan described Dooley as a "very well-liked guy through his multiple stints at the company," expressing hope for a new beginning for the company as he has been "integral to some initiatives where Viacom has been at the forefront as with advanced advertising and shorter-form mobile and social media programming."

Wall Street folks say Viacom's stock performance will be driven by what the interim CEO proposes in the coming weeks. Said Janedis: "How Dooley differentiates himself and the plan he presents to the board will likely be the driver of the stock in the intermediate term."