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Sell High

Everyone is talking about distribution, content, synergy, and succession in the CBS-Viacom merger, but the deal is really Mel Karmazin selling Wall Street a story.

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I got back on Labor Day evening from a zero-media vacation in the Italian countryside. At 7:30 the next morning, intruding on my jet-lag stupor, the calls started to come soliciting my opinion (and, apparently, vast understanding) of the Viacom-CBS deal. "It's a straight-up distribution play," I said, reflexively and authoritatively. Then I, too, got on the phone and began calling colleagues to find out what they were making of this latest corporate combination.

Understanding a megadeal -- the true nature of the deal, the possible permutations of the deal, the further implications of the deal -- has become a mainstay of modern journalism. The kind of second-guessing and scenario-playing that used to go into political maneuvering and cold-war geopolitical alignments now goes into reporting and analyzing the great business pacts. (Indeed, a new five-day-a-week newspaper called The Daily Deal, looking something like the Racing Form, launches this week.) And nowhere does the media become so enraptured with the epoch-shaping portent of mergers and acquisitions as when it's the media itself that is combining or engulfing. The Times' three-column front-page lead and almost five pages of inside coverage of the $80 billion Viacom-CBS deal was the most prominent play it's ever given to a merger agreement.

The nature of the coverage (not only in the Times but across the business- and entertainment-news spectrum) is noteworthy, too, because the story itself, the actual details of the combination -- an uncomplicated stock-for-stock trade -- could be stated in a paragraph. (Add another obligatory paragraph concerning who first made the proposition and in what hotel, restaurant, or corporate dining room the conversation took place.) Everything else is speculation. Breathless speculation. What component pieces might be sold? Which heads will roll? How will Wall Street respond? How will two kings co-exist in one kingdom? Will there be the slightest peep from Washington? What's the next merger to come? Reporters, in other words, get to indulge in some of the speculation that speculators engage in. Well, why should speculators have all the fun (as well as the profits)?

Still, part of the effort here is certainly an honest journalistic impulse to impose a logic on the transaction -- to uncover the thinking, to find the strategy, to nail the vision of the deal. Oddly, journalists seem to demand a much more exacting and immediate rationale for a deal than Wall Street, which accepts a certain randomness and even senselessness in any deal (there are more stupid deals than smart ones). Of course, this is our world (although we often construe it to be everyone's world -- Viacom-CBS will reach hundreds of millions of people, after all) being reshaped.

By midday, we were all interviewing one another, playing at being knowledgeable industry insiders and men and women of affairs. Charlie Rose (who took care to point out that he's on the CBS payroll, although he did not point out that his longtime companion is Amanda Burden, the stepdaughter of CBS founder William Paley -- which may be a more nostalgic than strictly relevant note) hunkered down with the Times' Geraldine Fabrikant, who has covered the media business for twenty years; the New Yorker's Ken Auletta, who has been a Boswell to numerous media moguls; and David Londoner, a Wall Street media analyst. The deadly earnestness of the conversation, suggesting at the very least some alarming shifts among the nonaligned nations, teetered back and forth between journalists' talking about journalism ("there will be fewer voices," said Fabrikant, who also pointed out that there were now no newsmen running the networks -- causing Rose to madly search his mental Rolodex for any newsmen who had ever run a network; "Edward R. Murrow used to sit with Bill Paley," added Auletta) and journalists' talking like investment bankers about duopoly, asset values, the "product," distribution vehicles, synergy, and, of course, branding. "Is it a win-win?" asked Rose.

It is a particularly striking and somewhat weird sensation when you know how little the experts being interviewed for a story actually know about what they're talking so expertly about. Indeed, it is an unsettling point about a journalism career today that we are so far removed (way down the food chain) from what the companies we work for actually do. What do we know, finally, about what makes these companies run?

It's partly this, our own insecurities, that I think causes us to adopt the language of investment bankers as a real analytic framework -- we don't seem to understand that investment bankers use investment-banking jargon mostly as sales talk. This language seduces us (that's its purpose, after all -- "He seduced us," said Viacom's Redstone about CBS's Karmazin) into thinking that there is not only a grandness but a grand strategy to these deals. Someone, we believe, really knows what's going on. Someone must be Bismarck.

Accordingly, in the aftermath of the St. Regis news conference where the two CEOs and masterminds announced the marriage (the 76-year-old Redstone in monotone light-brown hair; the 56- year-old Karmazin in what might or might not be a meaningfully contrasting untouched gray), there emerged a wide range of authoritative, albeit contradictory, formulas for understanding the merger.

Viacom needs a television network to provide an outlet for its television programming. (Spoilsports rushed to say that Disney thought it needed one, too, when it acquired ABC in a so-far-unhappy deal.) Contrarily, CBS needs to minimize its reliance on the television-network business, which is why it sought the merger with the more diversified Viacom.

Or CBS needs an affiliation with a movie studio, although, conversely, Viacom needs to minimize the position of low-growth, low-margin Paramount in its overall portfolio.

Or both companies are mired in low-multiple assets (Wall Street pays more for some businesses than it does for others -- television networks and video retail outlets are downers; television stations and cable networks are uppers), and what they really have to do is create a critical mass of high-multiple properties.

Or content is king, which is why you want to put together Viacom's strong programming arm with CBS's traditional network model.

Or content is a zhlob, and distribution is the reigning monarch, and in the end what this deal is about is what media deals are always about, which is how many eyeballs you can gather together and sell advertisers access to.

Or the 76-year-old Redstone needs a successor, and by buying CBS he bought the hottest media CEO of the nineties; or not, and what we'll have is an inevitable showdown (Redstone, after all, is one of the great sons of bitches in this business of great sons of bitches, a strictly "Jump!"-"How high?" kind of executive).

Or if you're a reporter whose beat is new media, then, doing some serious tail-wagging-the-dog analysis, you see that the true gold in the deal is the spinout value of the combined Viacom-CBS Internet businesses (marketwatch.com, mtv.com, country.com, cbs.com, and sonicnet.com), which properly packaged might be worth, what? Thirty or 40 billion? Or you could argue that the brilliance of the deal is the formation of a bulwark against the vagaries and encroachments of fractured new media. This is the "footprint" analysis -- Viacom-CBS together has the reach of, well, nearly an old-fashioned television network.

Pick one of the above.

Or conclude that the media's capacity for blather, especially about itself, is unlimited; or that what we have in this, as in most mergers and acquisitions, is an absence of logic and quite a pure example of chaos theory; or even that there are secret forces, unknown agencies, hidden cabals that will get the real benefit of the deal ("some stuff in the fine print we don't know about," said Auletta).

Or try my theory.

There is no plan.

There is only the roll. The roll is what Mel Karmazin is on.

He used to hang around my dad's ad agency in Paterson, New Jersey, 30 years ago. Mel sold radio time. My dad bought it (or did something to get it; there was a lot of trading -- for several years running, in a great childhood humiliation, all my clothes were paid for with radio spots).

There is something about radio that seems to be at the heart of what's happened here. Real men were in radio; fancy country-club Waspy-ish guys (William Paley, Frank Stanton sort of guys) were in television. This could be why we're cheering Mel on: his very lack of media polish is appealing. He's an antidote, a kind of counterprogramming, to the Armani moguls we've had to endure through the nineties, not to mention the sweet-faced twentysomething Internet boys with their overnight fortunes.

Certainly, a subplot of the coverage of the deal has been the story of the Redstone and Karmazin careers. Redstone spends 40 years humping a chain of movie theaters, until at 64 he buys a cable company called Viacom, then Paramount, now CBS (Redstone, however previously humble, steps easily into the role of media mogul and major pompous ass; "We are indeed staggered by what we have wrought," he said after Viacom nailed the Paramount deal). Karmazin, out in the boonies, puts together a bunch of radio stations, gets bought by the Tiffany network, then takes over the Tiffany network from McKinsey swell Michael Jordan (one advantage of this deal may be that the term Tiffany network will be forever retired) and seems to stay a pure suburban mensch -- a pure suburban mensch ad-space salesman.

Now, it is no secret that the secret of all this is share price. You're successful in the eyes of your board, your shareholders, your employees, the media, and probably your family too if your share price is going up. You're wearing a kick me sign if the price goes down. What makes one company a plotzer and another a Wall Street darling is less and less about balance sheet and more and more about what is called "story." The story is what turns fund managers into fans.

And every good story has got to have a good character. The greater the character, the greater the story. You could make the literary argument that the key moment in the modern business story is the transformation of the ordinary, nerdy, buttoned-down executive (Gates, Welch, Case, Eisner) into a shamanlike being.

The humper becomes a visionary. (All visionaries were once humpers -- and many visionaries return to being humpers; Sumner Redstone was a humper, a visionary, a humper again -- and now a visionary once more.)

He understands, or we believe he understands, not only how to make more money than he spends (and even this attribute is not absolutely necessary anymore) but how technology and communication and worldwide markets will shape the future.

Of course, a visionary -- a modern business visionary, anyway -- isn't a single-minded soul pursuing his lonely vision. He's a salesman, a consummate salesman, and something of a quick-change artist, willing and able to do whatever is necessary to be what my dad used to characterize as "an operator." Even better if he's a little quirky -- what my dad used to call "a character."

And right now, that guy is Mel Karmazin.

The fund managers and the analysts began to like what they saw after he deftly took CBS from Michael Jordan (that was very sweet). That set his role in motion. The Karmazin role translated into the CBS share price -- indeed, they are extensions of each other. And when your share price is high, you've got to do something with it -- obviously! It buys you more today than it will tomorrow (ask Disney about that). And trading is your job. So you buy -- or sell; you act. Foolishly or not. When you're on a roll, you go with it.

E-mail: michael@burnrate.com


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