The epic and unseemly (though highly entertaining) battle that has broken out in the past few weeks between 78-year-old Sumner Redstone, the chairman and controlling shareholder of Viacom, and the next-gen Mel Karmazin, his theoretical successor, is just one of the endgame dramas now being played out in the media business.
These are also, more or less obviously, the twilight years of 71-year-old Rupert Murdoch, the chairman and controlling shareholder of News Corp., and of a younger but no less hoary Michael Eisner at long-struggling Disney. (As for the other two behemoths: AOL Time Warner has just announced an uncertain and tetchy succession; at Vivendi, 45-year-old Jean-Marie Messier is trying to fashion himself as the Young Turk of the entertainment business, taking advantage of his betters’ experience and weaknesses – Barry Diller now works for him.)
The battle at Viacom, an extreme and comical instance of not going gently into the good night, provides an example of the rage and ridiculousness that may inevitably come at the end of a mogul’s reign.
Redstone – not much of an argument has to be made – is too old to run a major public company. To do so without a successor, or with a series of embattled and belittled successors, is not so much arrogance as it is farce. And yet, even with a general consensus that Karmazin has been doing a respectable job, Redstone has made it clear that he’d like Karmazin out – and that he has little intention, if he has anything to do with it, of renewing Karmazin’s contract when it expires at the end of 2003.
With a striking head of orange hair, Redstone is a vainglorious, old-school egomaniac who has an operatic personal life that has been largely kept out of the media undoubtedly because he controls so much of it.
But most of all, Redstone benefits from an odd tolerance on the part of investors and bankers that lets a media company, more so than any other type of company, function as a hybrid between a public and private entity – Redstone’s Dedham, Massachusetts-based National Amusements has a lock on Viacom’s voting shares.
Which means he gets to treat the company as his alter ego.
“Viacom is me. I’m Viacom,” he told Fortune. “That marriage is eternal, forever.”
Even if the proposition of Redstone running Viacom for, as he’s suggested, another fifteen years is preposterous (“I know I don’t look my age and I don’t act my age and therefore I will not accept that age,” he’s pronounced), shareholders are stuck with him for as long as he wants to hold on.
The outlandishness of the conceit makes it almost endearing. (“I am on a high-protein diet,” he told an interviewer, spelling out his plan for longevity. “It’s a way of life. People don’t realize it, the culprit is not fat. The culprit is sugar … I am an expert nutritionist, by the way.”)
We like our moguls to be over-the-top.
And then there’s Mel Karmazin – the mogul-in-waiting. There are keen similarities between Redstone and Karmazin, who linked up two years ago, when Viacom bought Karmazin’s CBS. They are both small-timers in the big time. Redstone spent most of his career running a chain of movie theaters in New England, then got lucky when MTV, the fledgling cable channel that was part of his acquisition of Viacom, took off (at 63 he bought Viacom; a few years later he bought Paramount). Karmazin was a radio-spot salesman, and then a station conglomerateer, who was able to trade his way up (first he got control of the radio network Infinity Broadcasting, then merged it with CBS, where he pushed out management and took over the whole shop) because he owned the cash cow Howard Stern.
What both Redstone and Karmazin do very well is topple others.
Their decision to merge CBS with Viacom was not that different from, say, Enron deciding to park a lot of debt in its dubious partnerships: Karmazin and Redstone became one another’s secret liability – a massive problem they’d each have to deal with later. Both almost certainly knew one would have to kill the other (and that it would cost the company – but how do you account for that on the balance sheet?).
At the same time, both guys were doubtlessly sure: That toppler isn’t going to topple me. The logic of this was certainly on Karmazin’s side. Sumner got rid of his last successor, Frank Biondi, but still … come on … 78 is 78. He can’t hold on forever, Mel must have sensibly figured.
Indeed, for Sumner, getting rid of Karmazin at this point is the grandest of indulgences. It lacks any sort of business reasonableness. It’s a primal gesture: I live! Redstone will do it, or try to do it, because what’s it all for, what’s it been worth, if you can’t keep control?
For the time being, reports from the recent board meeting suggest, Mel seems to have held on. My guess would be that all the he-said/she-said Viacom leaks are from the Mel side (though the Sumner side is retailing reports about the depth of Viacom’s management talent – who needs Mel?). Mel probably rightly figured that enough people – outside directors and institutional holders – would get so worried about a steep drop in Viacom’s share price without Mel that they’d put the breaks on Sumner. And if Mel can forestall getting fired now, that gives him two years on his contract during which, he must be betting, Sumner’s health is not going to get better… .
Surely, though, Sumner can’t possibly be finished plotting. Indeed, his children’s names – Shari and Brent Redstone – are showing up in more and more prominent spots on the Viacom org charts (Shari runs National Amusements, and they’re both on the Viacom board).
Of course, in some sense it’s refreshing that this Punch-and-Judy show is taking place in public rather than behind closed boardroom doors. Everyone may be richer for being able to watch it (with its Olympian, battle-of-the-gods, heroic, better-them-than-us feel), except the shareholders.
The era of the modern mogul is just about a generation old. The founders of the mass-media business (many of whom, like Paley at CBS, also hung on too long) passed from the scene, and the business was rebuilt on the leverage concept. Owning one company enabled you to buy another and another. Tricks of corporate finance let you reach way beyond mortal ambitions – not just a network or a movie studio, but the entire communications and sensory apparatus.
And yet mortality becomes the issue – because near-absolute power tends to be held in the various media megalopolises by one guy, who, of course, can’t hold it forever.
Indeed, if Redstone is a somewhat ridiculous figure, Murdoch, holding absolute power at News Corp., can seem to be a poignant one. Viacom’s dominance is really just the lucky result of MTV’s vast success (who could have known?). News Corp., on the other hand, is the clear result of Murdoch’s virtuosity. He’s the centripetal force keeping all the disparate, unlikely elements of his empire together.
I’m not sure there is anyone who would argue that the company, with its far-flung combination of Australian holdings, English tabloids, American television, and international satellite networks, would make sense to anyone but Rupert himself (to the extent it makes sense to him). Now, what’s more, the company has spent the past two years in intent pursuit of DirecTV and its vision of satellite domination. Murdoch has pretty squarely acknowledged that everything was staked on this deal. That he was betting the farm.
And then he lost the deal.
It is possible, I suppose, for a company to go into an existential funk, to have seen the world one way, and then to have lost that vision (although this is usually a moment for outside directors to fulfill their duties and urge a change of leadership). But what happens when the guy who must search his soul is no longer young – no longer even middle-aged? We know what happens.
Eisner, too, at Disney, is painfully stuck in the middle of a meaning-of-life argument in which there can’t be a winner. He’s only 59, but he has been running Disney for eighteen years and is now long past his 20-percent-growth-per-year glory days. Indeed, little has gone right for Disney in the past six years – not since the company bought ABC. The mouse house missed the boom and is now getting hit with the bust.
And yet, even with this long malaise, there is almost no separating Eisner from Disney. He is as much the company as Walt himself once was (the present company bears little resemblance to the old Disney – as little as AOL Time Warner bears to the old Warner Bros.). Everything about the company is Michael. He’s micromanaged the enterprise into absolute submission – paralyzing it. The company long ago lost any objective capacity. Everybody has left Michael – he’s isolated himself. Even Disney’s large and faithful outside shareholders – Warren Buffett, the Bass family, former Cap Cities chairman Tom Murphy – have sold all or big parts of their stakes.
While there is pretty much no one who does not see that the end has arrived for Michael Eisner and Disney, there isn’t anyone who sees an end to the end.
The media mogul is imbued with special status and power. It is not the kind of power that is ever accorded a mere entrepreneur or manager (one bad year in the technology business, for instance, and odds are, you’ll be taken out). The mogul is a version of royalty – different from you and me.
It might be that the companies they have created – like most empires – so defy rationality, are so ungainly, obtuse, and self-aggrandizing, that we fear taking power from them because it is so unlikely that any other reasonable executive could ever appreciate the leaps of logic that created these modern media states.
After them, in other words, the deluge.
Of course the moguls themselves haven’t prepared for a world without them running the show, the elementary argument would hold, because they’re the ultimate narcissists. It’s the media business, after all.
Viacom, News Corp., and Disney are among the largest and most influential companies in the world – with more presence in our daily lives and more power over the direction of the real desires and beliefs of the nation than any other force, including government – but they have no future. They’ll be traded, broken up, merged, picked apart without Redstone, Murdoch, and Eisner.
We’re all just waiting around for the inevitable to happen.
E-mail: michael@burnrate.com