It had been a rough 24 hours for Sumner Redstone, Viacom's 83-year-old executive chairman. He and his wife Paula had been up much of the night before with Arthur, one of his long-haired dachshunds, who was ill. Now, as he settled into his rambling home in the hills overlooking Los Angeles, Redstone was in the midst of changing leadership for his 72% controlled media behemoth.
Unimpressed by Tom Freston's eight-month tenure as Viacom's (VIA) CEO, Redstone and the Viacom board had asked for—and gotten—Freston's resignation, ending a 26-year career for the exec who helped launch MTV and plot its iconic expansion.
Redstone has been anything but quiet since engineering the Jan. 1 split of Viacom into two companies, one that kept the Viacom name and houses MTV, the Paramount studios, and other cable assets, and the other, CBS (CBS), where he placed the legendary network along with the radio and billboard businesses.
Just two weeks earlier, Redstone had made news, announcing, more or less without knowledge of anyone else in the company, that Paramount was "firing" superstar actor Tom Cruise after 14 years, part of an effort to trim costs at the studio. And, he reveals to BusinessWeek.com, the Sept. 5 ousting of Freston has been in the works much of the summer.
With Viacom's stock down 12.5% since the Jan. 1 split from CBS, Redstone replaced Freston with long-time lieutenant Philippe Dauman as CEO and onetime Viacom CFO Thomas Dooley, who becomes chief administrative officer.
Excerpts of Sumner Redstone's conversation with BusinessWeek's Los Angeles Bureau Chief Ron Grover follow:
Viacom just reported pretty strong results. Why get rid of Tom Freston now?
The board has been considering this for some time, six weeks I think. They knew that the results were stronger. "Who cares," they said. "If the company is getting better, no one on Wall Street is listening." The point is that we were not communicating that to Wall Street, and as a shareholder, that was very frustrating.
Was this your decision? You do control this company.
It was the board's decision. These are 12 very independent-minded people, and I didn't have to sell them. They understood the problem. The stock was down, and there was no really good reason for that.
What exactly did Tom Freston do wrong in running the company?
I don't want to get into details. Tom did great things for this company and for MTV. You know, he really didn't want to run Viacom when I first asked him to do it last year. He really liked running MTV, was very good at that. He changed his mind—I don't know why he did—but maybe it wasn't the right decision for him.
Was there still some residual concerns because he lost the bidding war for MySpace to Rupert Murdoch's News Corp. (NWS), whose stock has increased tremendously since that acquisition?
I'm not going to discuss specifics. Philippe and Tom [Dooley] and I have worked together a long time, and they tell me that we never lost an acquisition that we wanted, especially not one that embarrassed us by ending up with a competitor. So we're going to be looking at more acquisitions. Philippe says he is looking for smaller acquisitions, cutting-edge companies that can make a difference to this company. We're not going to let something get away again that we want.
Were the problems at Paramount, where you went public two weeks back with the Tom Cruise situation?
No. It's early, but it's clear to me that Paramount is in turnaround. Look, we're going to make a lot of money on World Trade Center [an Oliver Stone film]. We made that for $58 million, and people look at it and think it was $100 million or more. We're going to make money from that. That's the way a studio should be operated. Brad [Grey, Paramount's top executive] and Tom [Freston] and I were all on the same page about Tom Cruise. He was off the lot, and should have been. I was just the one who talked about it publicly.
Of course, Tom Freston has been around for so long. How do you let someone go who has been with you that long?
I love Tom. I talked to him yesterday, and it was tough for me, for both of us. This was not an easy decision. But we agreed to have dinner together soon, and I hope we do. It was just not a good fit.
And Philippe Dauman and Tom Dooley. What do they bring to the company?
I think there's been too much concentration on what Tom may have done or not done, and not enough on what Philippe and Tom [Dooley] will bring to this job. The three of us worked together for many years. That was when Viacom's stock was at historic highs—it was three times what it is today—and I have to think that we did a pretty good job back then. They know what it takes to run this company and to get Wall Street to notice it again.