A Loser's Race for Media Moguls

The Power Lunch Stakes pits Messier, Pittman, Karmazin, and Eisner in a contest to see who's first to be put out to pasture

By Ron Grover

There won't be mint juleps, an infield party, or a congratulatory horseshoe of flowers at the end of this race. But as War Emblem and his fellow thoroughbreds head to the paddocks for the Belmont Stakes on June 8, informal wagering is rippling through the media world as to the mogul who'll break the tape in a far more dubious contest: Which bigwig will be put out to pasture first, done in by galloping investors, skittish directors, a rival with a strong whip -- or maybe just his own lameness?

So, for anyone with an interest in such bets, here's the my tip sheet for the Power Lunch Stakes, complete with odds on each mogul's likelihood of being the first to be let go.

The Favorite: Jean-Marie Messier (even money). Poor Jean-Marie. A wild, 18-month spending spree has saddled Messier's Vivendi Universal with $30.8 billion in debt and left him with Wall Street's sorriest reputation for keeping his word.

The 45-year-old former investment banker and French civil servant is already several lengths ahead, having broken away from the pack after a tense May 29 board meeting, during which a special board committee was set up to look over his shoulder. The committee is co-chaired by Vivendi Vice-Chairman Edgar Bronfman Jr., who represents the Bronfman family and its nearly 5% state in Vivendi.

Messier's problem is that he isn't American enough to satisfy U.S. investors, who are worried about French-style accounting and lack of disclosure, and he's no longer French enough to satisfy the hometown crew, who worry that he has gone Hollywood. Messier's new oversight committee is expected to force the publicity-loving chairman to stop prancing around town and concentrate on streamlining the company, perhaps by selling off pieces like a small stake in its 63%-owned water unit.

Closing the Distance: Robert Pittman (2-1). Although he's several lengths back, AOL Time Warner's chief operating officer could give Messier a run for his money. Pittman is the one-time Time Warner executive who, as AOL's second-in-command, helped broker the $166 billion merger in early 2001. But he has stumbled by overpromising on cost savings and synergy-enhanced revenues to make the deal pay off.

AOL's stock has fallen by 66% this year, and Pittman himself has more or less been in a corporate free fall for much of the past seven months. Once considered an heir apparent to then-Chairman Gerald Levin, Pittman last fall was passed over for the top spot in favor of fellow Co-President Richard Parsons.

This April, Pittman was given responsibility for turning around the company's wobbly AOL Internet unit, so he's once again focused on Reston, Va., and tending to sagging advertising and the still-unfulfilled promise of AOL's broadband future. Insiders say Pittman is counting the days until he can bolt for greener pastures. A recent rumor -- already denied by AOL Time Warner and Disney both -- has him going to Disney, possibly to land as successor to Michael Eisner. The rumor is "ridiculous," according to a Disney board member, and it left the odds on Pittman unchanged.

The Dark Horse: Mel Karmazin (10-1). Viacom's president was leading the pack earlier this year, when rumors had the blunt-talking former radio advertising salesman in the middle of a messy fight with Chairman Sumner Redstone. The two hadn't gotten along for months, insiders said then, with the 78-year-old Redstone bristling at the notion of sharing control with Karmazin, despite a five-year contract giving Karmazin operational control of the company.

Among Karmazin's supposed transgressions were holding high-level meetings of which Redstone was unaware and giving control of Viacom's UPN Network to CBS honcho Leslie Moonves. Redstone was also said to be upset that Karmazin sold 15% of his stock in Viacom last year without first informing Redstone.

Since then, the two have seemingly patched things up, even going so far as to make the rounds of investment conferences to share the limelight and speak warmly of one another. That happened after a remarkable Viacom board meeting in February, when outside board members insisted that the increasingly public spat was hurting the company's stock.

The shares have since climbed 11%, and Karmazin recently predicted "dramatic improvement" in Viacom's ad sales. But Redstone has a history of not being able to tolerate a strong No. 2. So, when the Viacom chairman crows -- as he did at the recent annual meeting -- that he and Karmazin "love each other," you know Karmazin may be pointed toward the Loser's Circle.

Late Entrant: Michael Eisner (20-1). The Disney CEO missed the start of this race, but a whip-cracking board could have him catching up fast. Until recently, while investors were decidedly Grumpy about Disney's five-year stock performance, the media giant's board was a little Sleepy when it came to reining in Eisner. But Enronitis has spread through much of Corporate America's boardrooms, and it seems to have some of Disney's crew champing at the bit for Eisner to shape up its operations.

First, Eisner needs to fix Disney's ratings-challenged ABC TV network and to make his very expensive purchase of the ABC Family Channel from Fox pay off sooner rather than later. Either would be no mean feat. And it's very likely the board will push the 60-year-old Disney chairman to name a potential successor, lessening concerns on Wall Street that the Mouse House has no post-Eisner plan.

What the board mostly wants from Eisner is some lift for a stock price that, in the low 20s, still trades below where it was in 1996, when Disney closed on its CapCities ABC transaction. That puts Disney in the dangerous territory of being likely takeover bait for a company that would covet assets such as ESPN, ABC, and its film and TV library. Comcast comes to mind.

The Power Lunch Stakes has a small field, largely because the price of entry is steep: Unless you're running a company worth at least $23 billion, you can't get to the starting gate. But it's also a race like few others, where the finish line often seems to show up before anyone -- especially the victor -- sees it coming.

When not handicapping races, BusinessWeek Los Angeles bureau chief Grover dishes up Power Lunch, exclusively on BusinessWeek Online

Edited by Patricia O'Connell

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