Nobody ever doubted that octogenarian Chief Executive Sumner M. Redstone could put on a good show. By the time Viacom Inc. (VIA ) President Mel Karmazin finally took a powder in June, Redstone was well aware of the jitters on the Street about his succession plans -- or lack of them. So he pulled off a masterstroke, naming his longtime confidant and MTV Networks guru Tom Freston and his CBS prime-time ratings magician Leslie Moonves as dueling lieutenants. In the realm of CEO succession plans, the bake-off has all the makings of Hollywood high drama.
At least that's how it seems to have been scripted for investors. But with Redstone, things may be trickier than they appear. Sure, "[he] knew people were nervous because there wasn't a succession plan, so he gave them one," says analyst Jake Balzer at Guzman & Co. "We'll see if he keeps it." But Redstone is cleverly getting more. Rather than announce one heir, he's setting up his top two talents to go into hyperdrive and take the risks needed in today's high-stakes media world. It's a way to hold on to both guys and get investors jazzed again. How could the Tom and Les Show fail to eventually give his stock a kick, especially after dropping 14% since last January?
Until now, most observers assumed that the CEO gig was Freston's for the taking, even if it meant waiting years for Redstone to call it quits -- or for that other inevitability that would create a vacancy in the corner office. After all, it was Freston, then a go-getter at MTV, who met secretly with Redstone as the Boston theater chain mogul was plotting a hostile run to take over Viacom back in 1987. That sealed a bond between the two that only grew with MTV's repeated successes over the years.
But Moonves, the gravelly-voiced onetime actor who earned his red-hot status by reviving a tarnished Tiffany Network with cool programming such as CSI, is showing that he might just make a race of it. A hands-on guy who has been known to pick the actors himself for roles, Moonves got out of the gate first. Charged with turning around Viacom's Infinity Broadcasting, he sold a small radio station, intends to sell more, and told analysts that he would focus the company on its "oceanfront" properties in the 20 largest markets. Still, with radio ad sales up a minuscule 2% last year and only modest gains expected again in 2005, Moonves has moved quickly to find revenues in the hot Hispanic market. He swapped Infinity's San Francisco station for a 10% stake in the fast-growing Spanish Broadcasting System Inc. (SBSA ), with a first option to buy the rest, as well as inking a marketing agreement that allows CBS' ad team to sell time for the Spanish stations, too.
Freston isn't coasting, either, despite his front-runner status. He hopes to turn around Paramount Pictures Corp., which has been plagued most recently by such bombs as the The Stepford Wives and Alfie. He put his MTV research team in charge of the studio and politely eased longtime studio chief Sherry Lansing into retirement. Since then, he has chatted up big-time names to head the studio, including Universal (V ) film chief Stacy Snider. Most recently, he has been negotiating with talent manager Brad Grey, who produces The Sopranos for HBO but is a film neophyte. Freston figures Grey's connections would lure talent that has steered clear of Paramount's penny-pinching ways. Seeking a younger audience for Paramount, Freston also signed Universal Music Group hitmaking exec Jimmy Iovine and Eminem's manager Paul Rosenberg to make films for the studio. No Viacom exec would comment.
That's a lot of positive energy at a company that was distracted for years by reported clashes between Redstone and Karmazin. Now, Redstone gets to enjoy a double benefit: His two deputies race each other to fix problems, and Moonves, a sought-after manager these days, remains in the fold. Remember that just a few months ago, when things weren't looking so good for CEO Michael D. Eisner at Walt Disney Co. (DIS ) across town, Moonves' name landed on the list of potential Mouse House successors. Sensing that a winner might slip away, Redstone quickly promoted him.
But Redstone is nothing if not unpredictable, as he has proven in the past by turning out potential successor Frank Biondi and alienating Karmazin. Redstone even has a booby trap of sorts waiting for Freston and Moonves, each of whom signed contracts to receive $15 million a year in salary, bonus, and deferred compensation. But the contracts also give Redstone the opportunity to name the men co-CEOs by 2007, effectively keeping the chairman's job for himself or his 50-year-old daughter Shari, who runs the family-owned National Amusements Inc. theater chain. "So what changes then?" asks Biondi. "You still have two guys working hard to please the top guy, and the top guy is Sumner or his daughter. That's succession?" True to Redstone form.
Moonves himself appears to be clear-eyed about the role he has been chosen to play. His intimates say he has let it be known that even now he wouldn't shun overtures from the Disney board, which is expected to name Eisner's successor sometime later this year. The odd twist: The guy who gave America Survivor could vote himself off the Viacom island. And that could abruptly foil Redstone's shrewd two-for-one play.
By Ronald Grover