During a retreat last January in Miami's South Beach, members of the ad sales staff of MTV Networks expressed excitement about a new era for MTVN's parent, Viacom, freshly split from CBS. As they munched on chicken wings and sipped gin and tonics poolside, longtime staffers joked that the new name for Viacom (VIA, VIA.B) should be "TomCo," a reference to the popular Tom Freston, a founder of MTV who 25 years later was picked by Viacom's Chairman and controlling shareholder Sumner Redstone to be chief executive officer of the cleaved Viacom.
As much as the notion of "TomCo" may have been good old-fashioned pandering to the new boss, it was also a testament to the imprint the 60-year-old Freston had left on both the creative and business sides of the company.
Less than nine months later, Freston is out, pushed aside by Redstone, who made it clear that the company he controls was never going to be TomCo. The Sept. 5 announcement that Freston had resigned under pressure left many shocked that the new CEO had not been given more time to prove himself. Many rank-and-file workers at Viacom's Times Square headquarters were stunned upon returning from the long holiday weekend on Tuesday to discover Freston had quit, leaving some to break down in tears in the hallways, say insiders.
But Viacom's stock is down 19% since the split with CBS (CBS, CBS-A), and the tanking share price has tried Redstone's patience, especially since Viacom was supposed to be the half of the company on the faster growth track. While Redstone has tired of other execs in the past and shown them the door—including Frank Biondi and Mel Karmazin—no one has been as much a part of the fabric of the company as Freston.
Not only did he help create its jewel, MTV, and a collection of red-hot cable channels, but he also has been a collegial, regular guy with a tad of the old hippie in him. He made those around him feel at ease and part of a creative enterprise; unafraid, at least in those early years at MTV, of pushing the envelope of the youth culture. MTVN became a club and Freston was its leader, longtime MTV staffers joke, saying many executives postponed their respective adulthoods by staying on for years.
Once elevated to the top job, Freston clearly showed his shortcomings and that his learning curve would be much steeper than anticipated. Redstone says he and his board looked at the fast-changing media landscape and came to the conclusion they didn't have the time for Freston to become a more forceful, eat-or-be-eaten kind of executive. Yet removing a leader with such deep ties to the team of executives and the on-air talent (The Daily Show's Jon Stewart is a friend) could create a cultural crisis for Redstone and his new CEO, the octogenarian's longtime associate Philippe Dauman. "This is enormously disruptive," says media consultant Peter Kreisky. "Freston had such a personal imprint on the organization."
SUITS VS. CREATIVES.
As much as Wall Street was dissatisfied with Freston's tenure as CEO, it is now fretting about a possible talent drain. Jason Bazinet, an analyst with Citigroup (C), cited management uncertainty as a new risk for Viacom, "particularly at cable (networks) where employees identify strongly with Mr. Freston."
It doesn't help that Viacom is a company whose employees are still largely identified as either "creatives" or "suits." After several years under the no-nonsense Karmazin, who as president once referred to the creative folks at Viacom as the "arts and crafts" people, it was refreshing to those inside the company that Freston, long thought of as an ally of creative workers, would be helping to chart the company's future.
Some insiders are concerned that Dauman, a lawyer and a former Viacom vice-chairman who operates his own private equity firm, may not have the patience and understanding necessary for the creative process. He will be joined by another former vice-chairman of the company and his partner in the private equity firm, Thomas Dooley, who will serve as senior executive vice-president. Both men have had long, mostly amicable relationships with a lot of the executives at the company—both creatives and suits—say company insiders. But it remains to be seen whether in their new roles and under heavy pressure from Redstone, those relationships will change.
EXECS TO STAY.
In an interview, Redstone downplayed the impact of Freston's departure on others at the company. Redstone says he quickly placed phone calls to several of Freston's top lieutenants, including Paramount Studio chief Brad Grey and MTV Networks CEO Judy McGrath, and both told him they intended to stay on the job.
Grey, a former talent agent, was recruited to Viacom by Freston, and McGrath perhaps shares the closest relationship with Freston of any executive at the company, as they helped build MTVN together into a media powerhouse. Even if either of those executives is thinking of leaving now, Redstone says, "they have contracts with us. That's not the first reason either would give. They both said that they wanted to continue to build on what they had started."
As his loyalists at Viacom begin to come to terms with the news, Freston himself "is still a little shell-shocked,"says a senior Viacom exec with close ties to Freston. "He'll do fine. For now, he's just worried about how everyone else is taking it."