Redstone: "Legacies Are For Dead People"
Sumner Redstone, chairman and controlling shareholder of both Viacom (VIA ) and CBS (CBS ), remains one of Big Media's most outspoken and vigorous chieftains. Often portrayed as a demanding taskmaster who has run through Viacom executives—Frank Biondi, Mel Karmazin, Tom Freston—with the ferocity of a kid gobbling up a bag of popcorn, Redstone recently made news by suggesting that he is eager to oust his 53-year-old daughter, Shari, as vice-chairman of Viacom and CBS. Shari, who also runs National Amusements, the private cinema chain that holds the family's stakes in Viacom and CBS, has clashed with her father over corporate governance issues and her future role.
On July 23, Redstone spoke on a wide range of topics, including his differences with Shari, the possibility of taking his companies private, Katie Couric's flagging ratings, and why, at 84, he doesn't need a succession plan. The following are edited excerpts:
In retrospect, was breaking up Viacom and CBS the right thing to do?
Absolutely. It was the right thing for me, it was the right thing for Viacom and CBS, and it's the right thing for our investors.
How do you gauge that? Some people might say absolutely not, since when you look at the stock, it hasn't really done anything, plus you took on debt.
Well, no, hold on. I think unwittingly you are using the wrong parameters. You have to remember that under the prior management, the stock was off 20%. What investors should be concerned about is what has happened since we installed new managers, Philippe Dauman and Tom Dooley. In a short time, [Viacom's] stock is up 23%. I don't think you could possibly ask for any more. Moreover, today CBS reached an all-time high, and both companies have made new highs in the last few weeks. So in terms of the stock, the split is justified. In terms of the operations, the split is justified.
Where does the growth come from in the next three years?
It comes from both companies. I know people assumed that CBS was a nongrowth company. They were wrong. CBS is growing extremely well. As far as Viacom goes, it will grow significantly in the U.S. and all over the world. The fastest growth part of Viacom...is overseas. That's the fastest-growing part of MTV Networks. And that will continue to grow. As you know, I travel the world to assure that.
You say there's this tremendous growth coming and that the companies are well-positioned. But you've been buying back a lot of stock. You're not making acquisitions in digital. A lot of people say that's where the future is. Is that the right use of company cash? How about using that money to buy digital properties?
Are you listening?
Let's hope so. I've bought a large number of regional properties. You've read about some very recently. Both Viacom and CBS have bought a large number of digital properties. But as we said, we prefer to buy cutting-edge young companies that haven't matured. The companies that have matured are very high in price, maybe even exorbitant. Our goal is to buy companies that are really on the edge of big things and to grow them ourselves.
Well, you mentioned MTV, Sumner. The ratings are down from the glory days. Why is that, and how do you fix it?
Let me answer it my way. We are spending a great deal of money on programming...[that is] very exciting and extremely consumer-friendly. So one might assume that the ratings will go up as the programming improves. But you'll hear more about that very soon.
I spoke to a money manager about Viacom and CBS, and he said: "I feel like these two companies are going in different directions. Look at the YouTube (GOOG )lawsuit. Viacom is suing YouTube for a billion dollars, CBS is doing deals with it." Your reaction?
A smart investor would see that there's nothing inconsistent. We filed a big lawsuit against Google's (GOOG ) YouTube. Why? Because they were using our product without paying for it. I mean, you cannot have a really successful entertainment industry without protecting proprietary rights. What we did was good for all media companies. Now, in the case of CBS, they got paid. And by the way, they were not paid by YouTube, they were paid by an advertiser on YouTube. If they get paid, we're happy.
Would you consider taking any of these companies private?
The fact of the matter is that we all like these companies the way they are. We think their growth potential without taking them private is enormous. As I said, the stocks of both companies made new highs in recent weeks.... Now, having said that, would we consider [going private] at some time in the future? We consider all alternatives. And if we did decide to take one of these companies private...there would be more money offered than we could possibly handle.
Let me switch gears, Sumner. Will your daughter Shari step aside as vice-chairman of Viacom and CBS?
Nobody has asked my daughter to step aside. And let's get to the real issue, O.K.? I've always been concerned, as I should be, with the interests of the stockholders of Viacom and CBS. That means that I should follow the principles of good governance. And those principles require that the boards of these companies, these two public companies, Viacom and CBS, that they are the ones to pick my successor. And no individual, family or otherwise, should be imposed on these companies. They couldn't work effectively if that were the case. And that's the real issue, if there is an issue, because I'm not certain Shari doesn't agree with me.
You talk about corporate governance, but you're controlling three companies (Viacom, CBS, and Midway Games). Do you worry that there's increasing skepticism and criticism about that kind of structure? It can't be a good thing for a general shareholder that one person or one family has that kind of power, can it?
The problem is you are asking these questions and you're answering them. Control is bad if you use it for your own interests. And everyone in our industry knows I have never done that. I worked for nothing for 13 years when I could have gotten plenty of money. So I certainly don't put my interests ahead of the stockholders. I have never used control for my personal interests. I've used it only to enhance the value for our stockholders. And that kind of control is fine.
So if Shari doesn't step aside as vice-chairman, will her role in the Redstone empire change in the near future?
I can't answer that. The question is too hypothetical. I can only tell you that nobody has asked her to get off the boards, and she herself issued a statement saying that nobody has asked her to get off the boards, and that statement is true. But will it happen in the future? Of course I don't know. The one thing I do know is that the principle I announced to you earlier is right. We cannot impose on these boards anyone, family or otherwise. The companies couldn't work properly that way. And as far as I'm concerned, as of now the issue is strictly one that will take place after my death. And you see me, you talk to me, that's going to be a hell of a long time from now.
Is one option to transfer to your daughter ownership of the theater-chain business, which she's managing already?
It's been written up, and I have not denied it, that one of the scenarios would be—and I'm not going to get into the financial conditions, which would be many—to transfer the circuit to Shari and in return get her stock.
You would want her to sell her 20% interest in Redstone family company National Amusements [which owns a controlling stake in CBS and Viacom and operates a chain of movie theaters]?
There is very little difference between owning 80% and 100% of National. You have exactly the same amount of control. So I'm ambivalent. However, Shari and I do have a difference in our view—which doesn't mean we don't respect each other. We do. Shari thinks there's more growth in the motion picture theater business than I do. I hope she's right, because we have a great chain of theaters. So one possibility would be, subject to various financial conditions, to trade the theater circuit—which Shari loves, which she has spent her life working at, and which she has done a great job at—to trade that for her stock. And let me tell you something, there's been so much inflammatory material in the press that is really not well-founded. Shari's welfare is important to me. Her well-being is important to me. If Shari should want to sell her interest, then I'll really consider it. But of course, the price will have to be reasonable.
It has been suggested that she's valuing the company at $8 billion. [A spokeswoman for Shari says that number was suggested by her brother, Brent, in a lawsuit filed in Maryland. She would not confirm whether the number is accurate.]
I would think that Shari would be realistic and understand that that kind of a price [$1.6 billion for Shari's 20% stake] would be out of reach for me, out of reach in terms of investor sentiment. But as I say again, I love my daughter. If she wants to sell and the price is acceptable to me and to National, then I'll take a good, hard look at it.
Sumner, on a personal level, let's face it, success comes with a price. You've been through a divorce, a falling-out with your son, Brent, a public disagreement with your daughter. Has it all been worth it?
I know it's been said differently, but I'm telling you, I gave my children their start. And my father, a wise man, told me I would live to regret it. Now, in the case of Brent, I sure had reason to live to regret it. I hope that will not be the case with Shari. And I don't think it will be the case with Shari. We see more things the same way than differently, and I am telling you, I love her. I'm concerned about her well-being, and I know that she loves me. The press would have you believe that all of our correspondence and all of our conversations are adversarial. That is not true.
So let's clear the air about Shari. What happened?
The answer is the press—and I generally find the press accurate—created an inflammatory situation out of nothing. Shari loves me. I love Shari. What's in her interest is in my interest. What more can I say? I'm not about to throw Shari out of anything. She's my daughter. I empowered her. Think about it. I made her second-in-command at National Amusements. I made her, with the help of the board, vice-chairman at CBS and Viacom. There's nothing in that action that indicates some negative, hostile feeling toward my daughter.
O.K. What's the succession plan?
That's a good question. As John Malone said to me when I met with him recently at the Allen & Co. conference: "Some of us are going to die, Sumner, but you're never going to die, so you don't have to have a succession plan." That's my answer. You know I'm not going to discuss my will, my trusts, or whatever. But believe me, what I do, as I've done throughout my life, will be appropriate.
Do you expect your wife, Paula, to take a more active role in your companies?
No. My wife's role should be to be my wife. She takes an active role in this sense: She travels the world with me. But as far as taking some formal interest in the company, no, that's not in the offing.
Are you concerned that the experiences that have been out there in the press—from Frank Biondi to Mel Karmazin to Tom Freston, and now Shari—may make it difficult for you to recruit top talent?
Let me answer this way: I have the best talent in the world. Why don't you call Les [Moonves]? He'll tell you—Les will tell you he loves working with me. Call Philippe and Tom [Dooley], two very great, terrific executives. They will tell you they love working for me. With respect to each of the people you mentioned, there was a good reason to say goodbye. Frank Biondi was a great guy, I love him, but he was not a great CEO. You know the story with Karmazin. I like him, but he had a very short-term point of view. As far as Tom Freston goes, I like Tom. I admire him today. He made a great contribution to our company. But he himself said he was out of touch with Wall Street. The real answer, though, has nothing to do with Tom Freston. The board and I decided that it was in the interest of Viacom to have Philippe and Tom lead Viacom. That's the way I make decisions. They're not capricious.
CBS remains dead last in the nightly news race. Did Moonves make a mistake in naming Katie Couric as anchor?
Les doesn't make mistakes. I have said time and time again, I would support Les in everything he does because he does everything right. I know there's been a lot of controversy about that lady, but I'm telling you this: CBS is better off to have her than not to have her. And CBS is better off because a CBS competitor is feeling the loss of Katie Couric.
Besides being an astute global business-man who has seen value where others didn't, you've been very philanthropic. What will your legacy be?
I'm not going to have a legacy. Legacies are for dead people. I already told you, I have no intention of leaving! But I would like to be remembered—it's hard for me to contemplate that—primarily as a loving father and grandfather. I would also like to be remembered...for what I have done in building these two great companies, Viacom and CBS. As far as philanthropy goes...every dollar I have given away I've had to work for, which makes it all the sweeter to be able to do something for other people.
By Maria Bartiromo