Months of legal wrangling and mudslinging have finally culminated in a settlement at Viacom Inc. It will mark the end of Chief Executive Officer Philippe Dauman’s tenure and cement the Redstone family’s ability to control the media giant’s destiny. Viacom owns cable networks such as MTV and Nickelodeon and the movie studio Paramount Pictures, and it has struggled with sagging ratings and poor box-office results. Billionaire Sumner Redstone, 93, was said to be unhappy with Dauman’s plan to sell a minority stake in Paramount to raise money for debt repayment and dividends. Now he and daughter Shari will face some difficult choices to get Viacom moving in the right direction.
1. What happens to Dauman’s plan for Paramount?
Under the terms of the settlement, Dauman remains with the company as non-executive chairman until Sept. 13. That gives him a chance to close the deal he’s been pursuing since February -- the sale of a 49 percent stake in Paramount. While Sumner Redstone has opposed the idea, the board has agreed to hear Dauman out. He’ll need its unanimous support to approve a transaction.
2. Who might buy the 49 percent stake in Paramount?
The Wall Street Journal reported that Dalian Wanda Group Co. was in talks to buy it, valuing Paramount at $8 billion to $10 billion. Bloomberg reported that Baidu Inc. had considered participating in a bid alongside DMG Entertainment & Media Co. It’s possible that the board’s acknowledgment that it will listen could draw more interest from prospective buyers.
3. Is Viacom going to merge with CBS?
Now that the battle against Dauman is over, the Redstones can concentrate on what to do with Viacom. One option is to recombine it with CBS Corp., from which it separated in 2006. The idea was that the fast-growing cable operation would soar when cut free from CBS, then known as the slow-and-steady broadcast business. It hasn’t worked out that way. Under CEO Les Moonves, CBS has become the most-watched network, with a collection of widely watched shows.
4. Who’s really in charge?
The central question in the legal fight between Dauman and the Redstones was whether Sumner was of sound mind when he decided to cut ties with his longtime business associate. The settlement of the dispute doesn’t resolve that question, but it does provide a clear path for Shari Redstone to steer the company from here on out. Dauman will be replaced as chairman by Thomas May, one of the nominees the Redstones backed for the board, according to a person familiar with the matter. Barring a surprise change of direction from her father, Shari Redstone holds the keys to the kingdom.
5. What does this mean for Viacom’s cable properties?
Something must be done quickly. MTV is still struggling to get younger viewers to look away from their phones and tune back into cable, and Comedy Central is pining for the glory days of Jon Stewart and Stephen Colbert. Media veteran Sean Atkins was hired last year to right the ship at MTV and has tried to bring the network back to its music roots. Dauman had been working to rebuild Paramount’s own TV production operation to help supply more content in-house. His replacement as CEO, Tom Dooley, will now be tasked with showing he has a plan to boost ratings.
The Reference Shelf
- A Bloomberg Gadfly column on the prospects for a Viacom-CBS deal.
- A Bloomberg story on the decline of Paramount Pictures.
- A Bloomberg View column by Justin Fox on Sumner Redstone’s friend problem.