Back in the height of the August heat, Mel Karmazin and Sumner
Redstone - two of the most powerful media players in the US - met for
lunch. The agenda, initiated by Karmazin, the chief executive of CBS,
was to focus on TV. Karmazin wanted to get his hands on Redstone’s US TV
stations, part of the Viacom media combine of which Redstone was the
aggressive, septuagenarian chief.
It was a meeting not without pathos. Viacom and CBS were sister
companies before TV ownership regulations forced a split back in the
1970s. A recent relaxation of the rules had set Karmazin pondering
Viacom’s TV stock.
But discussions soon took on a significance wider than a simple TV deal
and, by 4.30pm last Monday (Wall Street time), the two companies that
were blown apart three decades ago reunited to form the world’s newest,
and perhaps biggest, media player.
The new company, Viacom, has been hailed as a beautiful strategic
manoeuvre, bringing together some of the world’s most powerful media
assets: Paramount, CBS, MTV, Blockbuster - the names roll off the tongue
with the familiarity of the truly mega brand. The new Viacom boasts a
$21 billion revenue base, a $4 billion cash flow and is the world’s
largest seller of advertising spots and space.
But dazzling though the deal is, the two architects find themselves in a
rather awkward marriage contract. They have become the odd couple, and
speculation is already focused on two men used to doing it their own way
who are now shackled together.
Redstone will be chief executive of the new company. He will retain
voting control but will cede much operational control to Karmazin - not
an easy task for a man who axed his own number two several years ago and
has made no secret of his thirst for control.
The progeny of a linoleum door-to-door salesman, Redstone grew up in a
Boston tenement in the Depression. While his father went on to build a
successful chain of night clubs, Sumner went to Harvard, took two
degrees and found himself employed to crack Japanese codes during the
Second World War.
By the time Redstone entered the family firm it had expanded into
drive-in movie theatres. Investments in Hollywood studios followed and
in 1987 the company, National Amusements, bought Viacom. Later came the
acquisitions of Paramount and Blockbuster and, by the time of the CBS
deal, Redstone had clocked up a personal fortune of $9 billion, and
Forbes has him down as the 12th richest man in the US.
Now 76, Redstone refuses to bow to age and was recently quoted as saying
he has ’no intention of retiring for another 25 years’. One particular
story is often used to illustrate his steely determination. In 1979
Redstone was caught in a hotel fire and had to climb out of a third
storey window, where he clung to the sill for ten minutes while flames
engulfed his body. Sixty skin grafts later and with a gnarled right hand
as an eternal reminder, Redstone has said that the experience was a
sobering lesson: ’Staying the course. Hanging in there. Refusing to
drop. Having the confidence I could make it.’
Karmazin has the same determination and the same drive for success. As
the heir-apparent to Redstone, he will have the balance of day-to-day
power at Viacom, which should suit since he, too, has found
power-sharing a little difficult; in 1997 the then-chairman of CBS,
Michael Jordan, quietly stepped-down to make way for Karmazin to take
full control.
But where Redstone grew up schmoozing with celebrities, loves premieres
and hob-nobbing with the glitterati, Karmazin is publicity-shy: his idea
of a good night is picking up a take-away pizza.
Yet Karmazin, too, is a self-made man. The 56 year-old grew up in a
housing project on Long Island, the son of Eastern European immigrants:
a taxi-driving father and a factory-working mother. To pay his way
through high school, he took a typing job at the Zlowe advertising
agency in New York and moved into the media department once he
graduated.
He then joined the radio station, WCBS-AM, as a sales executive,
eventually moving into radio management at Infinity, which merged with
CBS in 1996.
Despite being a shrewd deal-maker, Karmazin is also credited for his
bold programming decisions, championing the shock-jock, Howard Stern and
laying out $4 billion to win the National Football League rights in the
US. But fundamentally he is a salesman who admits to a lack of interest
in TV and radio. For him they are simply routes to the bottom line. His
personal fortune has yet to rival Redstone’s, but Karmazin’s business
acumen did bring home the bacon last year - all $200 million of it.
Although Redstone and Karmazin may make for an unlikely pairing, their
respective track-records are formidable deterrents for would-be critics.
More importantly, in the global game of media consolidation, the
Viacom/CBS deal has pleased analysts on both sides of the Atlantic.
Yet there are no doubts that rival players are even now working on deals
which will threaten Viacom’s claims to be the world’s largest supplier
of advertising spots and space. Redstone and Karmazin may have built a
new media colossus but they will have to work hard - and together - if
they are to stay ahead of the game for long.
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