The Double Whammy: Mel, Recession

Author:
Publish date:
Updated on

At Viacom Inc., content is king, but advertising pays the bills. Unlike media conglomerates that draw more of their revenue from subscription services, Viacom relies heavily on advertising.

About 45 percent of Viacom's $24 billion in revenue comes from advertising, according to president and chief operating officer Mel Karmazin. The giant company considers itself the biggest player in the TV-advertising arena because of its extensive broadcast and cable reach.

During separate interviews, Karmazin, MTV Networks chairman and CEO Tom Freston and Viacom Plus senior vice president Lisa McCarthy cited the same illustrative statistic: Viacom's various TV properties — which include MTVN and the CBS and UPN broadcast networks — give it an average 27 share in primetime. That's roughly 45 percent ahead of the No. 2 player, The Walt Disney Co.

With ad sales so crucial, MTVN's unit received a special eyeballing from Karmazin after the Viacom-CBS Corp. merger two years ago.

It came at a difficult time for MTVN's ad-sales crew, and particularly for MTV: Music Television and Nickelodeon. For years, the networks had been spoiled by double-digit ad-revenue growth and ever-increasing prices, because their young audiences fell within a desirable demographic.

"MTV was getting some of the highest CPMs [costs per thousand] in the cable business, and was a must-buy for youths and kids," said one former MTVN official. "They had whole areas locked up. They had been insulated."

'WORST TIMING EVER'

That situation dramatically changed just a few months after the merger closed, in May 2000, with the onset of the still-lingering domestic advertising downturn and with Karmazin — the trained-in-the-trenches ad-sales veteran — taking charge of operations within the merged Viacom-CBS holdings.

"It was probably the worst timing ever because in July 2000, the ad market just came to a grinding halt — particularly in cable, but even in broadcast," one source said. "July 1, it was like the faucet just turned off. And that's when Mel started asking tough questions, and everybody started freaking out."

Added a source: "Karmazin was pretty much hands-off on the programming and creative side. But there was greater scrutiny on the ad-sales side than there had ever been before."

More bad news hit MTVN's ad-sales crew in October 2000. Its top executive — MTVN president of U.S. ad sales John Popkowski, a company superstar — announced he was leaving, citing "weighty family issues" related to his son and mother. He still consults for the programmer.

Numerous sources now say Popkowski's decision to step down was professional as well as personal.

It was true that he wanted to spend more time with his son, who had been badly hurt in a rollerblading accident, according to several sources. But Popkowski also didn't relish having his unit come under Karmazin's careful watch, numerous sources said.

Popkowski reportedly differed with Karmazin on a variety of issues, including the proper strategy in a down market, compensation and the packaging of Viacom properties.

MTVN's ad-sales compensation structure incorporated a low base salary, but sales people could double their earnings if they beat their budget goals.

Popkowski, for example, was making $1.5 million to $2 million annually, according to several sources.

Karmazin, by contrast, was accustomed to radio, in which he would hire a lot of young, hungry sales reps for a low base salary and let the strongest survive, rather than employ a smaller pool of well-paid sales veterans such as Popkowski.

Karmazin didn't micromanage. But, according to one source, "He did expect results which — bang — that's what he's paid to ask for. And the ad-sales people were paid a lot to give him those answers and deliver all the goods."

The source said that led to a few tense moments.

"For the most part, it was more bark than bite" from Karmazin, the source said. "If you pushed back at him in a respectful way, he would back off. But one guy did push back one time and Mel said, 'Don't get cute with me.' It put a chill over the room.

"That was the beginning of the end of that executive, who later left."

The source also claimed that Karmazin "wasn't bashful" about calling not only then-MTVN president of worldwide sales Harvey Ganot, but also MTVN network presidents, with questions related to ad-sales issues.

"He would talk to them a lot more than [Viacom chairman] Sumner [Redstone] would ever talk to them, and he would ask them very pointed, blunt questions, so they felt the heat for the first time," the source said.

NO ORDERS FROM MEL

Karmazin insisted he doesn't tell any MTVN executives what to do — in ad sales or anywhere else.

"I get the numbers every day," he said. "I want to understand what's going on. Obviously, it is my responsibility to be very much on top of what's going on in general trends, and [in] making sure the company has a relationship with the major advertisers."

Back at MTVN, Freston's executive team — Nickelodeon, TV Land and TNN: The National Network president Herb Scannell and MTV Music Networks Group president Judy McGrath — said Karmazin hasn't looked over their shoulders or tried to run the show regarding advertising for their services.

"We speak a couple of times a month, but it's not like he's breathing down anybody's throats," Scannell said.

After Popkowski left, Ganot — who had focused on international efforts —was again enlisted to actively work on domestic ad sales.

But by fall 2001, MTVN president and chief operating officer Mark Rosenthal, considered a savvy insider, began to take a much more active role in ad sales than ever before.

Rosenthal said he now devotes about 70 percent of his time to MTVN ad sales, which decreased last year.

Since 1999, Ganot had reported to Rosenthal, so Rosenthal had technically been responsible for ad sales for some time.

But "that was completely window dressing," one source said. "He let Harvey and John run the show. But when the numbers started going south, and they started under-delivering their budgets, that's when it all began to change, and Harvey was moved to international."

Ganot moved over to become president of ad sales for MTV Networks International, leaving his post as president of MTV ad sales worldwide.

Following an MTV ad-sales restructuring, there are now two executive vice presidents and general managers of ad sales for MTVN's domestic networks, Sue Danaher and Doug Rohrer.

Both initially reported to Ganot, but they now report to Rosenthal.

Rosenthal, who cut his teeth in MTVN's affiliate sales operation, is now actively leading the ad-sales strategy.

"It sends a very strong signal to the internal organization that they're taking ad sales very seriously, and that there's an increased focus on the organization as a partnership-building and relationship-building organization, rather than strictly as a negotiating unit," said Jack Myers, publisher of the Jack Myers Report.

Rosenthal said aligning the ad-sales department by brand made sense. So Danaher handles Nick, TV Land and TNN, while Rohrer oversees ad sales for MTV, VH1 and CMT: Country Music Television.

"All of us were the beneficiaries of a very, very robust ad economy for the past 10 years," Rosenthal said. "That didn't happen last year, so it was a good time to reflect and say, 'Is MTV Networks' ad-sales organization structured as optimally as possible?' "

One change, according to Rosenthal, was to give Nick its own distinct kids-focused ad-sales force.

MTVN's ad-sales force also has added to its ranks.For example, Jim Perry recently was named Nick's senior vice president of ad sales.

MTV ON-LINES 1-5

The changes apparently haven't been completely smooth. At least one ad-agency official complained that since the reorganization, she has received calls from about five MTVN ad-sales people, each representing a different network.

"It means we have to spend more time to meet with more people," said Advanswers PHD senior vice president and executive director of broadcast Kathy Haesele. "It's not more efficient for us."

And within cable ad-sales circles, there has already been speculation that MTVN ad sales will eventually be put under the wing of Joe Abruzzese, CBS Television's president of network sales.

Earlier this year, Karmazin put UPN under the oversight of CBS Television President Leslie Moonves, and UPN's ad-sales department now reports to Abruzzese.

Related