Redstone Doubts Defections, Touts Logo

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Sumner Redstone said Mel Karmazin will serve as a consultant for a couple of months to aid in the transition of Viacom Inc.’s new executive leadership team and his resignation will not prompt major defections at the company.

Speaking during a conference call with the financial community following the announcement that Karmazin was leaving the company, Viacom’s chairman and CEO also talked up Logo -- MTV Networks’ recently announced channel targeting gays and lesbians, which will bow next February -- as having an enormous upside.

Before we [purchased] CBS [in 2000], we were not known as an advertising company,” he said. “We were known as the creative company. You saw recently the launch of the gay channel. It may cost us $30 million-$40 million to launch, but it is a channel that we believe could be worth billions in the near distant future.”

Redstone added, “What I want to assure you of is that the financial discipline you have seen in this company will not go away. You will not find us doing anything that Wall Street would disapprove of.”

Redstone said former president and chief operating officer Karmazin will stick around to aid MTVN chairman and CEO Tom Freston and CBS boss Les Moonves in their new corporate roles as co-presidents and co-COOs.

“Mel has agreed to act as a consultant, with Les and Tom, for a period of about 60 days,” Redstone said, noting that Karmazin “does not have a noncompete. I wish him well, by the way. I don’t see any particular place where he would go to compete with us. But if it does, we’ll be ready for it.”

During a second conference call later in the morning with reporters, Redstone told the press Karmazin didn’t come to him directly with his resignation.

“I can understand some reluctance to talk to me directly about such an important decision, but I don’t really know,” he added.

According to Redstone, he first heard second-hand, from another executive, that Karmazin was “frustrated” and wanted to get out of his contract and resign.

At a recent staff meeting, Redstone recalled that Karmazin said “that he felt responsible for the price of our stock, and I said, ‘Mel, you have no right to blame yourself. Your job has been the operation of this company, and you’ve done a great job at that. Don’t blame yourself: The stock price will take care of itself. Sooner or later, the market will recognize your and our contributions.’”

Redstone told reporters, “Nobody asked Mel to resign … It was his decision and his decision alone,” adding, “Frankly, I was sorry. I like Mel. I thought he’d done a good job.”

With Karmazin gone, Freston will now oversee not only MTVN, but Showtime Networks Inc., Black Entertainment Television, Paramount Parks, Simon & Schuster and the motion-picture operations of Paramount Pictures.

Moonves, in addition to overseeing Viacom’s broadcast-TV businesses, will be responsible for the operations of Paramount TV, Infinity Broadcasting Corp. and Viacom Outdoor.

During the press call, Freston told reporters he is “still mulling over … exactly what I’m going to do sort of in the wake of this new move -- what I’m going to do with MTV Networks. But I expect to come to a decision in the next few days.”

Freston added that he plans to meet with the heads of the new divisions he’ll be responsible for in the next few weeks. For example, both Freston and Redstone said they had talked with Showtime Networks CEO Matt Blank, who will now report to Freston.

“I had a great talk with Matt both last night and today,” Freston said. “We’re looking forward to working together.”

As for how he will co-rule Viacom along with Moonves, Freston said, “I have great admiration for Les. I think we’re going to work our way through a lot of this, but I do think that with great communication, we can make this work very, very well.”

Relative to any additional other changes, Redstone anticipates defections to be minimal. He added that he’s “on the phone talking to every executive. There’s nobody who wants to leave this company. There may be changes, but it’s nobody’s wish to leave Viacom … Les and Tom are in place, [and] they have tremendous loyal followings. I don’t expect there to be any other significant management changes.”

Redstone noted that Moonves, top Infinity shock jock Howard Stern and DJ Don Imus are all “close to Mel.” Karmazin has a “relationship with Stern,” but “one of the things we’ve done successfully is nurture talent.”

Addressing a prospective role for his daughter, Shari, at Viacom, Redstone said, “My daughter will not play any executive operational role at Viacom. I want to say it one more time … Someday in the future -- I hope a very distant future -- that may become important.”

It has been reported that tensions between Karmazin and Redstone became further strained because the latter’s progeny had moved to New York and indicated her intent to spend time working at Viacom come fall. Previously, she had been involved with National Amusements Inc., the Boston-based theater chain controlled by the Redstone family.

Speaking about the new roles for Freston and Moonves, Redstone noted, “Tom and Les have been good friends for years. They’re two of my favorite people. It is extremely likely that one of them will be my successor, but the board, keeping in mind its fiduciary responsibility, will have the power to look at other people during this interim period. I would bet that one of these guys would succeed me.”

As part of Tuesday’s announcement, Viacom’s board indicated that Redstone will relinquish his role as CEO within three years.

Freston told reporters he doesn’t think Karmazin’s exit, or Tuesday’s changes, will impact MTVN’s upfront.

“Our upfront is going fantastic already. I can’t imagine it’s going to get much better,” he said. “We put a good deal of it already to bed. We expect it’s going to end up fairly quickly.”

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