A drawn-out management battle continues at entertainment giant Viacom as embattled CEO Philippe Dauman duels with the family of Sumner Redstone, the billionaire owner and former chairman of the company.
Redstone, whose father Michael founded National Amusements, the controlling company of Viacom, is currently 93 years old and is a legend in the entertainment industry, having acquired significant interests in Twentieth Century Fox, Orion Pictures, Columbia Pictures and Paramount Pictures (the latter of which he bought entirely in the 1990s) over the years.
In 1987, Redstone completed a hostile takeover of Viacom, which was originally spun off from broadcasting company CBS in 1971. Redstone transformed the firm over the intervening years into one of the country’s seven media giants, along with Fox, Sony, Disney, Bertelsmann, Time Warner and Comcast.
Today, Viacom owns Paramount Pictures, Dreamworks, BET, MTV, VH1, Nickelodeon, Showtime, The Movie Channel, Comedy Central, SpikeTV, CMT, TV Land and numerous other media properties.
Unfortunately, Redstone is not in good health. He’s undergone therapy for aspiration pneumonia, which has left him weak and unable to eat, drink, or speak clearly. He uses a feeding tube and a catheter to urinate.
He can no longer stand by himself and requires round-the-clock nursing care. People who have been in his presence say that he sometimes no longer appears to know where he is or what is happening around him.
In October of last year, Redstone signed a new will giving his daughter Shari (from whom he had been estranged at various points of his life) control over much of his empire and National Amusements.
Viacom CEO Dauman was named as Redstone’s agent for health care in the event that Redstone becomes completely incapacitated. This was despite the fact that Dauman’s full-time job is in New York, 3,000 miles away from Redstone’s home in Beverly Hills, California.
In February of this year, Redstone at long last resigned the chairmanship of Viacom. Shari Redstone had the right to succeed him, but did not want the role and yet, at the same time, had indicated she did not want Dauman to take it, either. The board of Viacom overruled her, however, and elected Dauman to take the reins by a vote of 10 to 1.
Bad news was announced about Viacom’s performance for 2015’s fourth quarter. The company’s stock price had fallen by 45 percent over the previous year, making it the worst performer in Wall Street’s S&P 500 Media Index.
In a conference call with investors, Dauman spoke out against an analyst, saying that “our outlook and the facts have been distorted and obscured by the naysayers, self-interested critics and publicity seekers.”
This tirade caused a sudden 21.5 percent drop in the stock’s price that day, eliminating $320 million in value from Redstone’s fortune. Company insiders say that if had Redstone remained in the role of chairman, Dauman would have been fired instantly.
But Redstone was not in good enough shape to comment on the matter. In the meantime, Dauman signed a new three-year employment contract with the company and was paid $54 million in salary for fiscal 2015 plus a $17 million bonus in stock.
In early August, Viacom announced a new earnings report which showed profits had fallen again by 27 percent for the latest quarter. Shari Redstone and representatives of the Redstone family have called for Dauman’s ouster from his role as chairman.
National Amusements released a statement, saying, “Viacom’s overall performance continues to highlight the need for changes to leadership at the company. In recent years, the company’s senior management has overseen a steep erosion of revenue growth, earnings, operating performance, financial capacity and shareholder returns.”
National Amusements claims the company has been drained of much its most creative talent. The company accused Dauman and others of orchestrating stock buybacks worth $15 billion between 2011 and 2015 at prices that exceed what Viacom now trades for.
Shari Redstone is fighting court battles in Massachusetts and in California to remove Dauman, who acknowledges that her interference is “obviously… somewhat of a distraction. But we are not deterred from pursuing strategic initiatives” — one of which is the planned sale of a 49 percent stake of the company’s Paramount Pictures to a Chinese investment firm.
It’s been reported that Redstone — during moments that he’s clearheaded — vehemently opposes the sale and desires Dauman’s dismissal. Plans for the sale have been slowed due to concerns about the boardroom turmoil and new earnings reports.
Viacom has announced that Paramount’s performance this quarter is disappointing, with a loss of $26 million compared to a profit of more than $48 million in the previous year. Much of this is due to a poor showing from one of the company’s biggest summer releases, “Teenage Mutant Ninja Turtles: Out of the Shadows.”
Dauman declared, “There is no question the studio has had a rough go at the box office recently.” However, he believes his company’s movie business is sound, stating “Paramount will see better days ahead through improved film slate performance, television production and, we hope, a groundbreaking strategic alliance.”
Revenue for Viacom overall has increased by 2 percent to $3.11 billion, and the latest edition of the Star Trek franchise is expected to bring in solid returns for the company.
Dauman and National Amusements have been in negotiations about Dauman’s future role at Viacom. These broke down in late July, but recent rulings by the judges in the ongoing legal cases have given Dauman reason to hope that he can cling to power. Ultimately, the decision about whether he will remain with the company appears likely to rest with Viacom’s board.
Regards,
Ethan Warrick
Editor
Wealth Authority
