The Hot Blog: F-in Wow!

« 4-Day Weekend Estimates by Klady | Main | How The Paper Of Record Has Fallen »

September 05, 2006

F-in Wow!

Following up on the Paramount/Viacom shalke-up...

Here is my projection of the future. Philippe Dauman is Redstone’s replacement as chief, long-term. Les Moonves has 6 months to get the CBS stock up by more than a point or two or watch to see the reuniting of the two stocks into one larger Viacom. The split has failed. Long live the split.

The only danger here is that Moonves will exit if they diminish his power base in any significant way and either NBC or a Time-Warner, ready to build a fifth major network, will jump all over him like white on rice. Moonves is the top network builder of the moment. (We’ll see what happens when CSI, like NBC’s Thursday comedy line-up, dies… but that is a few years away.)

Still, it’s not about the network’s success for Redstone. It’s stock price, stock price, stock price. And the Wall Street Journal’s drum beating over the internet strategy is sweet and all, but the MySpace failure for Viacom is a failure of the short term and again, of stock price. MySpace is not the future of any of these companies, including Fox. But they are learning more and more about what the future and the web is every week by operating MySpace and their other acquisitions. And MySpace media coverage makes News Corp look very forward-thinking on the street. The issue isn’t really MySpace, but what acquisition will make Viacom stock rise, old school or new.

Inside Paramount, Freston was seen as more and more hands off, allowing Brad Grey and the DreamWorks team to do as they saw fit. This lack of aggressive leadership ultimately led to his corporate death. (Expect Harvey Weinstein to be the first name on his call list, trying to acquire him to give the Ovation acquisition more legitimacy and a leader for the future, this morning.) A recent awareness that spending had gone up and off the charts at Paramount has led to an austerity program at the same time some big dollars are still going out the door more quietly. Tom Cruise became Sumner’s symbol of that austerity. But even that move is still a question mark, long term.

I would be shocked to not see a Disneyesque staff purge in the weeks to come using the new regime as cover. It won’t be as big, since the studio fat is not as thick and the future of the organization looks to be wider than that of the Disney movie studio. But, a couple of hundred pink slips would not be a huge shock (except to the lives of those getting slipped). It fits the Redstone positioning of the company being tight and aggressive. And unfortunately, it is still needed. And… it would be surprising if most of the cuts aren’t long-time Par veterans.

There is also a time clock on the future of DreamWorks at Paramount. Remember, the major players have 3 year contracts with the studio. And the library doesn’t belong to Paramount at all. So the clock is running (28 months and ticking) before Spielberg gathers up his toys and, uh, stays in The Adobe.

The thing that never made sense about the split was that entertainment is a volatile business and the reason why a bigger company is needed for these studios is that it means that you can stabilize your stock price in spite of peaks and valleys. But Redstone wants a peak, not the stability the company has had for so long. And so, the split. But the industry is too volatile for the street to jump on every success. So they jump only on failure. So being small is kind of lose, lose.

In any case, I would expect this to be the beginning on more volatility – at least over the next six months – not anything close to the end.

=============================

EARLIER - I am still digesting this, so this comment is just a placeholder if you all want to discuss it, but the major news of the month is the exit of Tom Freston from Viacom this weekend, Sumner Redstone's intentional wait until today (the start of the Wall Street Week) to announce it, and his major dissing of Freston in the process.

Here is the WSJ story - And here's Reuters

It also points out once again that most Hollywood news only becomes news when those in power release the information to the media. Most major events are very closely held.

Of course, I know that many of you who comment here don't care at all about this story, but make no mistake, the movie business has changed a little today and the longer term significance of this could be very, very significant.

More thoughts to come.

Posted by poland at September 5, 2006 10:35 AM

Comments

Sumner Redstone bypassed Tom Freston and Brad Grey to "fire" Tom Cruise....

Now Tom Freston is out....

Is it a sign for a big "change" in Paramount?

Posted by: marychan at September 5, 2006 10:53 AM

Did Sumner go over Brad's head? Is that a big deal? Or is this just business as usual?

Posted by: martin at September 5, 2006 11:22 AM

So what's the major change in the movie business? Paramount's slate this last year has been Last Holiday, Failure to Launch, Mission: Impossible 3, Nacho Libre, World Trade Center, Barnyard, and the Dreamworks movies Over the Hedge and She's the Man. and Paramount Classics' An Inconvenient Truth, Ask the Dust, and Neil Young: Heart of Gold. There are a couple of good movies in there but by and large, pretty safe and mediocre. So are we going to see a further devaluation of the quality of their slate?

Posted by: jeffmcm at September 5, 2006 11:29 AM

Tom Freston was CEO of Viacom, and he would have outranked Brad Grey, so there was no head-over-going involved here.

Posted by: jeffmcm at September 5, 2006 11:30 AM

Mr. MTV is gone.

Question: was he fired or did he resign (or both)?

Posted by: palmtree at September 5, 2006 11:56 AM

There already was a major purge at Paramount last year. Are you expecting another?

Mooves leaving to build a fifth network? Isn't that what he's already doing with The CW?

Six months before the two companies remerge? After only one year of the split? Wouldn't that indecision affect the stock price even worse than keeping the status quo?

I don't buy it.

Posted by: Wrecktum at September 5, 2006 12:31 PM

Change is the excuse for change.

If the same players make the change, it was a mistake. If new guys are there, you can do almost anything. (see: Disney)

Stockwise... separate companies make no sense. And Moonves surely started squirming as soon as Dauman returned. He is the heir apparent and a much tougher adversary in that regard than Freston was. They have to take some next step to keep Moonves happy... or allow him to squirm.

Posted by: David Poland at September 5, 2006 12:39 PM

But Moonves is a proven TV exec with a lot of balls in the air right now. Maintaining CBS' primetime lead, helping build the CW brand, Katie Couric, digital content distribution, etc, etc. Can Redstone really afford to lose him in the next year?

Is Dauman really the future of a recombined Viacom? I don't think that's in the cards.

Posted by: Wrecktum at September 5, 2006 01:49 PM

Well, I agree about Moonves. But Dauman, whose in his 50s, is a business guy, not a showbiz guy. And isn't that what they really need on top?

Posted by: David Poland at September 5, 2006 02:04 PM

Anything keeping Moonves from a higher position of power is a good thing. This likely hedges on how well The CW hits it off.

martin: Did Sumner go over Brad's head? Is that a big deal?

Yes, even if he is far above Brad in the first place. Last I heard, Brad was planning a nice going away blahblahblah for Tom before the circus came to town.

Posted by: Tofu at September 5, 2006 02:56 PM

I actually enjoy your perspective on news like this Dave. I hope you continue to post behind-the-scenes topics, including your analysis and possible outcome of such events.

Just don't turn into Defamer, m'kay?

Posted by: wolfgang at September 5, 2006 05:41 PM

well is the 'recombined' Viacom going to stay that way? WIll there be a separate fiefdom for Dauman and a separate fiefdom for Moonves in an insidious future marriage deal of CBS and NBC parentage?

[Just kidding. but there are many trustbusting possibilities esp if the low TV ratings continue of *certain* major network owning companies...but maybe the fifth network option Dave mentions is likely]

Posted by: Lota at September 5, 2006 05:53 PM

Redstone has lost his "Master of the Universe" creed and desperately wants it back.The main problem is he built his empire on a house of cards that has begun to crumble. The stock split was a wall street ploy that has failed; only exposeing his problems more fully. I envision 2 possibilities.

1) Redstone has lost his marbles and any day now will utter the word "ROSEBUD" then drop dead.

2) Redstone still has his shit together and there really is a master plan. Paramount Studios will be the first major to completely get out of the movie "MAKING" business; but will remain a distribitor. The new business model will be: studio will tell producer " If you deliver 'X' picture by 'Y' date; we will buy it for '$Z'." (Hello Tom Cruise) Why? 1) Eliminates all risk in production and 2) eliminates envolvment with all unions and guilds. "You want points? Don't talk to us; talk to the producer." Agents are going to be crushed in this new world.

Posted by: oldman at September 5, 2006 09:16 PM

Everyone here's really smart --
including jmcm -- so glad he didn't say "I don't understand and DP's writing's less than clear, let me edit you." God, we had a beautiful weekend here, sorry all you east coasters.

Posted by: T.H.Ung at September 5, 2006 09:56 PM

I think it's time to bring Robert Evans back into the picture in a big way over at Viacom. That's the kick in the ass they all need.

Posted by: Aladdin Sane at September 5, 2006 09:59 PM

DP, are you saying that you think MySpace is only going to be a short-term success, or that it simply isn't as valuable as it's being made out to be?

Posted by: James Leer at September 5, 2006 11:38 PM

I think the Myspace failure is really the failure of MTV online.

Posted by: palmtree at September 6, 2006 09:49 AM

Myspace is falling through the cracks because it's not content driven. As many add-ons or gimmicks they have on the site, ultimately it's still just a collection of cheesy personal webpages. And as narcissistic as we are, we still want content with some authorial/editorial standards, whereas myspace is essentially a free-for-all.

Posted by: martin at September 6, 2006 11:30 AM

Good point. The fact that MTV Online is not a major presence or go-to site for the youth demo shows blatantly how traditional media still doesn't understand the Internet or its trends.

Posted by: Wrecktum at September 6, 2006 11:30 AM

The Hot Blog

September 05, 2006

F-in Wow!

Comments

Post a comment