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Blockbuster bust barely a blip

The news that the merger between Viacom and Blockbuster is indeed all but dead may be the talk of Wall Street, but the mood at Viacom and Paramount is anything but defeatist.

Though Viacom’s original $ 8.4 billion deal with Blockbuster is not going to happen as planned, that does not mean Viacom’s acquisition of Paramount is in any way jeopardized. Nor does it mean that Viacom won’t emerge with a new relationship with Blockbuster entailing significant joint ventures. Nor does it mean that Viacom will be holding a distress sale of assets. Indeed, the management of Viacom is spending its time building bridges to Paramount and figuring new ways to mobilize resources and exploit their copyrights.

Since Viacom is still officially in its SEC registration mode, Sumner Redstone and Frank Biondi, its very articulate principals, are b arred from issuing public statements and clarifications. This complicates attempts at accurate reporting. Nonetheless, from talks with people who should know, here’s a quick glimpse of what seems to be taking place.

Redstone’s friends insist he is still positively ecstatic over the Paramount deal, even though he admittedly overpaid for the company. “It would have taken me three lifetimes to assemble the amazing assets that Paramount represents,” he told a friend recently — assets he has no intention of dismembering. A possible sale of Simon & Schuster is out of the question, sources say.

While the theme parks were once thought to be grist for a quick sale, they are spewing too great a cash flow to unload.

That doesn’t mean that Viacom isn’t looking to make some quick deals. Madison Square Garden, with its arcane labor contracts, is on the market. There are rumors that some music assets also may be.

Given Viacom’s vast size and resources, however, and the collaborative nature of its leadership — a sharp contrast to that of Martin Davis and Stanley Jaffe — intriguing joint ventures are expected to take root where there were previously fractious encounters.

While deal problems could cloud the overall Viacom-Blockbuster acquisition, dialogues are under way to utilize the vast network of Blockbuster stores to merchandise the Viacom brand names, such as MTV and Nickelodeon. This could provide instant access to a business dominated by Disney and Warners.

There have also been reported discussions about putting the Blockbuster name on the Showtime pay TV network, propelling the video company into the movies-on-demand business.

Meanwhile, while TCI and Viacom still have litigation outstanding, joint ventures are being discussed, aimed at taking on Time Warner’s HBO franchise. Links between Showtime and TCI’s neophyte channels like Encore and Starz could certainly hold promise.

Redstone, who started as an exhibitor, is pushing hardest on the Paramount film front. His initial appointee, Jonathan Dolgen, not only is taking a hard look at costs, but also is plunging the studio into the sort of off-balance-sheet financing that previous Paramount regimes abjured.Paramount sees its new deal with Michael Douglas and Steve Reuther as a Castle Rock-type arrangement.

To help woo the team away from Disney, Dolgen helped arrange offshore financing, as he plans to do for other production entities as well.

None of this means that Redstone will endorse a Disney-like sharp acceleration of production — on the contrary, Redstone has been critical of that studio’s parade of “one-weekend wonders.” Still, Redstone and Biondi are both said to be persuaded that the studio has not managed to bring forth sufficient product to optimize its distribution and marketing capability.

One thing is certain: Both Redstone and Biondi are very cool, sophisticated corporate players who have a firm understanding of where to take their company. No one returning from the Viacom building reports an atmosphere of crisis management, but rather one of two skilled chess players, deliberately weighing their next high-stakes moves.

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