NEW YORK — Peter Lund, CEO of Westinghouse Electric Group’s CBS Television and Cable Group, resigned abruptly Thursday after losing a power struggle over control of the web’s TV station group.
CBS sources said Lund, 56, quit after learning that Westinghouse chairman Michael Jordan had given control of the CBS TV station group to CBS Radio CEO Mel Karmazin, the biggest individual shareholder in Westinghouse. Karmazin, whose radio group is highly regarded for its efficient management, had been pressuring the TV station group to improve its performance.
Word of Lund’s resignation dramatically overshadowed CBS’ presentation of its fall schedule to advertisers, who will soon make their upfront ad buys. Westinghouse is understood to have been trying to keep the story quiet until today, and none of its execs, including Jordan, would comment. Lund, who did not attend the presentation, did not return calls to his office and Karmazin could not be reached.
Lund appears to have been a victim of efforts by Karmazin and Jordan to more directly control the TV side of CBS. The Westinghouse chairman does not plan to replace Lund, sources said, and will instead take over Lund’s responsibilities himself.
Those responsibilities will shortly include oversight of CBS’ expanded cable networks, as the company is shortly to complete the $1.5 billion acquisition of the Nashville Network and Country Music Television from Gaylord Entertainment Inc.
Karmazin is expected to instigate a bloodbath at the TV station group, replacing Jonathan Klein, president of the TV station group, and many of the general managers of CBS owned and operated stations. The station group’s No. 2 exec, Tony Vinciquerra, apparently anticipated the shakeup and quit the company Wednesday (Daily Variety, May 22), saying he felt “really uncomfortable in a huge company like this.”
“This is the tip of the iceberg,” said one source.
Whether CBS Entertainment president Leslie Moonves will be affected is unclear, although there was no indication Thursday that his position was in doubt. Advertisers applauded the fall program lineup, unveiled at Carnegie Hall.
The episode brings to the surface long-simmering tensions between Jordan and CBS execs, all of whom were in place before Westinghouse bought CBS in November 1995. CBS sources said Jordan did not appreciate how Lund, who was appointed to run CBS in early 1995 by its former chairman Laurence Tisch, had “led an amazing turnaround at the network.”
“Lund was not appreciated by Jordan,” said one source.
Indeed CBS’ performance has improved, although it was at rock bottom when Lund took over. In the just-completed May sweeps, CBS finished in second place, with its ratings up six percentage points. But it finished last in the 18-49 age group, the category most sought-after by advertisers.
And the network continues to bleed money, losing $60 million in the first quarter. The TV station group’s earnings rose 3% to $54 million on 6% lower revenues of $177 million, producing a margin of about 31%. Analysts say CBS’ margin in the major markets is about 40%, well below the 55-60% margins at ABC and NBC.
Karmazin is believed to think the TV station group’s management is too “complacent,” a view shared by some CBS affiliates.
Alan Bell, president of CBS affiliate owner Freedom Broadcasting, said, “All of us who are CBS affiliates are aware of how awfully CBS runs its owned TV stations. CBS has always looked down its nose at its TV stations. (It) has a fatal attraction for using its TV stations as a dumping ground for executives it is either trying to hide or is testing for future assignments,” Bell said.
Bell complained that, unlike other networks such as Walt Disney Co.’s ABC, CBS’ owned station group did not make enough money to offset the loss at the network.
“Karmazin is a big shareholder and he is not going to wait for the turnaround,” Bell added.
Still, Lund was a popular figure with the affiliates because he rose through CBS station ranks, as head of both WBBM Chicago and the CBS TV station group.
“The affiliates loved Lund. He is one of them, a regular guy,” said one CBS source. Jordan will have to face the CBS affiliates at next week’s summer affiliate meeting in Los Angeles.
Lund’s departure is likely to raise alarms throughout CBS. One CBS exec expressed concern about Jordan taking on too much responsibility, slowing down decision-making, while other CBS staffers were worried about the prospect of Karmazin exercising control over the TV side.
“On a near-term basis, this may cause some anxiety” with some of the relationships Lund had with the industry, said Dennis McAlpine, an analyst with Josephthal Lyon & Ross. He added that a number of investors would like to see a faster turnaround at the network.
Lund’s contract guarantees him a payout of at least $7.4 million. He was 18 months into a four-year contract, under which he was paid a base salary rising gradually from $1.7 million to $2.4 million annually, in addition to an annual incentive bonus of $1 million.
Lund could now receive a lump sum covering the salary and at least part of the bonuses for the remaining years of the contract if he resigns after a “diminution of his authority,” which clearly appears to be the case here.
Lund also had 500,000 stock options which can be immediately exercised. But Lund gets little profit from those options, which are exercisable at $16.75 a share compared with Westinghouse’s closing price Thursday of $17.
With reports from John Dempsey and Jenny Hontz.