Viacom's split may pump up investors, but toppers might tussle for talent and elbow room

The twins arrived ahead of schedule. They seemed robust. They were even toilet-trained.

And early next year, it will be possible to buy a share of stock either in CBS Corp., run by Leslie Moonves, or Viacom Inc., run by Tom Freston.

For all the hullabaloo about the Viacom split, it hasn’t actually happened yet. There’s a flurry of SEC filings still to come, and an investors’ road show.

But for all intents and purposes the two companies already have come into being as separate and distinct entities. And as such, both are being avidly watched by investors and by entertainment insiders, with the following questions in mind:

  • Will these smaller entities prove to be tighter and more wieldy, and therefore capable of adjusting more quickly to changes in the pop culture?

    Sumner Redstone thinks so. “Large is no longer in charge,” he said on Aug. 4 during a conference call with investors.

  • If this is so, will other mega-companies like Time Warner and Disney be tempted to emulate Redstone’s pathfinding move?

  • Will the two entities not only sacrifice synergies but also end up competing with each other in key areas?

  • Will both stocks prove to be winners for investors, and if so, serve as valuable currency for acquisitions?

The shrewd and venerable Redstone will continue as chairman of both companies, but will cede his CEO title to Freston and Moonves when the company splits.

The sharply contrasting personalities of the two leaders inevitably will lead them in quite different directions.

Moonves is the consummate hands-on network boss, quick-triggered, occasionally irascible and a true original.

Freston’s style is more laid-back and inscrutable — his lined face wears the expression of the hard-core poker player. He is more of a delegator, more of an internationalist, but also fiercely determined to carve out his own course: Witness the entirely new management at his studio.

Paradoxically, Freston loves TV and associates expect him to expand his already significant activity in that arena; Moonves loves movies and no one would be surprised if, within a year or two, he starts making movies.

After a year as co-president, Freston has shown he’s unafraid of going against tradition — jolting what had been a slumping Paramount out of its longtime status as Hollywood’s most hidebound studio.

During nearly two decades heading MTV Networks, Freston combined a collegial style with a keen ability to stay one step ahead of the zeitgeist, leading to 15% annual growth rates via a diverse portfolio of networks, including MTV, Nick and Comedy Central.

Freston was expected to move slowly in adapting to the movie business. But after a few months of hectic changes, the studio is barely recognizable — with new execs, new deals and a new style.

Freston was appalled by the condition of the Paramount lot. The place was in need of repair; phones and computer systems had to be upgraded.

Indeed, one of the first challenges of the Viacom split is to design a joint venture for owning the lot, since both companies will have operations on the Melrose Avenue property.

Already, Viacom and CBS are grappling with the need to set up separate departments for such areas as HR, PR and IT.

And they’ll have their hands full since the divvying up of assets between the two companies is not always logical: MTV is with Paramount, but Showtime is with CBS, as are books and outdoor.

Freston was also bent on reversing the risk-averse creative decisions of the last Paramount regime.

Under new studio chairman Brad Grey, there’s been a succession of key roles for people with big industry profiles, but little experience in their new fields of responsibility. TV exec Gail Berman replace production prexy Donald De Line; Revolution Studios dealmaker Rob Moore supplanted both Rob Friedman and Bruce Tobey in administration, marketing and distribution.

Grey was quick to go after the Sundance acquisition “Hustle & Flow” (which he saw previously in L.A.), but Freston was in Park City to sign off on the transaction. The groundwork for doing so was laid six months earlier when Freston pledged that Paramount Classics would become bolder.

The key element of Freston’s style is empowering executives with strong track records to take ownership of their successes — and failures.

“His approach is actually fairly simple,” one associate asserts. “Pick the right managers and give them a lot of autonomy, which allows him to have a clear view from the top.”

Freston remains rooted in the culture of MTV. His office isn’t at the Paramount lot in Hollywood, but at MTV Networks’ sleek Santa Monica headquarters, a place teeming with so many interns and production assistants under the age of 30, it’s often compared to “Logan’s Run.”

It’s the perfect environment for Freston, who continues to rely heavily on research into the cultural trends of kids and young adults.

Freston, who spent eight years after college living in India and Afghanistan, remains an inveterate traveler. He spends long hours checking on foreign operations; he’s also is pushing hard for expansion on the international side of operations and increased activity for consumer products and digital content.

Already four-fifths of MTV Networks channels operate outside the United States.

Freston and Grey are widely expected to create a foreign distribution operation for Par, assuming the studio decides not to renew its UIP partnership with Universal in October. A DreamWorks-Universal merger could accelerate those plans.

During the Aug. 4 call, Freston noted Paramount would retain international rights as a rule and would do more deals for offshore co-productions.

It’s a startling contrast with the Paramount regime of Sherry Lansing and Jonathan Dolgen, with its strict focus on domestic operations.

It may take years for Freston and Grey to overhaul Paramount after several sluggish years. But the clock is ticking.

Already, a pair of remakes — “The Longest Yard” and “War of the Worlds,” both holdovers from the Lansing-Dolgen years — probably will boost 2005 box office to its best level in several years.

But Paramount’s unlikely to stay on the sequel/remake route as the studio skews toward younger moviegoers. Freston and Grey have started ramping up DVD releases from one of the most underexploited libraries in Hollywood.

For her part, Berman has totally reorganized the executive teams to speed up development; many of the Lansing-era projects have been ditched. And the rapidity of such moves has stunned some who were expecting a laid-back, MTV-type atmosphere.

In Moonves, CBS Corp. has a hands-on leader with strong — and recent — roots in the creative community, whose rock star-like profile sets him apart from the usual suit-and-tie crowd.

The gravel-voiced Moonves began his showbiz career as an actor, studying under Sanford Meisner. He produced theater in Gotham and L.A., and made TV movies for 20th Century Fox.

When Moonves ran Warner Bros. Television, he had an eye for casting, personally picking many of the “Friends.”

Moonves’ micromanagement of certain production elements might make him seem like something of a control freak.

But those who know Moonves well say he simply sees no reason to fully divorce himself from what he loves most: creating and marketing TV content.

“He has a great eye for casting, for marketing, for script concepts. Why not take advantage of that?” says Warner Bros. TV Group exec VP Bruce Rosenblum, who’s known Moonves for 25 years. “Some may perceive that as more hands-on than a CEO should be, but he’s good at it.”

While Moonves remains the one and only public face of CBS, he also has a track record for finding and nurturing strong execs to run his divisions, like CBS Entertainment prexy Nina Tassler.

And like Freston, he encourages staffers to be bold in their thinking.

Moonves allows his execs to take chances without fear of being hung out to dry if the gamble doesn’t pay off. When Tassler ran drama development, for example, Moonves regularly gave her free rein to produce at least one pilot a year she believed in — even if Moonves wasn’t willing to sign off.

Even as he prepares to become CEO of a new publicly traded company, Moonves shows no sign of stepping back from his hands-on management of the creative process at the Eye and its many siblings.

Since taking over Paramount Network Television a little more than a year ago, Moonves has wasted no time making radical changes. He put in a new exec team, led by prexy David Stapf; shed a number of unproductive deals; and beefed up the studio’s roster of younger scribes.

Yet he’s also delegating far more than before. At the recent TV Critics Assn. summer press tour, he let Tassler and UPN prexy Dawn Ostroff handle formal sessions with reporters.

At a recent TCA dinner party, he made a point of demonstrating his enthusiasm for his newer media assets, telling reporters he had just finished devouring David McCullough’s new “1776” — published by Simon & Schuster — before touting the ratings of Jack FM, the hot radio format that’s front and center on key Infinity-owned radio stations.

Moonves has never shied away from needling his competitors, or anyone he thinks has wronged him.

On more than one occasion, he’s refused to let projects he’s passed on go to other nets, even tying up the talent attached because he doesn’t want to let a competitor find success in something he developed.

It’s too soon to say how this competitive streak will manifest itself once CBS is divorced from Viacom.

Consider this scenario: Both companies covet the assets of Rainbow Media, and each makes a plausible case for acquiring them. So, how does a deal get brokered and who gets the goods?

But both Freston and Moonves are consummate boardroom diplomats.

When Viacom and CBS merged, Moonves found himself reporting to both Mel Karmazin and Sumner Redstone. Moonves managed to maintain strong ties to both, even though he clearly had more in common with the gregarious Redstone than the colorless Karmazin.

Moonves may in fact have been one of the behind-the-scenes architects of the plan to split Viacom into two companies.

When Freston and Moonves were tapped co-COOs after Karmazin ankled, Wall Street types predicted an eventual bake-off between the men, with the winner claiming the CEO title. Many suspected Freston had the upper hand, given his long relationship with Redstone and his flashier collection of assets.

While the final call was clearly Redstone’s, Moonves had plenty of reasons to advocate a split.

Each has his own obstacles.

Moonves’ mission: Defying relatively low expectations. Wall Street isn’t expecting much of the new CBS Corp., already labeling it a slow-growth stock focusing on “old” media businesses like radio and broadcast TV.

On the Aug. 4 conference call, Moonves again made it clear he plans to ask cable operators like Comcast and Time Warner to pay up if they want to continue broadcasting hit shows like “CSI” and “Survivor.”¬†Without being tied to the MTV cable nets, Moonves thinks the new CBS Corp. will be “extraordinarily well-positioned” to monetize its broadcast assets via multiple platforms.

Freston’s situation is far more tricky: Everyone expects his company to continue to grow at a rapid rate.

Freston and Moonves will have similar growing pains.

Both will have to dial down their natural inclination to be salesmen when talking to the press. Financials will be a bigger part of their lives, and both execs will have to personally vouch for their company’s bottom line.

Some analysts are troubled that the new Viacom won’t be able to take as much advantage of synergies across the broadcast and cable networks. Others worry the new companies will lose the leverage a larger Viacom had in DVD and international sales.

Congloms like Time Warner and the current Viacom gain leverage in the global marketplace by bundling international film and TV sales, but that won’t be the case now that Par’s TV and film divisions will be under separate corporate roofs.

But Wall Streeters, to whom the split is largely dedicated, are generally gung-ho. Media congloms have been markedly out of favor for several years. They aren’t growing fast enough to please so-called growth investors, and yet they aren’t paying the hefty dividends prized by the so-called value investors.

Viacom plans to create something for everyone.

“We believe the split could unlock the current inefficiency inherent in the valuations of the conglomerates,” says Deutsche Bank analyst Doug Mitchelson, who recently named Viacom his top pick in the entertainment sector.

(This report was written by Jill Goldsmith in New York and Dave McNary and Josef Adalian in Hollywood.)

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