Redstone defending the red ink

NEW YORK — A resolute and sometimes feisty Sumner Redstone reiterated on Monday that content is king and that Viacom is committed to becoming a leaner and meaner company.

Turning up at the Bear Stearns 18th annual media confab in Palm Beach, Fla., Redstone also downplayed Viacom’s staggering $18.4 billion loss last quarter when addressing investors Monday, vowing that the company will shed assets and reclaim the throne of fastest-growing media titan.

“The bottom line is that in 2005, you will see Viacom become a smaller company and a more focused company,” Redstone said during his keynoter.

“We believe that content is king. Not only is content king, but Viacom is king of content,” he said.

Redstone didn’t elaborate much on which assets the conglom intends on shedding, other than to reiterate that Infinity radio will sell off or swap stations in smaller markets. Last week, Viacom co-president/co-Chief Operating Officer Tom Freston confirmed during Viacom’s conference call that theme parks and Famous Players theaters are on the block. Pub house Simon & Schuster also is believed to be in play, although neither Redstone or Freston have said it’s a definite.

A new Paramount

Redstone reiterated that Paramount Motion Picture Group chairman-CEO Brad Grey — who officially arrives at the Par lot today —- will have the “wind at his back” when ushering in a “risk-taking” culture at the studio that is no longer viewed by the creative community as stingy.

“You are going to see a new Paramount. It has already begun,” said Redstone, referring to Grey’s role in cinching a multipic deal to acquire John Singleton’s urban pic “Hustle & Flow” at Sundance.

Redstone also said Par’s film and TV library have been vastly underutilized for DVD releases.

He also was queried as to the presence of his daughter, Shari, at the Bear Stearns gathering, and what it might indicate about succession plans. The 81-year-old Redstone said it only makes sense for his daughter — who runs the family-owned National Amusements theater chain — to know all aspects of the biz. She is widely expected to assume the role of Viacom chairman when Redstone steps down.

“If she is going to control it, she should know it,” Redstone said.

Redstone heaped praise on his two top deputies, Viacom co-prexies/co-chief operating officers Tom Freston and Leslie Moonves, saying they are making “tremendous strides” within the respective divisions they oversee.

Moonves, who is credited with turning around CBS over the past decade, now finds himself in the uncomfortable position of overseeing two problem children, Infinity and outdoor.

Record loss

On the touchy subject of the $18.4 billion quarterly loss — the fifth-largest in U.S. corporate history — Redstone said the press and others are dwelling only on the write-down. He reminded that the $18 billion charge was a noncash, one-time item, and that aside from the charge, net earnings jumped 19% to roughly $2.7 billion.

Redstone touted the strength of CBS and Viacom’s cable properties, saying if the conglom were to make any acquisitions, it would be cable programming.

He vehemently disputed that Viacom has overpaid in its acquisitions. He said he would buy CBS all over again, and several times pointed out that King World is worth far more than the purchase price. Redstone also reminded that the company has already taken steps to shore up its radio biz under Moonves’ tutelage.

Wall Streeters listening to Redstone’s presentation in Palm Beach said Viacom is a company in transition, but still a good bet.

“They are going to sell all the stuff that isn’t core to their company,” one analyst said. “I think if they stop buying things and shed businesses and keep to their knitting, it will be a good stock in 2005.”

After rebounding Friday, Viacom stock slipped again Monday. Shares were down 31¢ to close at $35.29. Thursday — the day earnings were released and the $18.4 billion loss reported — shares fell 2.46% to $35.28.

Midway point

During his remarks at Bear Stearns, Redstone also brushed aside investor concern about whether he’s spending too much time on Midway Games, which he privately owns.

“Yes, Midway is a good company. But having said that, I have never once been to its headquarters in Chicago,” Redstone said. “When I said ‘Viacom is me and I am Viacom,’ it wasn’t meant in an arrogant way. My whole life is Viacom.”

Midway is nevertheless turning out to be a strong investment. Vidgame publisher, which released earnings Monday, scored its first profit in five years last quarter, bringing in net income of $17.6 million on strong holiday sales for its titles, including “Mortal Kombat: Deception.” Revenue grew by 156% to $77.2 million in the fourth quarter.

Black ink is expected to be short-lived, though, as it is looking to end 2005 with a net loss of $38 million, even though revenue is projected to grow 40% to $225 million. For the full year 2004, Midway lost $18.8 million on revenue of $161.6 million.

Company is upping its spending on high-quality game production this year, looking to add more profitable franchises to its lineup that can spawn sequels and, potentially, Hollywood development deals. Among titles in development are “Fear and Respect,” which Singleton is helping to produce and is attached to direct as a feature for Paramount. Publisher is also bringing several Cartoon Network properties to vidgamers.

(Ben Fritz in Los Angeles contributed to this report.)

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