Beleaguered media conglomerate Viacom has had to contend with ratings declines, executive defections, and months of corporate infighting among its leaders and top shareholders. Now the company faces a new hurdle: The executive who many had expected would seize its reins is instead stepping down.
The New York owner of MTV, Nickelodeon, and the Paramount movie studio said Wednesday that Tom Dooley, a longtime senior executive who has served in recent weeks as the company’s interim CEO, will leave on Nov. 15. Dooley took up the post after Philippe Dauman stepped down as Viacom’s leader at the end of the summer following a bruising legal standoff with the company’s controlling Redstone family. Viacom also said it would suspend any thought of seeking a minority investor for Paramount and cut its dividend in half.
The maneuvers indicate Viacom faces continued headwinds and could leave investors grasping to understand how the company intends to move forward — it could even suggest Viacom’s operating struggles are more severe than most people suspected. Dooley has been involved with the company since 1980, serving in a number of senior executive positions and rising to the chief operating office position in 2010. There were some signals that Dooley, who has strong ties to the Wall Street and technology communities, might remain in place on a more permanent basis. “My understanding in talking to people is he didn’t want to stay on,” said Sal Muoio, an investor who holds 230,000 shares across Viacom’s two classes of stock.
By staying into November, Dooley will earn $4.4 million as a “retention payment,” the company disclosed in an SEC filing.
“While this was a difficult decision for me, I have great admiration for our new board and I feel that they will be best able to execute on their vision for the company in the hands of a new president and CEO,” Dooley said in a prepared statement. “I am certain that the board will make the most of the company’s extraordinary potential.” Dooley volunteered to step down, according to a person familiar with the situation, believing Viacom needed a different leader.
The sale of a stake in Paramount had been a major initiative of Dauman’s and one opposed by Sumner Redstone, the ailing billionaire whose family maintains a controlling position in Viacom through the National Amusements movie-exhibition chain. Having prevailed against Dauman, Shari Redstone, Sumner’s daughter, has been making her mark on the company, introducing a series of new board members as she tries to bolster Viacom’s flagging share price.
Viacom has been hit hard by the migration of younger viewers away from pay-television platforms to digital and streaming services. That shift has caused ratings and advertising headaches for the company. At the same time, the 93-year-old Sumner Redstone’s health has flagged, as the media pioneer has found himself entangled in a series of lawsuits with deposed board members, Dauman, and Manuela Herzer, a former romantic partner, that have raised questions about his mental competence.
Viacom said the cut in its dividend, to 20 cents per share, arose out of a need to maintain liquidity. It also reduced its guidance for the upcoming quarter due to a $115 million impairment charge related to an unreleased Paramount film, said to be “Monster Trucks,” the live-action/animation hybrid set for release on Jan. 13.
“While there is more work to do, the actions announced today are an important first step towards realizing the value of Viacom’s exceptional assets and positioning the company for the future,” Shari Redstone said in a statement.
Viacom’s board of directors is likely to start a comprehensive search for a replacement, the person familiar with the situation said, and consider both external and internal candidates. Among Viacom’s senior operating executives are Bob Bakish, head of the company’s international operations; Doug Herzog, who oversees the company’s music and entertainment networks; and Cyma Zarghami, who leads its kids’ and family-oriented networks. This person suggested the board saw opportunity in Viacom’s overseas and digital assets. “You want someone who creative people can thrive under,” Muoio said.
The news is likely to spur speculation about whether board members and the Redstones have lined up a new leader, and could revive Wall Street chatter about combining Viacom with CBS Corp, another Redstone-controlled media company. CBS and Viacom merged just before 2000, then broke up in 2006. At a time when media companies have come under pressure to consider gaining scale to match the leverage of distributors like Comcast and Charter Communications, some think a Viacom pairing with CBS could make longterm sense. On the other hand, Viacom’s operating woes are severe enough that CBS management may not believe a tie-up would be in the best interest of shareholders.
If that’s the case, Viacom’s ultimate direction seems about as discernible as its next chief executive. “What we are being given are headlines, but we really don’t have the full position on strategic direction, management direction,” said Muoio. “And so, there are a lot of question marks right now.”