The turmoil and turnover at Viacom show no signs of easing up. Long-serving executives at the struggling media giant are being tossed overboard at a furious clip, as a newly reconstituted board of directors scrambles to save a ship that has been taking on water.
Inside of 72 hours last week, Thomas Dooley, appointed as interim CEO only last month, announced his resignation, effective Nov. 15, and Rob Moore, vice chairman of Paramount Pictures, was forced to leave. Moore resigned under pressure from the Viacom board, which added five new members in August.
The disaster at Viacom has been years in the making. It’s the result of leadership that prized stock buybacks and dividends over longer-term investments in building an arsenal of hit shows and movies at Paramount, MTV, Comedy Central, and other properties. Instead, Viacom has seen its Tiffany brands tarnished, as ratings have faded and box office revenue has dwindled.
To replace Dooley, Viacom’s board is said to be focusing on hiring from within. That seems to signal that controlling shareholders Shari and Sumner Redstone are increasingly focused on reuniting Viacom with its former corporate sibling CBS Corp. Dooley’s successor would most likely be a placeholder until the Redstones can craft a merger that is palatable to the board of CBS Corp. and its chairman/CEO, Leslie Moonves. His happiness is essential, given that CBS is seen as one of the best-run television companies in the business.
The departures of Dooley and Moore followed a two-day review of budgets and long-term planning by the board during the week of Sept. 12 that included presentations from division heads across the company. Additionally, Moore was dragged from Los Angeles to New York last month to be grilled by Viacom’s leadership about the money-losing debacle “Ben-Hur.”
The board is said to be surprised by the depth of the company’s problems, from its debt load to projected declines in the long-term earnings of its cable networks. Compounding matters, Paramount is on track to lose $450 million in the 2016 fiscal year, according to analysts’ estimates.
At Paramount, Moore oversaw the studio’s day-to-day operations. He was known as a hard-nosed dealmaker, with an eye toward reining in costs. After his ouster last week, executives at rival studios, producers, and agents privately wondered if the cuts would stop with Moore.
Speculation has turned to Brad Grey, the chairman/CEO who has led Paramount since 2005. The studio lags behind its rivals both in terms of market share and in the creation of blockbuster franchises. While Disney has locked up the market on fanboys, acquiring Marvel and Lucasfilm, Paramount has scrambled to produce in-house tentpoles. It has had success with the “Transformers” and “Mission: Impossible” franchises, but other series are flagging. “Star Trek Beyond” cost $185 million to make and earned $335.9 million, and the collapse of “Teenage Mutant Ninja Turtles: Out of the Shadows” likely spells an end for that franchise.
Still, despite Grey’s spotty track record, Shari Redstone and the board have publicly endorsed his leadership and are said to be impressed with his vision, though insiders declined to elaborate. Grey has been in daily contact with Shari Redstone and was due to have dinner with her on Sept. 26 in L.A.
Reinvigorating Paramount’s slate will require a massive outlay of capital, as well as patience. It takes two or three years to build up a new trove of films, and that process is expensive. Moreover, spending large sums may be difficult given that Moody recently downgraded Viacom’s credit rating after the company announced that it would tap debt markets to maintain its liquidity. More than $15 billion in stock buybacks under former chairman Philippe Dauman left Viacom heavily leveraged: It has $900 million of debt, due in the next seven months, that it must refinance, and $1 billion it needs to pay by the end of 2018. It’s no wonder the company is exploring the sale of its stake in cable company Epix as it scrambles to find ways to improve its balance sheet.
The latest executive departures come a month after Viacom settled a legal fight between the Redstones and Dauman. The opposing sides reached a settlement in August that called for Dauman to step down on Sept. 13, and for the addition of the new board members.
After Dooley, the former COO, was named interim CEO, there was hope internally that the waters might calm. Dooley had been involved with Viacom since 1980, and was seen as a steady hand. But the announcement that he will exit indicates that the board isn’t done reshaping the company.
Shari Redstone has been on a whirlwind of meetings with prospective leaders for Viacom. But finding a seasoned media CEO to step into an executive suite in disarray is proving to be a tough sell, and Dooley’s Nov. 15 departure date gives her little time to work out a deal. Internal candidates said to be under consideration are Robert Bakish,
head of Viacom’s international channels unit; CFO Wade Davis; and Scott Mills, head of human resources.
Having emerged victorious from her standoff with Dauman, it now falls to Shari Redstone to salvage the company that her 93-year-old father spent decades cobbling together. The Viacom vice chair is said to be set on reuniting the two halves of the Redstone empire that were cleaved in 2006 — CBS Corp. and Paramount, which remained with Viacom.
But that means a deal to take on Viacom’s problems has to be made palatable to CBS Corp. and its shareholders. Despite the Redstones’ iron grip on CBS and Viacom — Sumner Redstone controls about 80% of voting stock in both companies — Shari Redstone has to tread lightly when it comes to Moonves, or risk giving him incentive to bolt. It’s a risk she can’t afford to take: She needs Moonves to bring his programming magic to Viacom, and restore a brand that’s been beaten down by corporate infighting and creative torpor.