Jan 13 '06
The Content King:
Sumner Redstone, Viacom, and CBSBy Sarah Stodola
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In 1954, when Viacom chairman Sumner Redstone was 31 years old, he quit his job as a lawyer at a prominent Washington firm in order to move back to Boston and work for his father’s small chain of drive-in theaters in New England. Under Redstone’s direction, that chain soon grew into National Amusements, one of the largest and most successful chains of movie theaters in the country, and the company responsible for the movie theater as we know it today, with its multiple screens, comfortable seating, and central concessions area.
Several years later and a couple hundred miles to the south in New York, CBS spun off its syndicated programming arm as a separate company in 1971, after the FCC ruled that television networks could not syndicate their own programs. CBS named the new company Viacom.
Redstone (who was born Sumner Rothstein, but changed his surname in what he surely perceived to be one of his first shrewd business moves), meanwhile, was growing richer and more powerful…and more ambitious. He was also solidifying his believe that media content was more important than media distribution, coining his famous adage that “content is king.” Redstone wanted to produce content, not just spread it around. And by the 1980s, he figured out how to do so. In 1987, he’d become rich enough to buy a controlling interest in Viacom. He’s been its chairman ever since, and he now ranks among the fifty richest people in America. Along the way, Viacom acquired, under Redstone’s direction, Paramount Communications (parent of Paramount Pictures), Blockbuster Entertainment, and Simon & Schuster, among others.
In the following decade, during Bill Clinton’s presidency, Congress passed the Telecommunications Act of 1996, a bill that was meant to accommodate the new forms of media emerging at the time, but which effectively paved the way for the slew of mergers and the media consolidation of the late 1990’s and early 2000’s…including Viacom’s acquisition of the company it had once been a division of, CBS, in 2000.
But at the beginning of this month, CBS and Viacom once again began trading on the New York Stock Exchange as two separate companies. Redstone has hailed the development as the dawn of a new era for big media: “The age of the conglomerate is over,” he proclaimed last summer when the split was announced.
But can it really be true?
There are a couple of glaring problems with Redstone’s assertion. First, both companies are still media conglomerates; CBS now controls its eponymous network, as well as UPN, Showtime, Simon and Schuster, CBS Radio, and Paramount Parks, among others. Viacom keeps the rest, including MTV Networks (including MTV, Comedy Central, Nickelodeon, etc.), King World Productions, and Paramount Pictures.
Second, Redstone still serves as chairman of both companies, with a controlling interest in each, which means that although they may technically be two separate companies, they are still serving the interests of a single person, for now.
Still, the split does make two mega-companies where before there was just one. And this begs the question: Could the Viacom/CBS split signal the beginning of the end for media conglomerates?
Redstone seems to think so, and there is some evidence to support him. The (second) marriage between Viacom and CBS has lasted roughly five and half years, no time at all in corporate terms, and an indication that it may have been clear from the outset that the merger had been ill-conceived.
And then there’s the most infamous merger of the past decade, between AOL and Time Warner. Also announced in 2000, it has not officially been reversed, but Steve Case recently urged the breakup of the corporation into four smaller publicly traded companies, and AOL has officially been dropped from the corporation’s name. Conventional wisdom now tells us that AOL-Time Warner was a mistake of mammoth proportions. This merger too, then, has lasted barely five years.
But what about the other major media companies: Sony, GE, Disney, News Corporation, Vivendi, and Bertelsmann? For now, they are showing no signs of following in Viacom’s and Time Warner’s footsteps. But the real influence of the Viacom/CBS split will emerge only when sufficient time has passed for competitors to see whether or not the two companies work better than did the one.
Redstone was on hand last Tuesday to ring the opening bell at the New York Stock Exchange, and indeed it felt possible that he was also ringing in a new era. At nearly 83 years of age, Redstone -- a man who’s had a lot to cheer about over the course of his career -- may have just given his last big hurrah. The end of media conglomerates as we know them or not, the king of content has made his point. If he’s right, it won’t be the first time. And after more than a decade of the bottom line having more to do with programming than quality, he may just pave the way for content to become king once again.
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Sarah Stodola is the Executive Editor of Me Three. She can be contacted here.
© 2005 Me Three
