Once one of a many august institutions in Hollywood, Paramount, owned by Viacom, has depressed on tough times as it competes with competitors like Disney’s Buena Vista and 20th Century Fox, that some contend are nimbler and some-more creative.
That dour maturation might assistance drive Philippe Dauman, authority and CEO of Paramount primogenitor Viacom, to do what leaders do with struggling businesses — relieve their bearing and lift income that could be used to compensate down debt.
Dauman, 62, announced on Feb. 23 that he would sell a “significant” interest in a film studio. A sale “will pierce poignant advantage to Paramount and Viacom, both strategically and financially,” Dauman said.
It was Dauman’s initial large pierce as a company’s chairman. And a preference by all accounts didn’t lay good with Sumner Redstone, a bum billionaire noble who is Viacom’s determining shareholder.
The Paramount preference also laid unclothed a simmering tragedy between Dauman and a Redstone family that could establish a predestine of one of a world’s many successful media companies, that also owns MTV, Nickelodeon, BET and Comedy Central.
Redstone, 93, and his daughter, Shari Redstone, are a dual pivotal owners of National Amusements, a Massachusetts-based museum sequence association that owns 80% of a voting batch of Viacom and CBS Corp.
With his health deteriorating, Redstone stepped down in Feb as authority of a Viacom and CBS boards. He insincere a pretension of authority emeritus, finale his approach impasse in a businesses that he has tranquil for decades.
Redstone’s retirement, however, has frequency brought assent to Viacom’s management. In a denote disclosure, Shari Redstone, whose attribute with Dauman has been stretched for years, publicly opposite Dauman’s ascent as Viacom’s chairman.
A few weeks later, Dauman was private as a keeper in Redstone’s trust, that would control Redstone’s business interests when he dies or is announced mentally incapable. Many saw it as an denote that Redstone — or some-more expected Shari Redstone, according to Dauman and Viacom’s other house members — wanted Dauman out during Viacom to waken a family’s control. Redstone is in need of consistent caring of nurses and has problem communicating.
Dauman sued in Massachusetts to retard his removal, contending that Shari Redstone is unduly conversion her father. Redstone and his lawyers have filed papers to try to pierce a box to Southern California, where he lives.
Earlier this month, Redstone took a bolder step to break Dauman’s reason on Viacom, filing papers to mislay Dauman, lead eccentric executive Frederic Salerno and 3 other house members from Viacom’s board. Redstone afterwards named his possess appointees.
Salerno sued in Delaware to quarrel behind on a dismissal of a house members, again arguing that Shari Redstone is truly behind a move. Shari Redstone has pronounced her father is creation his possess decisions.
A decider in Delaware ruled final week that Dauman and a suspended house members can stay until Redstone’s mental competency can be dynamic in other lawsuits.
Dauman and other Viacom executives were not accessible for criticism for this story.
MANAGEMENT IN LIMBO
The ruling, for now, allows Dauman to continue to make pivotal decisions per Viacom’s business. But a destiny remains murky as a government misunderstanding continues to percolate.
All vital decisions per a association are to be reported to National Amusements and Redstone. And Viacom house members — including Redstone, Shari Redstone and Dauman — will have to determine unanimously for any sale involving Paramount, expected quashing any approaching deal.
“We are in a early stages of a vital change in instruction for Viacom,” Kannan Venkateshwar, an researcher during Barclays Capital, wrote recently in a note to investors.
More than any sole deal, a predestine of Dauman, who became Viacom’s CEO in 2006, seems to be weighing heavily on Wall Street. Viacom’s batch has tumbled by about 16% over a past 5 years. And “given a market’s greeting to a conflict during Viacom, investors are clearly anticipating for a change in Viacom leadership,” wrote Michael Nathanson, an attention researcher during MoffettNathanson.
The stock’s remarkable spike in new weeks — adult some-more than 9% in a past 3 months — could be due to Wall Street’s expectation of Dauman’s departure. And not many analysts will skip him.
“While we trust a pierce (to reconstitute a board) is a initial step in a right instruction to strategically reposition a company, we trust this routine is distant from over,” Venkateshwar said.
GLOOMY TV MARKET
Viacom’s government play is maturation during a time when a categorical business — using wire networks — is underneath siege.
Pay-TV operators are confronting a timorous subscriber bottom due to some-more business “cutting a cord.” And they’re seeking to compensate reduce “affiliate fees” to wire networks for their content.
Cable networks with intermediate calm and low ratings — some analysts contend many of Viacom’s networks fill that check — are some-more exposed than ever to a hazard of being forsaken if they don’t compensate a seeking price. Viacom’s domestic associate revenues fell 2% in a mercantile second quarter, reflecting a dump in subscribers and, as a association called it, “softer” ratings.
Revenue for a media networks multiplication fell 3% altogether in a second entertain to $2.38 billion as promotion sales also declined.
Viacom’s vulnerabilities were exposed when some 60 tiny wire operators forsaken a channels in 2014 in a price standoff. Suddenlink, a biggest of a group, pronounced a few months after that dropping Viacom channels led to a decrease of only 2% to 2.5% of its customer base. The explanation serve cemented Viacom’s repute as a association with no must-have channels, a dangerous position during a time when wire companies are experimenting with “skinny bundles” that embody only essential channels.
While it has some of a best famous wire network brands in America, Viacom didn’t have any networks among a 10 most-watched wire channels final year, according to Nielsen’s data for a list of tip networks among viewers aged 18-49 during primary time published by Variety. Viacom says a networks collectively draw some-more TV viewers than any other wire network operator.
Much of Viacom’s troubles — operationally and financially — could have been mitigated if it were a incomparable company, analysts say. The incomparable a wire network operator, a some-more precedence it has opposite pay-TV companies, their evidence goes. “One place scale is critical is in associate price negotiations vis-à-vis (pay-TV operators),” Nathanson wrote.
Viacom’s “scale” problem might have started a decade ago. In January 2006, Viacom and CBS rigourously split, with a motive that their manifold businesses would be valued aloft in a batch marketplace if they were separated. CBS focused on broadcast, while Viacom kept a wire networks and a film studio. The pierce was “ill-fated,” Nathanson says.
Paramount was distant from Showtime, that used to atmosphere a studio’s productions. And Viacom had to launch a possess reward wire network business, Epix, after CBS, that owns Showtime, forsaken a Paramount deal, Nathanson noted.
Creativity, or a miss of it, has been another problem, says Eric Jackson, handling executive of SpringOwl Asset Management, a Viacom shareholder. Dauman “is not a artistic executive in a clarity of not carrying a knowledge of overseeing expansion of successful strike programs,” he says. “Most of a large hits when we consider of Viacom all predate Dauman as CEO.”
Viacom disputes that assessment. It says Jersey Shore, Teen Mom and Lip Sync Battle are some of the biggest hits that premiered after Dauman insincere a CEO job.
The dry strain has been quite celebrated during Paramount during a time when movie and radio prolongation has been a expansion area. “Paramount has under-invested in production,” Barclays’ Venkateshwar says. That might be during a heart of Viacom’s preference to sell a interest in Paramount.
“For a past few years, it has turn painfully apparent that Paramount should be sole to a vital buyer,” Nathanson said. Redstone “appears to resolutely remonstrate with even a thought of offered a minority piece. … Maybe he realizes a foolishness of his item subdivision (with CBS) and wants to make things right by recombining these assets.”
Viacom’s destiny isn’t wholly bleak. It is still a largest wire network user in terms of viewers. And with Nickelodeon, MTV, VH1 and BET, it is arguably a widespread actor in a kids, music and African American markets, says Brian Wieser of Pivotal Resarch Group.
Ratings for Nickelodeon, in particular, have stabilized, and it is once again a many renouned kids network, Viacom says. And it’s investing some-more than $6 billion annually in new content, a association says.
Viacom also recently sealed new carriage contracts with Dish and Cox Communications. And with no vital renewals entrance up, a relations with wire and satellite companies could be still for some time.
Meanwhile, its international business, a expansion area eyed by competitors, seems to be trending upward. Viacom’s general wire multiplication could beget adult to $1 billion in handling income by 2020 as it sells a 6 vital wire brands, including Nickelodeon, to wire operators abroad, Viacom estimates. More than half — about 54% — of Paramount’s melodramatic income came from outward a U.S. in mercantile 2015.
Dauman has been “satisfactory” in handling a company, Wieser says. Dauman was one of a top compensated CEOs in 2015, with about $54 million in his sum package. And with it, you wish someone “who can see around a corner,” Wieser says. “But they have been really trained in how they conduct capital.”
Still, since of Viacom’s ties with CBS and Shari Redstone’s open support of CBS Corp. CEO Les Moonves, rumors of a reunion with CBS — presumably by CBS’ merger of Viacom — won’t die down anytime soon. “I consider that merging with CBS is a many expected outcome,” Jackson says. The Redstones “have a lot of trust in Les.”
Another choice would be to sell a assets, says Jason Schloetzer, a corporate governance professor during Georgetown University. “Viacom’s resources are maybe some-more profitable being total with other resources of other firms than as a standalone set of wire channels,” he says. “Some of these channels could be eliminated, and other channels can be improved leveraged with other existent options.”
“Three years from now,” he says. “Viacom will demeanour really different.”
Follow USA TODAY media reporter Roger Yu on Twitter @ByRogerYu.