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Viacom's Redstone Weighs In on Eve of $85-Billion CBS Deal

CEO Muses on Advertising, Management in Merged Company

May 02, 2000|SALLIE HOFMEISTER and CLAUDIA ELLER

Sumner Redstone, chief executive of Viacom Inc., will celebrate his 77th birthday this month with his latest show of corporate vigor: the consummation of his company's proposed $85-billion merger with broadcast powerhouse CBS.

The media mogul, who likes to remind, "I'm the youngest executive you know," says he is still the same driven, feisty and brutally competitive executive he was when he bought Viacom 13 years ago for $3.2 billion and started building his now $39-billion media empire. As someone who has a knack for quoting financial statistics off the top of his head, Redstone likes to brag that his resting heart rate is 55--"that of a football star."

He scored his most recent worldwide media goal with a deal to acquire CBS--a merger that after imminently getting government approval will further expand and diversify his already vast Viacom empire--that also includes Paramount Pictures; Blockbuster Entertainment; cable networks MTV, Nickelodeon and Showtime; Spelling Entertainment; the start-up network UPN; and part of publishing giant Simon & Schuster.

In an interview at Viacom's corporate headquarters in Manhattan, Redstone discussed the new management structure of the merged Viacom-CBS, how he and equally aggressive CBS CEO Mel Karmazin will work together, how the deal differs from rival Time Warner's mega-merger with America Online, and how the ownership of two networks--CBS and UPN--will enable the new company to share programming.

Redstone, a Harvard-educated lawyer who was born in a Boston tenement and today is worth $11 billion, also talked about how his two adult children figure into the future of his company. His 48-year-old son, Brent, who had been a practicing lawyer in Denver, recently began working on the business side at Showtime.

Redstone's daughter, Shari, 45, runs National Amusements, the Boston-based theater chain that Redstone took over from his father in the mid-1950s and grew into one of the largest privately held circuits in the country.

Redstone refused to discuss the recent personal press he's received about his relationship with a younger woman, producer Christine Peters, and a bitter divorce from his wife of many years, Phyllis.

Having narrowly escaped death in a Boston hotel fire in 1979 and being told he would never walk again, Redstone says, "Today, I run faster on a tennis court than most people you know who are much younger than I."

When asked the source of his sheer determination, Redstone answers, "The will to survive is the will to win, too."

Q: What are the three things you love about the deal with CBS?

A: One, we will be an advertising juggernaut. We start with $11 billion in advertising revenue between the two companies. We will have the No. 1 platform for advertisers in cable programming, outdoor advertising, in radio and, of course, we have the television stations, which together give us six duopolies. We could offer advertisers all demographics, from Nickelodeon to CBS.

Q: But won't your reliance on advertising make you vulnerable during an economic downturn?

A: PaineWebber did a report on advertising and took a very strong position that advertising is no longer cyclical, and we believe that. They mentioned only one company, Viacom, and speculated that within the next several years we would add $40 billion to the market cap from this source of revenue alone.

Q: Why is advertising no longer cyclical?

A: In the last recession, MTV Networks did great. You know that if you're a major company and you're under pressure, you can't afford to stop advertising. Your competitors will eat you alive.

Q: Certainly, this current advertising boom is led largely by the "dot-coms."

A: Not true. I think there will be about $10 billion spent by the Internet companies this year in advertising. And, it's all found money. The advertising market is about $213 billion right now and the seers say it will go to $325 billion in about six years.

Who's going to get a good part of that? Cable. Cable is about $9.8 billion now and it's going to go about $25 billion over the next several years.

You asked me what turned me on about CBS, this is a big part of it.

Q: What are the other advantages of the CBS acquisition?

A: We saw that with CBS, we'd be the No. 1 provider of television entertainment for networks, cable and for syndication. That's a big business. And, finally, we'll have about 50% more hours in prime time than any other company.

Q: So, how is it going so far with you and Mel?

A: Mel has spent a great deal of time over here. There's not a day, I don't think, that we're not together or on the phone. Also, we have taken Mel through all of our businesses in order to familiarize him with our businesses and I've started to do the same with their businesses.

Q: Have you worked out the roles of other top executives, including Viacom Entertainment chief Jonathan Dolgen and CBS TV Chief Executive Leslie Moonves?

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