After circling the movie business for the last year, Leslie Moonves now has the CBS eye focused squarely on it.
The chief executive of the New York-based TV, radio and billboard company has frequently floated the idea to Wall Street. But Moonves finally took his first formal step toward launching a movie division Wednesday when he made his first hire for the newly created CBS Feature Films. Named as chief operating officer was Bruce Tobey, a onetime senior executive at CBS' former sister studio, and now rival, Paramount Pictures.
An ambitious and aggressive television executive, Moonves is venturing into an unpredictable business where a flop or two can produce a gush of red ink. This week, the Motion Picture Assn. of America released figures that show production costs are continuing to rise.
Moonves has tried to assure wary investors that, despite the volatility of the movie business, he could practically guarantee profit. One way he plans to do that is by exploiting the movies using several of his company's assets -- the CBS broadcast network, the Showtime premium cable channel and its international TV distribution operation to sell films in foreign markets.
Moonves, who is looking for a CEO to run the new unit, has no plans as yet to spend the kind of money or release the volume of films that a full-fledged Hollywood studio such as Paramount does. He aims to produce only four to six films a year, with budgets of $10 million to $40 million for each production.
Nonetheless, even a small operation puts Moonves closer to his longtime ambition of being a major player in the movie business.
His move underscores the ongoing rivalry between CBS and Paramount parent Viacom Inc. that started virtually the minute they split into separate entities last year. CBS and Viacom, both controlled by billionaire and Chairman Sumner Redstone, theoretically were to go their own ways, focusing on their existing operations.
But with each company increasingly moving into the other's territory, doubts have been raised about the 83-year-old media mogul's decision to sever them in the first place. Paramount, headed by former talent manager and television producer Brad Grey, has expressed interest in rebuilding Paramount's television production business, which Moonves inherited as part of the breakup.
Moonves is intent on diversifying CBS to reduce its reliance on TV and radio advertising, and fees from the sales of its syndicated programming. Advertising revenue is often vulnerable to downturns in the economy. In addition, CBS lacks a stable of popular cable channels that can generate subscriber fees.
CBS' radio division also has struggled to replace shock jock Howard Stern after his defection to satellite radio, which put a drag on company earnings. And its network division this season suffered a prime-time ratings decline after rival ABC moved a popular show to the most lucrative night of the week for broadcast networks -- Thursday.
Like many other media executives, Moonves believes owning TV shows and movies will strengthen CBS' hand, especially in the digital age. Moonves has said that Showtime, in particular, could financially benefit from owning its feature films rather than heavily depending on outside studio suppliers such as Paramount, Lions Gate and Metro-Goldwyn-Mayer Inc.
It's unclear whether Moonves plans to renew Showtime's agreements with those studios when they expire. Paramount's deal is up at the end of this year, while the Lions Gate and MGM deals end next year. Competition among Showtime, HBO, Comcast Corp. and other cable companies eager for movies to bolster their video-on-demand channels could bid up prices, giving Moonves another reason to make his own films.
Moonves, who declined to comment Wednesday beyond a CBS news release, has said that he had been exploring sources of outside financing to help bankroll the movies. Having financial partners would lessen CBS' vulnerability if a movie flops.
Hollywood is flush with outside money from hedge funds, investment banks and private equity firms that is being used to co-finance the movie slates of studios and production companies. CBS, however, would still need to pay a major studio to market and distribute its films in theaters and on DVD. No studio has yet been lined up.
Some industry analysts are dubious about Moonves' assertion that he can pretty much guarantee profit from the start.
"There's no such thing as risk-free," said independent media analyst Harold Vogel. "If you keep the budgets fairly small, you can probably come out fine. "But, you have to guard against paying too much for talent and other costs associated with making the films."
CBS was in the feature film business during the 1980s, as was rival ABC, and was once a partner in TriStar Pictures. Both networks exited the business after little success.
In tapping Tobey, Moonves is hiring an executive familiar with Paramount's playbook. A former attorney, Tobey worked for four years as executive vice president of Paramount's motion picture group, but was forced out of the studio amid a management shake-up more than a year ago.
Tobey will be based at CBS' West Coast headquarters in Los Angeles, and will oversee finance, legal, business affairs and home-video distribution.