Feature

The Media Barons: Sumner Redstone

The billionaire octogenarian is still hungry for world domination, and may be set to make a bid for ITV. Jeremy Lee talks to the chairman and chief executive of Viacom.

When asked a question, Sumner Redstone, the chairman and chief executive of Viacom, plays a little trick. He politely apologises, claims he has misheard, and asks for the question to be repeated.

You might think that Redstone, who has just celebrated his 80th birthday (which must surely make him the oldest of the MTV generation), might be suffering from an age-related hearing impairment.

But although a perfectly reasonable assumption, this would be inaccurate. What Redstone is really doing is taking his time to consider his reply before committing himself to an answer.

A comparison between this and Viacom's current manoeuvrings with regard to a possible bid for ITV is an easy one but the parallels are clear. True to form, Redstone is taking his time to consider the deal. It is on this simple principle that Redstone has built his media empire.

This empire, built on brands including the MTV and VH1 networks, CBS Television, UCI cinemas, Paramount Pictures, Nickelodeon, Paramount Television, Showtime Networks, Blockbusters, Simon & Schuster and Viacom Outdoor, produced revenues of $6.05bn in the first quarter of this year -- an increase of 7% on the previous year.

Such results are enough to make our homegrown wannabe media barons' eyes water, and Redstone has no intention of curtailing his ambitions just yet.

Speculation about a possible bid for ITV grew at the end of last year when Redstone came over to England and, among the highlights of his trip, he discussed the UK's media ownership regulations with Tony Blair before addressing a meeting of the Royal Television Society.

A bid is logical -- given the current woes of most of the global media players, Viacom and News Corporation are probably the only two media conglomerates with the clout to be making acquisitions.

Now that Rupert Murdoch has, at least for the time being, ruled News Corporation out of a possible bid for five (he is precluded from buying ITV), Redstone seems the most likely protagonist. So what did he discuss with Blair?

"We were very pleased and complimented to meet Tony Blair to discuss regulation. It's a good piece of legislation and we are constantly monitoring the situation," Redstone comments.

While this seems characteristically non-committal, Redstone is forced to bide his time until the communications bill gets on to the statute book. Any changes in ownership to ITV (or, indeed, Five) are domestically important, but they are both relatively small beer to Redstone, who seeks continued global expansion through acquisition or deregulation.

He is clearly a fan of deregulation and is a supporter of a relaxation of US media laws. As one of the biggest players, Viacom has much to gain.

In the US, Viacom, among others, has lobbied the Federal Communications Commission to decrease or eliminate restrictions preventing it from having more than 35% of the national TV audience. Earlier this month the FCC voted, three to two, to increase this to 45%. Critics slammed the decision, claiming it would hurt media diversity.

Other FCC changes include the removal of a ban on cross-ownership of TV stations and newspapers in markets with more than three TV stations, and legislation tightening the rules on radio ownership to deflect criticism that Clear Channel dominates the market.

During his talks at Downing Street, Redstone promised to do his bit to speed up the process. "We made it clear to Mr Blair that we will help the US government deregulate the market. We expect to have a great deal of deregulation," he says.

Following the FCC's decision Redstone revealed he is interested in acquiring some of the assets of cash-strapped Vivendi Universal's cable networks, which includes the Sci-Fi network. Vivendi Universal has put its entertainment assets -- including the USA and Sci-Fi cable networks -- up for sale to reduce its £7.7bn debt. "In most parts of the world we are driving the business constantly," he says.

Any suggestion that Viacom is first and foremost an American company with disparate global interests are strongly rejected. "We view ourselves as a global rather than just a US company," he says. However, he concedes that he'd like to reduce its dependence on North America. "We'd like to have 40 per cent of our revenue come from overseas. We're extremely strong in all areas and we continue to grow overseas and at home."

One of the areas of expansion is the Far East. Like Murdoch, Redstone has realised China has a potentially massive and largely untapped market for foreign media owners and advertisers. "There are three billion people there, two-thirds of whom are under the age of 24," Redstone points out.

Viacom has already put its flag in the ground with the creation of MTV China. "We launched the first and only branded TV station in China, which runs for 24 hours a day," he says proudly.

The strength of the Viacom empire has elevated Redstone, the son of a lino salesman cum movie theatre owner, up the rich lists. With a personal fortune of $9bn from an initial investment of $55 million, according to Forbes magazine, Viacom has made him the 32nd richest man in the world.

Redstone, who grew up in a middle-class Boston family during the depression, has had a fascinating career by any standards. Showing remarkable intelligence at an early age, his law studies at Harvard were cut short by the Second World War.

During the war he served in the US military intelligence , working with a special group on breaking Japan's high-level military and diplomatic codes. After the war, he was honoured for his contribution and devotion to duty.

Away from the business arena, other notable achievements include time served as a member of the presidential advisory committee for the John F Kennedy Center for the Performing Arts during the Carter administration. He is also involved in various philanthropic activities -- he is a former chairman of the Metropolitan Division of the Combined Jewish Philanthropies.

So how did Redstone become one of perhaps only two media barons with the ability to stride the world stage? The roots lie in his father's drive-in theatre company, National Amusements, which he joined in 1954 and built into a theatrical power before leaping into the media big time with the audacious $3.4bn takeover of Viacom in 1987.

Redstone's intellect and business ability have led Viacom to become the largest media company on the planet in terms of market capitalisation. While its rivals, most notably Universal and Time Warner, have seen their fortunes founder because of disastrous mergers and acquisitions and doomed dabblings with new media , Viacom has become pre-eminent.

Redstone can reputedly spot a bad deal a mile off and Viacom, again through Redstone's careful consideration, successfully avoided the new-media bubble through design rather than luck. "Bob Pittman [a former chairman at AOL Time Warner] and Steve Case [a former chief operating officer at AOL Time Warner] came to see me -- I saw that the currency was overstated," he says. So how did Redstone manage to avoid the pitfall? "I do lots of research -- I instinctively knew that this was not for us."

Not that Redstone will never look at new-media opportunities. "When it's right for MTV and Nickelodeon, we'll use it." Redstone believes that the electronic retail opportunities for his music portfolio are huge but, and to the surprise of some, this will not include a brand extension into an MTV record label.

As for the current recession, Viacom's revenue base is broad, with ad revenue making up 44% of its total, so is to some extent insulated. But Redstone is bullish about the advertising market, predicting a resurgence in the US. "Advertising is going to be extremely strong. We have the upfronts coming and we will sell 80% of our inventory at double-digit growth," he predicts.

Although Redstone is very much the company's front man, he runs Viacom with the chief operating officer, Mel Karmazin. Their relationship has been the subject of some speculation since Viacom acquired him as part of the CBS deal.

There was initial concern on Wall Street that the two personalities needed to agree and formalise their respective roles, lest in-fighting prove destructive to the company's health. To win approval for the CBS merger, Redstone was obliged to give Karmazin extensive control of operations and a clause saying he could only be removed by the Viacom board.

Observers noted that Redstone omitted Karmazin in the acknowledgements in his recent memoir, A Passion to Win, despite naming everyone from board members to secretaries. However, Redstone claims that any issues with Karmazin have been resolved and that he is an effective number two. "Mel is a great chief operating officer -- it's a very powerful job. We operate the company as partners," he insists. Revealingly, Karmazin has taken on responsibility for developing Viacom's largely US-based radio interests.

The Viacom music network MTV is the jewel in the company's crown and seems Redstone's particular favourite. "Advertisers have learned that they have to advertise with MTV," he says confidently. Certainly, the brand remains strong, but Redstone is aware that its dominance has been repeatedly challenged, including Sky's recent attempt in the UK. But Redstone is not too rattled by this: "We take every challenge seriously but MTV remains pre-eminent."

Brent Hansen, the president and chief executive of MTV Europe and a member of its founding team, testifies to Redstone's faith in his senior management. "One of the great things about the company is that you are pretty much allowed to do what you want, as long as it's profitable," he says.

MTV Europe is a good example of the Viacom financial model. Revenues were up 32% last year despite the ravages of the advertising recession.

According to Hansen, Viacom gives him the flexibility to explore other revenue streams such as the hugely popular flagship events the MTV European Music Awards and the Winterjam rock festival.

MTV awards ceremonies seem an unlikely place to find an octogenarian company chairman and chief executive, but Redstone and some of his senior management team have just returned from such an event in China. He, of course, managed to pop in and say hello to the Chinese president. Although a gruelling whistlestop visit and a late night for any man, Redstone says he outlasted any of his younger associates.

Redstone is clearly an energetic man and a comparison between him and his septuagenarian counterpart at News Corporation is obvious, but, Redstone says, not entirely accurate.

"We both lead great companies -- he is a great leader for Fox," Redstone says. And while he confesses to being friends with Murdoch, he prefers to spend what leisure time he allows himself with his Viacom colleagues.

So has Redstone any intention of hanging up his boots and passing some control to a younger Turk? For the first time during the interview, Redstone displays some irritation. "No, no, no," he says. "I love Viacom and that's what keeps you going. There's a lot of us old boys about." There is no pause in his answer or request to hear the question again.

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