Redstone’s move shocked investors. But perhaps it shouldn’t have. Just days before the firing, the Wall Street rumor mill had Biondi heading for another job–to replace Time Warner chief Gerald Levin, believe it or not. Instead, Biondi got the boot from Redstone, who controls Viacom. As such things go in showbiz, the move was quite mannerly. In nine years, the two men built Viacom into a powerhouse with such brands as Showtime, Simon & Schuster and Nickelodeon. But Redstone simply decided that the laid-back Biondi didn’t fit the new Viacom. “Frank’s style doesn’t work in this company as it is today,” Redstone told Newsweek. Says the genial Biondi, who’s poised to collect as much as $50 million on his way out: “Life will go on for me, and Sumner will go down in history as a great entrepreneur.”
Now, with Biondi out of the way, Redstone must turn his attention to some troublesome problems at Viacom (problems that aren’t Biondi’s fault), and that’s the real story here. The $17 billion acquisition of Paramount and Blockbuster has lately left the company springing leaks. There are a slew of box-office duds at the Paramount studio. And the video and music merchant Blockbuster faces fierce competition. Also, Wall Streeters are fretting about Redstone’s age (72) and who’s in line to replace him. The day after Biondi was fired, investors continued to dump Via-tom’s Class B shares, which have declined 30 percent from their 1995 peak.
Like other big entertainment/media conglomerates, Viacom is discovering that size can be a problem. Trouble can crop up anywhere, any time. Entertainment moguls are realizing they need to expand rapidly, produce big hits and have a lot of luck to make their multi-billion-dollar deals pay off quickly enough to suit Wall Street. R has little to do with “synergy” and “digitization"two favorite buzzwords in the postmerger press conferences. “The people who own and control are finding the businesses are a lot more complicated,” says Redstone. So what does Redstone need to do to satisfy Wall Street?
First, produce a few more “Forrest Gumps.” Since Paramount mined gold at the box office with “Gump” (worldwide ticket sales: $660 million), it has mostly hit a vein of duds. Among them: “Jade” and “Nick of Time.” Redstone is clearly taking a more hands-on role at the studio. In recent months, he has made numerous treks to the West Coast from New York to help mold a new plan for Paramount. After acquiring the studio, Viacom directed it to increase the output of movies to as many as 25 a year from the anemic flow before the deal. But Redstone soon realized such a sudden increase was hurting the quality of movies. According to a Viacom executive, Redstone asked Biondi to order studio executives to shift gears but Biondi never did. “I had to be CEO in that situation,” Redstone acknowledges. But the flip-flop in strategy has left some media pros confused. “It’s [still] not entirely clear what Sumner will do differently at the studio,” says media analyst John Reidy of Smith Barney.
At Blockbuster, Redstone has a couple of headaches. There’s too much competition in the video business. The chain has been cutting prices–and thus profits–trying to fend off everyone from mass market retailers to grocery chains that have jumped into the business. “By the end of this year, we believe the world is going to see growth that exceeds expectation,” says Redstone. But there’s more trouble: Blockbuster, also one of the nation’s largest recorded-music retailers, is under attack from rivals in that business, too. For now, Redstone’s most urgent task is keeping Blockbuster’s CEO, Steve Berrard. A protege of ex-Blockbuster CEO Wayne Huizenga, Berrard may rejoin his mentor. “Steve is an entrepreneur at heart,” not a manager, says Huizenga, owner of the Miami Dolphins and other ventures. “I don’t think he’ll stay.” Insiders say Redstone has offered Berrard a sweeter pay package. But Berrard is already quite wealthy. And besides, he wants Biondi’s old job.
Many investment pros also are worried about the management structure at Viacom now. They think Biondi was the perfect balance to the hard-charging Redstone. Now there may be no one to check Redstone, even though he has established an executive committee of top lieutenants to help run Viacom. Who will prevent Redstone from perhaps overpaying for another deal or firing an important executive?
And then there is the succession problem. Redstone promoted two close aides, Tom Dooley and Philippe Dauman, as vice chairmen. One is expected to succeed Redstone as CEO. Although both are considered very bright, neither man has ever run a business. Then again, Redstone has bucked Wall Street wisdom before. The experts said he couldn’t build a media empire out of a movie-house chain. Paramount could have a summer hit with “Mission: Impossible,” starring Tom Cruise. Even now, Viacom is hardly failing; its bottom line is just falling short of what some on Wall Street believe are hyped expectations. In other words: don’t underestimate Redstone. With Biondi gone, just keep a close watch on him.
PHOTO (COLOR): Now that Biondi is gone, who is Redstone’s hair apparent? The 72-year-old Viacom chairman in Times Square
Frank Biondi’s departure from Viacom last week topped an impressive string of management changes in the entertainment industry. Here’s a roundup of some recent ousters.
Sumner Redstone sacked Viacom’s president and CEO because he wasn’t aggressive enough in dealing with the entertainment giant’s troubles
In 1994 the Walt Disney Studios chief quit in a huff after CEO Michael Eisner refused to name him president of the entire company
In a shake-up at Time Warner, the head of Warner Music group and HBO was fired because of a bitter feud with the company’s film execs
A $2.7 billion loss and box-office flops led to the flashy exec’s departure as CEO of Sony’s U.S. unit. His replacement: new bosses to run the firm from Tokyo.
