Two of the media industry's biggest conglomerates, CBS Corp.
The events over the past two weeks seems more fitting for a cable drama rather than an executive boardroom. Kicking off the controversy was the announcement that Les Moonves, CBS chief executive, would replace the ailing Redstone as chairman. As rumors swirled before Viacom's board could meet two days later, Redstone's daughter Shari came out in strong opposition against making Philippe Dauman, Viacom's chief executive and longtime Redstone advisor, chairman over someone completely independent from the family. But at the meeting Dauman prevailed, as Shari Redstone was the only dissenting member in a vote that crowned Dauman as chairman of Viacom.
Taken at face value, the succession drama at the two companies seems tame but the leadership shakeup comes at a time where both conglomerates' stocks continue to tumble amidst shrinking subscriber counts and changing television viewing habits. Looking forward, the battle between Shari Redstone and Dauman is set to flare up leading up to Viacom's annual meeting and board election nine months from now.
The conflict is highlighted in Viacom's 21 percent drop to a 52 week low after Viacom's first-quarter earnings revealed declining profits at its Media Networks division and a $146 million loss at the film unit. Further complicating Viacom's position is the fact that, on a public stockholder call, Dauman aggressively lashed out at "naysayers, self-interested critics and publicity seekers" who challenged his vision.
Concerns about Viacom's viability to grow stem from the fact that the board and Redstone's trust, which has an 80 percent share in the company, are increasingly intertwined. Several members sit on the board of Redstone's trust as well as the boards of Viacom and CBS-leading many to speculate that conflicting interests would abound should there be a vote for Redstone's trust to sell stakes in the two companies after his death. In fact, researchers have noted that only 55% of Viacom's board can be deemed as independent from the Redstone trust-an alarmingly low percentage.
In terms of CBS and Viacom's potential for growth amongst leadership drama, many stock market analysts are eyeing further media consolidation as rumors swirl that CBS and Time Warner
Additionally, Viacom is struggling with its media properties: cable networks that skew towards younger demographics and the increasingly irrelevant Paramount Pictures. Its attempts to rebrand and restructure have led to growing negative sentiment within the entertainment industry, especially following last summer's $784 million restructuring that led to the departure of many veteran executives.
Looking forward, both CBS and Viacom must overcome the negative, gossip-fueled publicity to soothe investors' worries should they hope to grow in the coming months as numerous media companies continue to struggle in today's evolving media landscape.
