This article first appeared in The Edge Malaysia Weekly on September 24, 2018 - September 30, 2018
FOR 10 weeks every Sunday night between early June and August, American TV viewers seemed hooked on Succession, a drama about a media baron and his dysfunctional family. Logan Roy, the ageing patriarch and owner of Waystar Royco, a global media conglomerate, is not interested in giving up control of his empire even as his children jockey to take the reins. Despite a carefully laid succession plan, tempers flare over Logan’s intentions as Kendall, the eldest son from his second wife and heir apparent and president at one of the firm’s key divisions, plots with a rival conglomerate to take over his dad’s firm. As the drama unfolds, viewers have a sense of déjà vu. In some ways, Succession merges the ongoing saga of the Murdochs, led by patriarch Rupert, who control 21st Century Fox, and the Redstones, who control CBS and Viacom, into a single TV soap opera.
Life indeed imitates art, but if you think the twists and turns of the first season of Succession are fascinating, you probably have not being paying attention to the real-life drama unfolding in the Murdoch and Redstone households and the boardrooms they control.
On Sept 9, Les Moonves, the long-time CEO of CBS and the closest confidant of billionaire chairman emeritus Sumner Redstone, was forced to step down after a story in The New Yorker quoted six more women recounting disturbing and graphic allegations of his sexual misconduct, following the six who had made similar allegations against him two months ago. It was a stunning downfall of the world’s highest paid media executive — who has received US$650 million in salary, bonuses and stock options over the past 12 years as CEO, and was set to collect another US$180 million if he was ousted. Moonves may still walk away with up to US$120 million in compensation unless further investigations find him guilty.
The Moonves drama is two scripts rolled into one — sexual misconduct in the aftermath of the #MeToo movement against the widespread prevalence of sexual assault and harassment in the workplace, and the long-running battle for the control of CBS and Viacom, the main parts of the Redstone empire. Moonves and Redstone’s daughter Shari have been duelling it out in the boardroom and courts to get sole control of CBS. Shari has been trying to force a merger between CBS and Viacom that Moonves has been resisting for a year. His ouster will pave the way for the two companies that were once a single entity to get back together again.
Succession saga
No Hollywood screenplay writer could have written the script of the “succession” process that is playing out at Fox and Viacom. Both Murdoch, 87, and Redstone, 95, inherited small, local media companies from their fathers and turned them into media behemoths. Murdoch is in the process of selling most of 21st Century Fox — excluding the Fox News TV business — to Walt Disney Co for US$71 billion. His eldest son Lachlan will inherit Fox TV and the separately listed newspaper business NewsCorp, as well as a large stake in Disney as part of an assets-for-cash-and-shares transaction. Younger son James will leave the family business on completion of the deal, though the family’s new stake in Disney could presumably one day hand him the keys to Disney’s “Magic Kingdom”. As the empires built by Redstone and Murdoch are dismantled, the curtain is falling on the era of powerful global media barons.
Harvard Law graduate Redstone, who changed his surname from Rothstein (a literal translation of his German Jewish name) turned a small chain of drive-in cinemas in Boston’s West End suburbs into a global media powerhouse worth over US$36 billion, which includes America’s largest TV network CBS and media conglomerate Viacom that in turn owns music network MTV, Comedy Central, Nickelodeon, Nick Jr, BET (formerly Black Entertainment Network) and Paramount Pictures, one of Hollywood’s largest studios, which produced the recent hit Mission: Impossible — Fallout. In his younger days, Redstone was known for his sharp legal mind and photographic memory. He also had a rare instinct for what would go down well with an audience and what would not as he collected an array of media properties that make up his sprawling empire.
But that empire building came at a huge personal cost — the biggest of which was estrangement from his daughter and anointed successor Shari, in a drama that played out in the courtrooms. Eventually, the empire was split into two listed companies, CBS and Viacom, with the family holding firm National Amusements directly controlling the cinemas.
To say the 95-year-old media mogul is not in good health is an understatement. Indeed, he can barely talk. What comes out of his mouth are mostly grunts these days. So, how does he preside over two large, listed media companies or talk to doctors, his two children and his grandchildren? He communicates through an iPad with just three words: Yes, No and F.U. In any other country, he would long have been declared mentally incompetent, but in America, particularly in the state of California, as long as he can touch his iPad and point to one of three words, he is considered sane enough to make any decision.
Redstone also has a long history of appointing successors and CEOs and then firing them a few years later. Media executives such as Mel Karmazin, Tom Freston and Philippe Dauman were all once seen as a key part of the succession plan at CBS or Viacom, only to be summarily removed. Twelve years ago, Redstone brought in Moonves, a Warner Brothers TV producer who, among other things, had been behind the popular TV series Friends, to run his entertainment empire.
Like other larger-than-life CEOs, from Apple’s late co-founder Steve Jobs to Tesla’s Elon Musk, mercurial Redstone not only behaved badly throughout most of his career, he is also known to treat people badly. His staff, business partners, children and grandchildren, and just about anyone who has ever come in contact with him — restaurant waiters, doctors, nurses, household staff, even his wives and girlfriends — have all at one time or another been on the receiving end of his ire.
Straight out of the movies
His complex relationship with daughter Shari is another tale straight out of a Hollywood script. Redstone appointed her as his successor, then changed his mind and ousted her. Father and daughter were at loggerheads for years as they battled it out in court. Shari owns 20% of National Amusements (left to her by her grandfather) and her father owns the other 80%. The two bought out Shari’s brother Brent’s stake 13 years ago. Brent had worked with his father until he was removed from the National Amusements board in 2003. He sued his father and sister but later settled out of court, selling them his one-sixth stake in National Amusements that his grandfather had bequeathed him.
Four years ago, Redstone’s failing health set the stage for the fight over who would seize control of Viacom and CBS. At the time, the ailing media baron who has long been confined to his vast Beverly Park Mansion, had two live-in girlfriends — Manuela Herzer, now 54, and Sydney Holland, 47 — who controlled all access to him. Moonves and Shari could see him only when the duo allowed them to. But his deteriorating health somehow enabled Shari to take control of the mansion while he was hospitalised. Herzer and Holland were booted out of the mansion and Shari then began crawling her way back into the corporate empire. The girlfriends sued to get back into the mansion, forcing a Californian court to appoint a geriatric psychiatrist to confirm whether Redstone was mentally competent when, at the behest of his daughter, he ordered the two women out of the house.
With Moonves out, the focus will turn once again to the Beverly Park mansion and Redstone’s deteriorating health. There are a host of lawsuits pending and it is only a matter of time that a court will appoint another doctor who could declare Redstone mentally incompetent. Under Redstone’s will, his stake in National Amusements will pass to his five grandchildren — Shari’s three children and Brett’s two — while she will take control of the media empire. As hard as she has tried to get back at the helm of Viacom and CBS, Shari is no empire builder. She believes that her family companies are currently vastly undervalued by the market. What she wants to do now is to merge CBS and Viacom, nurse them back to health and then sell them as a package to Apple, Google’s parent Alphabet, Facebook, America’s top telco Verizon or whoever is willing to pay top dollar for them.
That is easier said than done. The media business has dramatically transformed in recent years from “content is king” to “distribution is the key”, and away from an advertising-based model to a subscription-based one. Netflix, which shuns ads, has shown that while content remains important, the key is direct-to-consumer distribution and the use of algorithms to understand what content the customer wants, and when. Netflix knows that you like to watch dramas on Saturday and comedies on Sunday, and that your neighbour only watches decade-old reruns. In an industry once dominated by the likes of Time Warner (now part of telco AT&T), Fox, CBS-Viacom, Disney and Comcast (which controls NBCUniversal) the new kings are Netflix, Amazon, Google’s YouTube, Apple and Facebook, which are combining their chops in artificial intelligence and machine learning with their ability to create content and deliver it on demand by streaming it to customers around the world.
Redstone’s entertainment empire has suffered more than some of its peers in part because of his poor health and boardroom battles. Viacom stock is down 62% from its early 2014 peak, while CBS stock is down 19% over the same period. (Comcast shares are up 42% and Disney shares 50% since February 2014.) Viacom has been a victim of the “cord cutting” of cable TV packages. Because it lacks a sports franchise, it commands far less in fees than rivals. CBS, though still the No 1 TV network in the US, has suffered as viewership has fallen and as advertising continues to migrate from TV to Google, Facebook and more recently, Amazon.
The irony is that media moguls such as Redstone and Murdoch who built their empires by being disruptors are, in the final phase of their lives, being disrupted by relative upstarts like Facebook and Google. One reason why old media barons find their businesses in the shape they are in is their reluctance to invest in technology, though to be fair to Redstone, he has been kicking tyres in the tech world for years. CBS once controlled financial website Marketwatch, now part of the Murdoch empire. And Viacom was a bidder for MySpace, the pioneer of social media, but Murdoch snatched it away with a very high bid — and eventually lost nearly a billion dollars on it. Redstone was so upset that he fired his then CEO Freston for losing the bid.
Had the media moguls stepped down earlier, their originally anointed successors might have saved the empires. After she was ousted from her dad’s empire, Shari co-founded Advancit Capital, an investment platform focusing on the early stage in media, entertainment and technology. Among its investments are several AdTech companies. James Murdoch actually dabbled in tech before he joined the family empire and is now reportedly looking at investing in AdTech companies focusing on programmatic advertising. Who knows, some day the new media barons of Silicon Valley might square off with the kids of the old media barons.
Assif Shameen is a technology writer based in North America
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