The Redstone family faces a steep challenge to turn around Viacom after the victory by founder Sumner Redstone in the bitter fight to wrest back control of his $ 40bn media empire.
The legal and family drama that had engulfed the beleaguered owner of Paramount Pictures and MTV has ended with the immediate departure of chief executive Philippe Dauman, who leaves Viacom with a $ 72m exit package.
Thomas Dooley, chief operating officer, will take his place temporarily, the company said. All lawsuits between Viacom and Mr Redstone’s National Amusements company, which controls Viacom and CBS via voting shares, have been terminated.
As part of the settlement Viacom will add five new directors to its board, including Kenneth Lerer, chairman of BuzzFeed and Nicole Seligman, the former president of Sony Entertainment. Mr Dooley would be interim chief executive until September 30, and it was possible he would be kept on permanently, but nothing had been decided, according to a person familiar with the matter.
Mr Dooley was a longtime friend of Mr Dauman, however, leaving questions about how much of an agent for change he would be, analysts said.
Mr Dauman’s exit marks a clear victory for the 93-year-old Mr Redstone. The ageing billionaire surprised investors in May when Mr Dauman, whom he had often referred to as his most trusted ally, was removed from the family trust that will control the billionaire’s holdings when he dies. A month later the push began to remove Mr Dauman and others from Viacom’s board.
Mr Dauman had fought against the ousting, trying to persuade courts that Mr Redstone lacked the mental capacity to make those decisions and that his daughter, Shari, was manipulating her father to gain control of his legacy.
With his departure now settled, Ms Redstone is in pole position to manage the empire, holding an effective majority on National Amusements.
However, the turmoil is far from over for the Redstones. Ms Redstone, vice-chairman of CBS and Viacom, must turnround the Viacom fortunes after Mr Dauman oversaw a 50 per cent fall in Viacom shares over the past two years.
The change in leadership also renews questions about the possibility of Viacom combining with CBS after its split a decade ago. Some investors have pushed for a merger of the two companies to unlock cost synergies, although it’s unclear whether CBS would be keen to combine, analysts say.
Viacom had surfed the explosion of cable television and the rise of the MTV generation to become a media powerhouse in the 1990s. However ratings at its cable channels have plunged in recent years amid the industry-wide shift to digital streaming.
Along with revamping programming at its cable channels, Viacom’s new leadership must decide the fate of Paramount Pictures.
Mr Dauman had looked to sell a stake in Paramount earlier this year in an attempt to shore up Viacom’s tumbling market value. Dalian Wanda had expressed interest in acquiring 49 per cent of Paramount in a $ 4.9bn deal that would have valued the studio at $ 10bn, according to a person familiar with the matter. But Mr Redstone, who paid close to $ 10bn for the film studio in 1994, moved to block the sale.
Problems at Paramount, where profits dropped by nearly $ 500m in the past year, are “truly shocking”, wrote analysts at Moffett Nathanson. “Short of firing the entire Paramount leadership team, there is little a new CEO could do to quickly improve its film pipeline,” they said. “The best Tom Dooley can do is sell 100 per cent of Paramount to the highest bidder.”
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