Viacom's Next Steps: Does CBS' Leslie Moonves Hold the Key?

The Hollywood Reporter

Does Shari Redstone have a plan?

Now that Tom Dooley has been swept aside after a brief few weeks as Viacom's interim CEO, will the troubled company's board go through a serious search inside the company and out for new leadership, as Viacom indicates, or will it merely go through the motions as a buildup to a tough negotiation with CBS chairman and chief executive Leslie Moonves?

Analysts lean towards the latter, and now that a Nov. 15 exit date has been set for Dooley, the clock is ticking. Moonves said recently that CBS is not in "active" talks with Viacom about merging the two companies controlled by the ailing 93-year-old Sumner Redstone and his National Amusements. But as FBR analyst Barton Crockett observes, "That does not rule out talks next week or next month."

Says BTIG analyst Richard Greenfield: "We expect the next steps for National Amusements will be a reunification of Viacom and CBS with Les Moonves bringing on creative leadership at both MTV Networks and Paramount that can resuscitate troubled assets. This is a significant value creation opportunity for shareholders of both companies."

If that's going to happen, it's clear Moonves is going to drive a tough bargain. Sources say he has been telling friends he doesn't want to run Viacom, and even if he does, he certainly would not want any perception that CBS stakeholders are being sacrificed to save his company's beleaguered sibling. "We are never going to do something that is bad for CBS shareholders," Moonves vowed Sept. 15 at the Bank of America Merrill Lynch Media, Communications & Entertainment Conference. That means a premium for CBS shareholders must be part of any deal. And Moonves no doubt would also want considerable control over the board of the combined companies.

Read more: Viacom Interim CEO Tom Dooley to Depart, Company to Consider "All Options"

For many years, Moonves, 66, was believed to covet Viacom and particularly the Paramount film studio, but by now there is good reason for anyone to have misgivings about taking on Viacom. The company has been so diminished by years of poor leadership under the now-dispatched Philippe Dauman that it has lost a lot of its allure. Its cable channels are struggling. Paramount is not only losing money this year, with disappointments including Zoolander 2 and Teenage Mutant Ninja Turtles: Out of the Shadows, but with the passage of time and the advent of new technologies, the movie business has become far more challenging.

(Ironically, Time Warner - the company Moonves would covet now, and that would seem to be a perfect fit for him - could be available to the right buyer, a scenario that for decades seemed unimaginable.)

Meanwhile Shari Redstone, 62, has just finished a bruising boardroom battle to eject Dauman and install board members of her own choosing (in theory, with the backing of her father, Sumner). The notion that she would keep Dooley in the top job after his long alliance with Dauman never seemed plausible. Still, Dooley appeared to be taking his role seriously and some associates believed he hoped to convince the board that he could reinvigorate Viacom. The news Wednesday of his departure, effective Nov. 15, took associates by surprise.

Now there is speculation about other candidates, inside and outside the company, to take Viacom into the future. But all the names to arise so far, from outsiders like former top Fox executive Peter Chernin to insiders like Bob Bakish, CEO of Viacom International Media Networks, seem to be unlikely candidates - either because they lack interest in the job or because they lack the stature to convince the media world they can solve the company's problems. The bottom line is that Viacom needs major surgery, and to many observers on Wall Street and in Hollywood, Moonves is the compelling choice.

Even if the new Viacom board is willing to accommodate his every desire, it has to do its due diligence and consider other contenders. And making it look like that search is serious strengthens its hand in its dealings with the savvy CBS chief.

But having won a hard-fought battle for Viacom's future, it is unclear whether Shari Redstone and the new board members are ready to grant Moonves all his wishes. And if he is asking for too much, the search for an alternative choice could be serious.

So does Shari Redstone have a plan? "I keep getting mixed messages," says one longtime Viacom critic. "Some say Les is posturing for the best possible deal and others say, `No, they're really looking.'"