Sumner Redstone's firing of Tom Cruise saw Viacom's share price rise but not everyone in the American film industry is overjoyed.
Viacom chairman Sumner Redstone was crowing yesterday after his harsh public dismissal of superstar Tom Cruise sent shivers through Hollywood and destroyed the feel-good spirit that had imbued his company's Paramount Pictures studio this summer.
For Redstone, a bump in Viacom's stock price - however slight- outweighed any hangover in Hollywood his blunt remarks about one of Paramount's most bankable stars may have caused. Redstone said he was justly reassuring Wall Street that Paramount would not squander profits by overpaying stars in an effort to help lift Viacom's recently sagging stock price.
"It's the first time in a long time that Viacom was up more than CBS, which means that Wall Street liked the message," said Redstone, referring to the two media companies he controls, CBS Corp and Viacom. "I don't see that any damage was done by what I said."
Redstone's priorities, however, upset morale at Paramount Pictures, which was beginning to enjoy some success after a tumultuous year marked by management turmoil, cost-cutting and box office disappointments. The studio will make money on the wacky comedy Nacho Libre, starring Jack Black, and Oliver Stone's World Trade Center.
"We were starting to hit our stride, everyone was feeling great, and then this Tom Cruise fiasco hits,"said one top executive, who was annoyed with Redstone's dismissal of the star. "The Cruise story is front-page news in papers all over the world, yet Redstone is crowing about his stock price being up 15 cents. That's not what people in this town want to hear."
Redstone's remarks were seen in Hollywood as undercutting the authority of Paramount chairman Brad Grey and Viacom chief executive Tom Freston. The two executives were blindsided by Redstone's remarks. After months of negotiations with Cruise and his producing partner, Paula Wagner, Freston and Grey were ready to cut its ties with the Cruise-Wagner team in what one insider called "a dignified way", as a tribute to their 14-year collaboration that resulted in hundreds of millions of dollars in profits for both sides.
Redstone, however, grabbed the headlines himself by announcing that Cruise would be let go because of his erratic behaviour. Leading up to Paramount's release of Mission: Impossible III, Cruise professed his love for his fiance by jumping on a couch on The Oprah Winfrey Show and attacked the use of antidepressants and other medication.
Redstone acknowledged he usurped his managers. "Tom Freston should have made the announcement, but it was apparent to me he didn't want to, and I understand why: because he's in the talent business," Redstone said, who went out of his way to praise both Freston and Grey for re-energising Paramount after a fallow period.
Yet, Redstone has long made a habit of stealing the limelight away from his top lieutenants. When Viacom chief Frank Biondi failed to move as aggressively as Redstone wanted into new European markets in the mid-1990s, Redstone abruptly fired him and took the title for himself. He also elbowed aside Viacom president Mel Karmazin in a power struggle in 2004.
Fuelling Redstone's frustration of late has been the sagging stock price of Viacom since he divided his empire into two separate publicly traded companies, Viacom and CBS Corp, in early January. The break up had been billed as a way to "unlock" value hidden within the conglomerate. Instead, Viacom shares have slipped 16 per cent since the start of the year.
Wall Street has largely been sour on media stocks this year, and Viacom's cable properties such as MTV, Nickelodeon and Comedy Central have experienced an unexpected slowdown in ad sales. More companies are steering a bigger percentage of their ad dollars to the internet and other digital platforms. The company's lacklustre performance has prompted some analysts to call for Redstone to shake things up, such as buying out shareholders to turn Viacom into a private company. Viacom has said it plans to remain a public company.
Following Redstone's comments, Viacom shares rose 19 cents on Wednesday, closing at $36.63, in an otherwise down day for the market.
The mogul holds more than 70 percent of Viacom voting shares, and has long been known as obsessive about the stock price of his companies. He has even been known to call up trading desks at brokerages to demand an explanation if a firm sold a large block of Viacom shares.
Redstone's actions sent a clear signal to both Wall Street and Hollywood: the high-priced talent deals that have been a weight on his company's Paramount Pictures movie studio aren't going to fly any more.
"I sent a message to Hollywood to 'just say no'," said Redstone in an interview on Wednesday. "We are over-paying for stars. 'The system' means the stars get it all, and the studios are lucky to stay alive. That system will not exist at Paramount."
Redstone's banishment of Cruise, had some questioning whether the 84-year-old patriarch, who built the nation's third-largest entertainment empire from a band of drive-in theatres inherited from his father, had lost his reasoning. In a business famous for coddling celebrities, Redstone had bluntly belittled one of Paramount's most bankable stars.
The 44-year-old actor and production partner Paula Wagner have enjoyed a lucrative deal at Paramount that, in recent years, has provided as much as $10 million a year to cover overhead, project development and other costs related to running their film production label.
The two sides had been trying to negotiate a new arrangement, but both sides had reached the conclusion that Cruise and Wagner would not accept Paramount's scaled-back offer of $2.5 million a year.
- (LA Times service)
