Mel Karmazin, the one-time radio ad salesman who rose to the top of CBS but struggled for power with Viacom Chairman Sumner Redstone, resigned yesterday as president and chief operating officer after a frequently tense four years.
To replace Karmazin and to calm Wall Street jitters, Viacom named MTV Networks chief executive Tom Freston and CBS chief executive Leslie Moonves as co-presidents and co-chief operating officers. Redstone, 81, said it is "extremely likely that one of them will be my successor" as CEO, possibly in three years.
While Karmazin was credited with financial discipline, his two successors have shown a creative spark. Moonves has lifted CBS from the ratings basement to the top with such hits as Survivor, CSI and Everybody Loves Raymond. Freston has built a powerful group of cable networks with hits ranging from SpongeBob SquarePants on Nickelodeon to The Osbournes on MTV. But in splitting the No. 2 job, Redstone may be setting up a new conflict, analysts said.
Karmazin's surprise resignation caps years of rumors and speculation that the uncomfortable corporate marriage between Redstone, who once declared in a book that "Viacom is me," and Karmazin, 60, would end in divorce rather than succession. Despite that, Karmazin, who helped engineer Viacom's merger with CBS in 2000, signed a three-year contract last year.
Redstone, stressing that nobody asked Karmazin to quit and denying that the two of them disagreed on strategies involving possible acquisitions or spending, said he first heard about the possibility after Karmazin expressed frustration to another Viacom executive about two weeks ago. The frustration centered on the company's tepid stock market performance and weakness in its Infinity radio station unit, which Karmazin once headed.
"Mel was frustrated about something," Redstone said in one of two conference calls with analysts and reporters yesterday. "I hope it wasn't about me. I had no issues with him."
Redstone said he, Freston, and Moonves have been good friends for years and socialize together. They are "two of my favorite people," he said.
Moonves, 54, who will add the TV side of Paramount Pictures, the Infinity radio group and the billboard ad unit to his responsibilities, said, "I'm a workaholic, so I'm looking to do it all." Overseeing Paramount's TV production will let him "feed more top product" to Viacom networks, he said.
Freston, 58, who will add Showtime, BET, Paramount Parks, Simon & Schuster and the Paramount Pictures movie side, said he is mulling how to share his old responsibilities.
"Although we believe that the company's remaining executives also possess a keen sense of financial discipline, we view Mr. Karmazin's ability to hold firm as unique," Merrill Lynch analyst Jessica Reif Cohen said in a research report, adding that his departure "leaves a tremendous gap" that will require "a significant amount of management time and resources to fill."
The company said Redstone, who is Viacom's controlling shareholder, has "indicated" he will step down as chief executive officer within three years. Redstone flatly rejected speculation that his daughter, Shari Redstone, 50, may take an "executive operational role," but hinted that she might eventually succeed him as chairman.
David McLaughlin, chairman of the board's governance committee, said Karmazin had been "one candidate among others" to succeed Redstone.
Karmazin said that after 20 years with various parts of the company, he was leaving for personal and professional reasons and to "pursue other challenges."
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