Redstone rocks Hollywood

Cruise's firing sends signal on stars' pay

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August 25, 2006|By Meg James and Sallie Hofmeister | Meg James and Sallie Hofmeister,LOS ANGELES TIMES

HOLLYWOOD -- Viacom Inc. Chairman Sumner Redstone was crowing Wednesday, the day 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.

"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 Cruise. "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 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 behavior. Leading up to Paramount's release of Mission: Impossible III, Cruise professed his love for fiance Katie Holmes 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. Yet he 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. Redstone elbowed aside Viacom President Mel Karmazin in a power struggle in 2004.

Fueling Redstone's frustration lately 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 percent since the first 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.

After Redstone's comments, Viacom shares rose 19 cents Wednesday to $36.63 in an otherwise down day for the market. They lost 12 cents yesterday.

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.

Redstone's banishment of Cruise, had much of Hollywood buzzing. Some questioned whether the 84-year-old patriarch, who built the nation's third-largest entertainment empire from a band of drive-in theaters inherited from his father, had lost his marbles. In a business famous for coddling celebrities, Redstone had bluntly belittled one of Paramount's most bankable stars. He blamed Cruise's off-screen antics for costing Paramount Pictures millions of dollars, and for abruptly ending the actor's 14-year relationship with the studio.

The 44-year-old actor and his 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/Wagner would not accept Paramount's scaled-back offer of $2.5 million a year. Viacom executives had planned to stage a dignified departure for Cruise at the end of the month, when his production deal officially expired, said two company executives.

Instead, they were caught off guard when Redstone sounded off in an interview Tuesday with The Wall Street Journal.

Cruise's attorney, Bert Fields, returned fire from his vacation home in France. Fields called Redstone's comments, "as priggish and pompous and inane a statement as anyone has ever made in the history of the entertainment business."

"I knew what I was doing," Redstone said. "And I did the right thing."

Meg James and Sallie Hofmeister write for the Los Angeles Times. Times reporters Lorenza Munoz and Claire Hoffman contributed to this article.

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