The Making Of A Media Giant

Mel Karmazin is a pretty funny guy. At last week's news conference announcing Viacom's $37 billion acquisition of CBS, Karmazin, the CBS chief, could have been auditioning his stand-up act for a spot on "Letterman." With mock seriousness, he explained how the two companies would exchange assets to complete the deal: "As of about an hour ago, one ticket to the MTV Music Awards was equal to one-and-a-half tickets for the U.S. Open, but not the finals.'' He teased his new billionaire boss, Sumner Redstone, the head of Viacom, about their trip the following day to Washington: "He's flying on his plane; I'm getting on a shuttle.'' When Redstone said the real reason for the deal was his interest in using all the empty billboards owned by CBS, Karmazin, without missing a beat, turned the awkward moment into a setup line: "And if you saw blank billboards, they weren't ours.''

For Karmazin, the Viacom-CBS deal is more than a great opportunity to showcase his wisecracking skills. Once the merger is completed, it will catapult the son of a New York cabdriver to the uppermost reaches of the media business and clearly signals that in the entertainment industry these days, business skills trump creative instincts. Unlike Disney's chief, Michael Eisner, who got his start picking shows for ABC, Karmazin spends little time on the creative side. Instead, Karmazin's clout stems from his obsessive focus on boosting ad sales and cutting expenses. He's generated enormous profits for investors through the years, and for himself--last year he cashed in $196 million worth of stock options. Even though CBS was acquired by Viacom, and Karmazin is taking the No. 2 spot, it's clear that Wall Street and media-industry insiders expect the former radio-ad salesman to make the merger pay off. "Mel's a superb executive,'' said David Geffen, a partner in DreamWorks SKG. "He's all about operations and marketing, making things run efficiently.''

By pushing for this huge deal, which will create the third largest media company, behind Time Warner and Disney, Karmazin may trigger a new wave of hastily arranged corporate media marriages. There was intense speculation last week that General Electric's NBC, which is the sole remaining network not linked to a movie studio, will rush into the arms of a partner like Sony or Seagram, both of which own studios but lack a broadcaster's pipeline into homes. The model is the kind of success that Rupert Murdoch's News Corp. has had with "The X-Files''--Fox produces the show, it runs on the Fox network, reruns are syndicated by Fox and cable rights go to a Fox cable network. Fox also made the movie.

Karmazin is already considered a master at making a modern media empire more than the sum of its parts. Last year CBS regained the status of most-watched network partly because Karmazin aggressively promoted CBS's TV shows on its huge chain of radio stations. He wants to keep your eyes focused, ears tuned and mouse clicking on the myriad divisions under his direct control, including the CBS TV network, radio stations, cable channels like MTV and Nickelodeon, Paramount Studios and a slew of Web sites. Karmazin sees all sorts of possibilities in a world where Paramount Studios can develop shows for the CBS network, and CBS's rock radio stations can plug MTV. In turn, Karmazin wants to publicize CBS television shows on MTV to help attract younger viewers to CBS. And with Nickelodeon thrown in the mix, he can boast of high-chair-to-grave demographics across the company's audiences. The new selling proposition: Viacom will offer advertisers one-stop shopping and oodles of cross-promotion among its units.

All that may be the easy part. Karmazin has to manage not only down and out, but also up. He maintained last week that Redstone doesn't even make the top-10 list of toughest bosses he's ever worked for, but that judgment may be a little premature. Redstone is not the easiest guy to work for, as Frank Biondi, his longtime chief executive, found out. Over a period of nine years, Biondi and Redstone built Viacom into a powerhouse with such brands as Showtime and Nickelodeon. But Redstone decided in 1996 that the laid-back Biondi didn't fit the new Viacom. "Frank's style doesn't work in this company as it is today," Redstone said after he sacked him. CBS's board slowed the Viacom negotiations with discussions on how to protect Karmazin from any similar rash moves by Redstone. Karmazin, whose contract lasts through 2003, can be dismissed from his job as president only if 14 of the 18 directors of the merged company agree he should go. If the 76-year-old Redstone vacates his CEO role, Karmazin automatically gets the position.

But early indications suggest that Karmazin knows how to work (with) Redstone. Karmazin initially wanted to acquire Viacom, and he first approached Redstone a few weeks ago with a modest proposal to buy its TV stations, and the talks quickly grew into a full-blown marriage. "He seduced us,'' Redstone said. Karmazin, returning the compliment, said, "This man has not lost his fastball.'' He declared his intention to make Redstone's considerable holdings worth more than Bill Gates's Microsoft stock, a nifty way to suggest that there's some uncut rock reserved for Redstone on capitalism's Mount Rushmore.

Karmazin's uninterest in programming is unfortunate, given his knack for telling a good story. From humble beginnings in Long Island City, Karmazin quickly found success in ad sales with New York radio station WCBS in 1967. He was apparently so good that his boss tried to throttle the $70,000 he was earning with commissions, so he quit. He spent the next 11 years at WNEW, then was recruited to manage Infinity Broadcasting, a company with ambitions that matched Karmazin's. He placed an early bet on Howard Stern by signing him up after Stern was fired by NBC (although Stern was forbidden to use Karmazin's name on the air). In 1996, Karmazin approached CBS, which in turn bought Infinity and gave Karmazin a launching pad to move up quickly to the top job. Karmazin is famous for questioning expenses as small as business-lunch tabs. But he is equally fixated on growing revenues--he's put a lot of ad salesmen on commission-only pay, removing their salaries altogether. He's rich, but by all accounts lives to work. Hollywood players say they simply don't know him, and that he's never at parties or dinners. Karmazin would like everyone to believe he's been busy preparing for this moment. "This is a deal I wanted to make, I think, from the time I was bar-mitzvahed,'' he said.

It's a good line, and Karmazin will need many more of them in the months ahead. Both Karmazin and Redstone ducked the touchy question at the news conference about where their respective offices would be after the two companies are merged. In an interview with NEWSWEEK, Redstone said the question hadn't been resolved, but vouched that "I certainly would like to see Mel and me in close proximity.'' Karmazin was asked the same in a subsequent interview, and dialed up his best deadpan: "We haven't decided whether Mr. Redstone is going to move to the CBS building or not. I haven't really thought about it. Does he have a big office? If his office is too big, we'll share it. We've got to make sure our shareholders are happy.'' At least for the moment, his shareholders, who have already seen their CBS and Viacom stocks jump on the merger news, are smiling.