Media behemoths need leaders with new skills

Aug 26, 2002  •  Post A Comment

A year from now, Michael Eisner could be gone as chief executive of The Walt Disney Co., Mel Karmazin may be Sumner Redstone’s designated successor at Viacom and Barry Diller could be king of a new media giant.
Such high-level executive reshuffling may be required to get the media industry back on track and would be every bit as stunning as what has occurred so far this year, including the forced exits of Gerald Levin and Bob Pittman at AOL Time Warner and Jean-Marie Messier at Vivendi Universal.
These fallen executives have, partly, been scapegoats for everything that has gone wrong with their unwieldy conglomerates in a slowed economy and volatile stock market. While clearly no one knows how to operate or maximize the value of these conglomerates, some executives also are to blame for being too self-absorbed in their own grand visions.
A new generation of chief executives will need different leadership skills than their predecessors to successfully preside over the next wave of media restructuring and issues.
With many of these companies immersed in accounting probes, deconsolidation moves and balance sheet squeezes, top executives must innately understand and be able to grow a company’s core assets without incurring more of the paralyzing debt that was the only sure thing that came from the mergers and acquisitions of the past decade.
A different kind of executive
The experts say what is needed is strong, focused executives who can exec ute well-thought-out plans and still be visionaries. They must be able to empower strong creative types and know how to reinvest in their brands while maintaining firm fiscal discipline.
Humility, an ability to successfully execute plans and a willingness to tie their own compensation to a company’s performance are among the most important values for leading executives these days at media companies that are undergoing extraordinary changes and pressures.
Measuring a chief executive’s worth can be as simple as looking at the growth of shareholder value, revenues and earnings during his or her tenure. However, unsteady consumer and advertiser spending, mounting debt, shrinking cash flows and plunging values haven’t helped many management legacies.
But in tough times, when everyone is suffering, other leadership qualities prove just as important, said Bill Simon, senior partner and managing director of global media for Korn Ferry International. “Because the business is so tough right now, and so much has dramatically changed in the past 18 months, credible and focused leadership remain high on everyone’s lists,” he said.
Comcast’s deep lineup
Experts at consulting and executive search firms say Comcast Corp., which is poised to become the largest cable operator after it acquires AT&T Broadband later this year, is well endowed with such executives, including President Brian Roberts, Comcast Cable Communications President Steve Burke and Chief Financial Officer John Alchin. News Corp. President Peter Chernin and General Electric Co.-bred NBC CEO Bob Wright also are seen in the same light, experts say.
The experts identify a string of leading media executives who are poised to ascend to the top of the heap, among them Chase Carey, former co-chief operating officer, News Corp.; Tom Freston, chairman and CEO, MTV Networks; Jeff Bewkes, chairman, Entertainment and Networks Group, AOL Time Warner; Jonathan Miller, chairman and CEO, America Online; Scott Sassa, consultant, strategic projects, NBC; Marc Rosenthal, chief operating officer, MTV Networks; Ron Meyer, president and COO, Universal Studios; Geraldine Laybourne, president, Oxygen Media; Judy McGrath, president, MTV Networks Music Group; Doug Herzog, president, USA Network; Steve Bornstein, former president, ABC Television; Les Moonves, president and CEO, CBS Television Network; Anne Sweeney, president, ABC Cable Networks Group; and Jeff Zucker, president, NBC Entertainment.
While top executives clearly will be signed for more cash salary, less stock options and more overall performance-based compensation, there’s a new mandate to select leaders who are from within the company and closer to its core businesses, in much the way AOL Time Warner recently appointed Richard Parsons as CEO and insiders Jeff Bewkes and Don Logan as his first lieutenants.
In a recent study of the past decade’s media mergers, Sanford Bernstein analyst Tom Wolzien concluded that management-related issues are major contributors to why many of these deals haven’t worked. At Disney, Mr. Eisner acquired but failed to properly manage ABC. Time Warner Chairman and CEO Gerald Levin moved his traditional media company outside of its core competencies in merging with America Online. AT&T Chairman and Chief Executive Michael Armstrong goofed by trying to save his dying long-distance business with more than $100 billion in cable television assets he knew nothing about operating, which are now being flipped to Comcast. Viacom is on the verge of keeping itself from committing what Mr. Wolzien calls a deadly sin: “significant senior management turnover as a result of cultural or philosophical differences.”
When the differences between Viacom Chairman and Chief Executive Sumner Redstone and President and Chief Operating Officer Mel Karmazin burst into the public and sent Viacom’s stock price plummeting earlier this year, the men were put on notice by Viacom’s board of directors. Much to their credit, both executives, who also are major shareholders, put a cap on their public and private feuding.
Contrary to Mr. Redstone’s privately stated resistance six months ago to keeping Mr. Karmazin on board, a special Viacom board committee now is angling to renew Mr. Karmazin’s contract (set to expire in 2003) to keep him out of the hands of needy competitors such as Disney, sources said.
Unlike most of his peers, Mr. Karmazin has allowed Viacom’s strong, sometimes disparate, core businesses to thrive independently rather than forcing synergies or integration-a feat that Mr. Eisner and others at Disney have been loath to accomplish.
Alternatives to Eisner?
Mr. Eisner’s own long-supportive board of directors may not consider him the best person to revitalize and reverse Disney’s fortunes. Even in the boom years, Disney has seen a 6 percent annual decline in shareholder value and has seen a steady decline in earnings and stock price-of more than 40 percent this year alone.
Several board members have been actively seeking alternative leaders, and coming up with few names. The most prominent among them is Steve Jobs, the Apple Computer founder and chairman of Pixar. Another candidate to succeed Mr. Eisner, 60, is his nemesis and former Disney studio chief Jeffrey Katzenberg, who could bring his independent DreamWorks Co. in tow.
Although President Bob Iger and theme park chief Paul Pressler are well thought of, they are not considered first-choice CEO candidates by all concerned.
Over at Vivendi Universal, the new French leadership is looking to Mr. Diller, the non-salaried, non-contracted chairman of its Vivendi Universal Entertainment subsidiary, to help leverage-not sell-the likes of Universal Studios, Studio USA, USA Network, Sci-Fi Network and Universal Music assets.
“Companies are scrambling to sign executives who fit the new mold, as soon as they figure out what the new mold is,” said Steve Unger, managing partner and director of the media practice at Heidrick & Struggles. “All they know is the old way of doing things doesn’t work anymore.”