Full Transcript of Tom Freston Interview on CNBC on June 15, 2016

Jun 16, 2016  •  Post A Comment

CNBC Exclusive: CNBC Transcript: Former Viacom CEO Tom Freston Speaks With CNBC’s Melissa Lee on “Fast Money”:

WHEN: Wednesday, June 15

WHERE: CNBC’s “Fast Money”

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with former Viacom CEO Tom Freston on CNBC’s “Fast Money” (M-F, 5PM-6PM ET) today, Wednesday, June 15th.

All references must be sourced to CNBC.

Melissa Lee: As this Viacom soap opera unfolds, we’re now joined in an exclusive interview with the original architect of Viacom, Tom Freston whose credits include launching MTV, VH1 and Comedy Central. Tom, welcome to the show. Great to get your perspective here. Julia outlined the potential for executive departures, there’s also the courtroom battle that is going on. It’s got all the elements, frankly, of a reality tv show, which ironically, MTV helped to pioneer. What do you make of the situation that is going on at Viacom and the decline the company has been in?

Tom Freston: Well, the whole soap opera of the Redstone versus the women, all these lawsuits, I think has really been a side show compared to the real story, which has been the fall of Viacom from grace, essentially, over the last bunch of years, last several years, that have been really one of the leading television networking companies in the business. And now it’s fallen to a level below really any of its peers on almost any metric plagued by all types of problems, including creative departures, which I know you just ran a story on. But I mean, it’s a company where jon stewart and stephen colbert left and john oliver all left within months of each other, which really has one scratching their head.

Lee: Right. Who is to blame? How did Viacom get here?

Freston: Get here from –

Lee: From the grace period in which it was when you were there.

Freston: Well, I think that, you know, and I’ve got to say I’ve been gone for a while and a lot of my passion for the company has left, so I’m not really an insider. But you really have to be from another planet not to know some things. I think Viacom got quite a bit more corporate. The culture that had been at the company, that had been so vibrant and profited was worn down gradually over time. I mean, litigation became a key tool at the top of that list would be a lawsuit that Viacom launched famously against youtube for a billion dollars. A billion dollars, and it really just turned heads everywhere in the digital world, at a time when Viacom’s audiences were beginning to migrate to digital rather than trying to get engaged with youtube like nbc or other people were and learn. They decided to sue them which basically froze Viacom for years on the sidelines, unable to really make any digital moves. They suffered hugely in terms of their reputation. And at the end of the day, it was a total joke because they didn’t get a nickel out of this and probably spent tens and tens of millions of dollars on this folly over several years.

Lee: You point out a lot of things that have happened under Philippe Dauman. Is he to blame?

Freston: Well, I don’t think he’s been the optimal leader for the company, no. I don’t.

Lee: Should he be fired?

Freston: Well, that’s really not for me to say. I do think that –

Lee: Is he the right guy for the job right now?

Freston: No. I would say no. I think the right guy for a job like that and a company that is steeped in the popular culture with young audiences, the person who holds that chair should be somebody who is turned on, attracted to, and somewhat knowledgeable about the creative community and the popular culture and what’s going on there and to be able to telegraph that and inspire the employees of the company behind that vision. You can’t run an entertainment company through lawsuits, through litigation, top down. It’s really in that business, particularly in that company, it’s sort of a bottom up. That’s where ideas come from. And I think it requires more dev management than maybe they’ve had in the past. There’s been a series of pretty serious errors.

Lee: Some have described him as an arrogant elitist. Would you agree with those words?

Freston: Totally.

Lee: Totally?

Freston: Yes. And has a reputation of not being a great listener.

Lee: How much interaction have you had, and some people who might be in Dauman’s corner would say that he actually inherited a number of problems from you.

Freston: Well, that’s probably true. Anybody who steps into a job, there’s always problems to pass on and I’m sure I created a few that he had to deal with, yes.

Lee: What is his number one misstep in your view? I mean, you mentioned the departure of talent. There’s also a paramount pictures letting go steven spielberg and david geffen. But what is the number one thing?

Freston: Well, I think besides being a real visionary that a company can rally behind, the idea that they really move from the center of the popular culture to the sidelines. They spent $18 billion, that is a ton of money, on stock buybacks in a period of time where the whole world was changing and they could have bought any number of things like time warner, disney, and nbc and others did. But they use all that money to sort of prop up the stock price., which was a trend if you look through a lot of things that happened there – selling their libraries off to netflix so people thought maybe SpongeBob now is not a Nickelodeon property. And I could go on.

Lee: Right. It’s not just Dauman, though, who has been there. I mean, Sumner Redstone is on the board. Runs, essentially, the company above Dauman. There is the board as well. What role do they play? Is it really – is it Dauman?

Freston: No, I think the board’s complicit in the inactivity of Viacom and approving various things that probably haven’t advanced the company in a proper way. I don’t know that the board is a board that’s really in touch with the world that Viacom viewers live in. The whole movement to digital has been where people just go increasingly. They’ve been very, very paralyzed. There’s no one that board who is really a digital person, for example.

Lee: So in terms of Dauman and what his future should be, how do you think he got into this position where he can stay in this position if what you say is true in terms of his missteps? Do you see a future for him? What is your prediction?

Freston: That’s at the heart of the soap opera right now.

Lee: Sure.

Freston: I mean, I don’t really know. For me, when the Redstones don’t want you, when wall street doesn’t seem to want you, and when from what you can hear, there’s not a huge amount of support for him in the company, you’ve got to wonder what’s the game he’s playing. What’s the point.

Lee: You have been in talk with one of the board members. Shari Redstone. What’s her take on this?

Freston: Well, she’s not a fan. She fully understands what has happened, what has transpired. She has been really the lone voice of dissent on that board.

Lee: Is there any sort of relationship beyond just being friends in that – in speaking with Shari? Is there any sort of a quid pro quo, you help us, go on tv, talk against Viacom and there may be a board seat for you in any sort of shake up?

Freston: She doesn’t even know I’m on tv. I mean, I’ve never really done this before. So I mean, I talk to her occasionally. I’ve talked to her over the years, she’s always been very friendly to me. Was very friendly to me when I was at Viacom. She has a lot of friends within the company still. But I don’t really have any ongoing back-and-forth with Shari. But I’m really rooting for her in this battle.

Lee: Why are you speaking out now? It’s been a long time since you’ve been at Viacom. Why now?

Freston: It just seems – well, there’s a lot of people speaking out. I just am speaking my feelings. I mean it’s a company I worked for for 25 years and it’s a shame to see something sort of fall from grace in such a way.

Lee: Alright Tom, hang on, our exclusive interview with former Viacom CEO Tom Freston will continue in just a few moments. We’ll find out if he’s been asked to resume his role as head of the media giant. Stay tuned.

Lee: Welcome back to “fast money.” let’s get right back to our exclusive interview with the former CEO of Viacom and MTV founder, Tom Freston. Tom, thanks for sticking with us. We ended the last segment talking about your conversation with Shari Redstone. And I’m just curious, and I’m sure a lot of people wonder if you would take the job as CEO of Viacom if asked.

Freston: No.

Lee: Absolutely no? That was a quick no.

Freston: No, listen, I’ve sort of moved on in my life. And things are good and it’s hard to go back again. Despite the affection I have for the place, I think they can find somebody else that can do that job with a little more passion than I could at this point in time.

Lee: Have you been asked? Has Shari floated that idea? Has anybody floated the idea to you?

Freston: Floated the idea to be CEO of Viacom?

Lee: Yes.

Freston: No.

Lee: No. Absolutely not? You just want to see the best for the company. At this point can Viacom be fixed in your view?

Freston: Sure.

Lee: How?

Freston: Well, there’s a lot of good people still there. I’m looking at it right now, it is right across the street. I think for them to fix it, they need to have a change of administration. I think top management really needs to go.

Lee: So, number one Dauman is out? Is that number one?

Freston: Dauman and I think some of the management group around him.

Lee: Okay.

Freston: And to install someone who could be a good inspirational creatively oriented leader who understands business.

Lee: Who on the team? Would it be a cleaning of the house sort of purge that you are envisioning?

Freston: You know, I haven’t been that close. But I would imagine that there’s some folks there that you know, they kind of came in as a team, they can go out as a team, assuming that happens. But then the board needs to be repopulated. And so you’d bring the age down. Get people from the digital world, other people from other forms of the entertainment business, people who have some kind of connections to the popular culture who could really add something and understand the business maybe a bit more. And I think it’s going to be difficult for them to just organically grow out of this. They’re going to need to make some acquisitions or do some smart strategic partnerships, plenty of which would be available to them. But Nickelodeon, MTV, Comedy Central, those are all really good brands. And by no means have they reached the point of no return. And I think they could be rejuvenated. America loves a second act.

Lee: You mentioned acquisitions. When you were there, you actually talked to facebook at a time when they were not public. What was the offer that you gave them?

Freston: We made an offer to facebook in 2005, this is a joke right now, for $750 million, with an earnout, if you can believe it, to mark zuckerberg. At that point in time, facebook’s revenues were about $25 million. And they turned us down. And then they turned down later yahoo! Was in for about $10 billion. And then microsoft was in for more than that. And it’s now worth 300 some odd billion dollars. So clearly, let’s not question mark zuckerberg’s decision powers.

Lee: Is that the kind of acquisition you would like to see Viacom make in terms of that space, that direction?

Freston: Well, I mean, it would be lovely if Viacom would love to have – if they could afford facebook or maybe they could figure out some closer arrangement with them. But being more deeply involved in the various spheres of digital, be that with mobile operators or social networks, would be an important place and way for them to go. And I’m sure they could find people on the other side who would be interested.

Tim Seymour: Hey Tom, first of all, thank you for joining us. And as someone who was born in the MTV culture, obviously, I think it changed all of our lives. What is that next creative angle for you? We know vice is a big part of that. But what would you say is going to be the defining way to reach young people in the media world in the next ten years? Or five years even?

Freston: Well, one thing I work on that I’m excited about and you mentioned, is vice. And I did a deal with them when I was at Viacom, which they bought out after I had left. But vice basically ripped off the Viacom/MTV network’s rule book. They play the same exact game but as in the digital age for the millennial generation. But it’s a big brand, vice, with a lot of little brands under it for fashion, food, music, and so on, so forth. They have the same type of attitude about creating their own product, owning it, putting it on all the platforms. They’re on tv, they’re on digital, they’re on mobile. They have several revenue streams. Big worldwide footprint. And they’re just really getting going. They’ve got a great deal now with home box office that you may know about.  Starting in the fall, we’re going to be launching a daily news show on home box office, which is really their first foray into that type of thing. They’ve launched a new network called viceland in a joint venture with a&e, which it’s sort of under construction, but it’s making headway. They’re a very smart and able group of folks who run it. So that’s something to me that has high appeal. And it’s sort of a mirror of what we used to do at Viacom in a way.

Lee: Under the umbrella of acquisitions, Tom, would a studio like lionsgate be among the targets that you would say Viacom should look at?

Freston: That’s really hard for me to say.

Lee: Okay.  Do you see a fit?

Freston: You know, there would certainly be a fit with some parts of Viacom with lionsgate. But if that’s better than something  else it’s really at the level I’m at, the distance I’m at, is hard for me to tell.

Lee: We actually just got a statement from Viacom. So I would like to read this to you. It’s a bit long, so have patience here. “Viacom is significantly bigger, more global and generates far more profits today than when Philippe Dauman’s predecessor left office in 2006…Viacom is making more global hits than ever before exemplified by recent successes such as lip sync battle now airing in 96 countries. Philippe has also brought in new creative leadership to reposition key networks…the company has generated billions of dollars in new distribution revenues from emerging digital platforms while at the same time more than doubling affiliate revenues since 2006.” What’s your take?

Freston: Well, the pie has grown for everybody, but they’ve fallen down from being the second most viewed television company to the seventh. They’ve fallen down in terms of their ad sales growth, in terms of their ratings. Of course the entire television business has expanded. As for certain shows being set in certain countries, I don’t know. They have a good worldwide network. But it’s hard to think of any great shows, any big hits that have come about in the last bunch of years.

Lee: They point out lip sync battle. Is that the kind of –

Seymour: Guy loves that. I think – were you a contestant?

Guy Adami: Next season.

Seymour: Ok, yeah, sorry.

Najarian: Next season.

Lee: Is that the kind of show that you would think a media company would point out to exemplify what their success has been internationally?

Freston: Well, lip sync battle is not SpongeBob, let’s say that. But it may be very successful for all I know. It sounds like it’s fun. I haven’t seen it, so forgive me.

Lee: At this point, what do you think the company can do? What would you like the board to do at this point?

Freston: Well, I don’t know what the board can do at this point. They’re locked in this battle with the Redstones. They’re suing. And it’s back and forth. So it seems like both sides are paralyzed. I would just say that I think it would be in the interest of everyone, especially the employees there, to have this over and done with one way or the other. And not be sitting in limbo. Because every day in limbo, they’re losing more and more ability.

Dan Nathan: You know Tom, we talked about what they can do, what they can acquire. I look at this media property as $17 billion market cap. A pretty good balance sheet here. A lot of problems in the c-suite and on the board and that sort of thing and you’re talking about lip sync battle. That’s the sort of thing that should be on another platform that somebody else like facebook owns. If you’ve seen it, I’ve seen it. That’s the stuff that goes viral. To me, this seems like a company at 1.3 times sales when you have disney at 2.8, time warner at 2 times sales, it seems like this would be something scooped by a new media company, and just used as this linear tv platform with content.

Freston: You mean scoop up Viacom?

Nathan: Yeah.

Freston: Well, it’s entirely possible that they could be an acquisition target. But remember, natural amusements owns 80% or 90% of the stock and they’re the controlling shareholder. Sumner’s never been one to want to sell anything. He’s been a buyer lord knows over time. So, hard for me to say. But no, there’s—it’s a great company.  And it has, you know, it has stumbled. But it certainly has the ability to rebound and it certainly has the ability to merge, combine, strategically, or on any other type of basis with other firms.

Lee: Okay. Hold on there. We’re going to take a quick break. Much more “fast money” right after this.

Lee: The final word from the former Viacom CEO Tom Freston who is here with us in an exclusive interview. Tom, I want to get your take on the future of the company. There have been a lot of people who floated the idea that CBS and Viacom should merge. Do you see such a combination? Could les moonves be the ideal candidate to lead this combined company?

Freston: Look, les is like the perfect entertainment executive. He’s done a great job. He’s a great guy. He’s done a great job at CBS. And the company was once together and worked pretty well. Whether they get together again now, it’s not for me to say. Les and the board there might have a lot of other things on their plate. It’s really not for me to say. But that would be an interesting combination, an obvious one.

Lee: We were talking about a period in which you think that there’s a fall from grace which implies that Viacom once was a great media company. Do you think it can retain that status? Or has the world just changed around them to the point where it’s got to reinvent itself?

Freston: Well, it’s still a great company. I don’t want to – they’ve had some steps and falls. And there are ups and downs in life. They could be well timed for an up right now. But I think for them to become relevant again, they have to deeply engage in the digital world that they really have been a bystander to, largely to date. It’s going to be hard to imagine them being relevant particularly with the audience segments that they deal with. Kids, teens, young adults who hav migrated so much to the two other screens.

Lee: Right. Tom, thanks so much for coming by. We appreciate your time and your insight into the situation at Viacom.

Freston: Okay. Pleasure to be here.

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