Viacom reshuffle: Karmazin exit could upset sales operation

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With Chief Operating Officer Mel Karmazin's departure from Viacom last week, the media-buying community is watching to see how the ad-sales functions, especially unit Viacom Plus, will operate without the executive credited with driving much of the company's advertising success.

Jessica Reif Cohen, a media analyst at Merrill Lynch, thinks his departure is bad news. "He was the best operator in any business, an incredibly strong, talented operating executive. ... There is going to be a ripple effect," she said, adding that the true impact might not been seen for a while.

"The reason Viacom has been so successful is because of the goals that Mel set from the get-go," said one agency buyer.

Four-year-old Viacom Plus, run by Exec VP Lisa McCarthy, is the place where the company's cross sales of its broadcast, cable, outdoor and radio units gets done. "Mel was really Lisa McCarthy's champion, she reported to Mel," said one executive who has negotiated deals with Viacom Plus. Many agree that Viacom Plus functioned because Mr. Karmazin made it work both internally and externally for advertisers.

"He was something of a Wizard of Oz," said this executive. "Whenever you negotiated with CBS and Viacom, there'd be all this smoke and flames in the background with executives saying `I got to hold that number for Mel.' He was their bad cop."

power-sharing

CBS Chairman-CEO Les Moonves and MTV Networks Chairman-CEO Tom Freston will now share Mr. Karmazin's title. Neither came up the ranks at Viacom through the ad-sales department.

Viacom depends more on its ad-sales revenue then other media companies, and its stock performance has trailed other players during the ad recession as a result. In 2003, Viacom generated 45% of total revenue from advertising-$12.1 billion. Time Warner last year generated 15.6% of total revenue from advertising, while Walt Disney Co. in its last fiscal year pulled in 23.4%. Viacom Plus, which accounts for an estimated $600 million in annual ad sales, has a long-standing agreement with Procter & Gamble Co., worth as much as $350 million, and has put together deals for marketers such as Johnson & Johnson and Home Depot.

Mr. Moonves has already reaffirmed his commitment to Viacom Plus. "It has been a fabulous asset for us, obviously, in reaching clients and presenting different plans of each one," Mr. Moonves said. "Now having radio and outdoor along with the CBS TV network, Viacom Plus becomes even more important."

While Mr. Moonves and Mr. Freston have barely had a chance to settle into their new roles, it is unclear which of the two men will control Viacom Plus, or if they will run it jointly. "We truly haven't delineated it. ... I'm sure to be dealing with Lisa quite a bit and I'm sure Tom will be as well," Mr. Moonves said.

He added that his new responsibilities overseeing both the radio and outdoor businesses would lead to greater cooperation and may provide a boost to the promotion of CBS's fall lineup.

Mr. Freston is already looking at who might succeed him at MTV Networks, and MTV executives suggest that person might be named as early as this week. Those in the running: Judy McGrath, MTV Networks Group president, Mark Rosenthal, president-chief operating officer of MTV Networks, and Herb Scannell, president of MTV Networks Group/president of Nickelodeon Networks.

Mr. Moonves said it was unnecessary right now for him to name a successor, but: "That could change as we go down the path."

In what is shaping up to be a bake-off to see who succeeds Viacom Chairman-CEO Sumner Redstone, each executive has been given an even start with regard to the operating profit they are responsible for. Mr. Moonves will control broadcast TV, radio and outdoor, which had total revenue of $11.6 billion and operating profit of $2.42 billion in 2003. Mr. Freston's grouping of cable networks, Paramount Pictures, Paramount Parks and Simon & Schuster generated revenue of $9.7 billion, with operating profit of $2.44 billion.

contributing: bradley johnson

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