Commentary by Scott Donaton

AN INTERVIEW WITH MEL KARMAZIN

Viacom President Discusses Acquisition Wish List and Media Consolidation

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When Viacom President-Chief Operating Officer Mel Karmazin joked that he was the ring bearer at Chairman-CEO Sumner
Scott Donaton, editor of 'Advertising Age.'

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Redstone's recent wedding, it was the wittiest line he delivered during a wide-ranging interview at the American Association of Advertising Agencies' management conference in New Orleans. It wasn't the most insightful.

That came when he was asked to give ad agencies advice on how to stay relevant to clients.

Raising rates
"I assume there's a great deal of value that you add," he said. "You just need to raise your rates." That line, too, drew laughs. But it wasn't meant to be funny.

Before we went on stage (I conducted the interview with Karmazin and, while there were no knockdowns, several observers scored it a draw) Karmazin and I chatted about the impact of consolidation on the agency business. Karmazin noted that while agencies have suffered the side effects they haven't reaped a supposed benefit: the ability to hold the line on, even raise, prices, in part because clients have fewer alternatives. Agencies instead have had margins squeezed, particularly by purchasing agents. As I see it, agencies are too fiercely competitive to advance the greater good. If one shop holds the line on price, another undercuts it.

His audience appreciated Karmazin for what he is: a salesman. If I had more time, I wanted to ask him to reply to those who say he lacks the sweeping strategic vision of a Rupert Murdoch. I suspect he wouldn't have taken it as criticism but as validation of how he views himself: another media peddler carrying a bag.

Wall Street is thrilled
That's fine by Wall Street. It was thrilled when Karmazin signed a new three-year employment contract after tense negotiations. It lets him retain day-to-day control of the $25 billion media company's

Photo: AP
Mel Karmazin's wish list: CNN and NBC.
operating units, including CBS, MTV, Infinity and Paramount Pictures, while giving Redstone, who owns nearly 70% of Viacom's voting stock, more input. The most recent Fortune, owned by rival AOL Time Warner, called Viacom "the most valuable, the most admired and the best-managed media company in the world."

Agencies aren't the only ones affected by consolidation. Media ownership is very concentrated, and it isn't over yet despite growing concern that deregulation and consolidation create media bullies able to control prices and content while burying competitors.

"Consolidation has been irrelevant because we have not forced anybody to look at us differently," countered Karmazin. "It is bizarre that there's been so much talk about it." Viacom's networks capture one in four TV viewers, I noted, asking, "Is that too big?" Him: "Not even close." Karmazin admitted his wish list includes NBC and CNN -- the latter, he said, would benefit from a partnership with CBS -- but he doubts either will be for sale soon. More likely to be on the block are the cable assets of Vivendi Universal, which Redstone and Karmazin clearly covet. "We like the television business," Mel said.

He doesn't, however, have kind words for magazines and newspapers, which Viacom doesn't own. "We like to be in growth businesses," he said, "and print has not led up to that."

Bullish on the upfront
What else? He's bullish on the upfront. He admitted it's an absurd way of doing business, but added, "I'm not about to eliminate it."

He believes the digital-video-recorder threat is overstated, and that Madison Avenue's 18-49 obsession is narrow-sighted. He insisted he's happy with his contract, and said he expects to retire from Viacom (he's 59 to Redstone's 79).

"I know I'm not going to learn to play golf," he said. "I just have nothing else to do."

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