Media Money with Julia Boorstin

Sumner Redstone's Companies Face Off Yet Again


Since Sumner Redstone split up CBS and Viacom, the two companies have had an increasingly acrimonious relationship.

It's remarkable that the media mogul would let his two babies battle each other like this.

After the split in 2006, CBS created its own movie studio, since it no longer had direct access to Paramount's movies. Now CBS Films has signed a 3-year marketing and distribution deal with Sony Pictures . This means that CBS will pay Paramount's rival Sony fees to distribute the four to six films it plans to distribute a year. CBS and Paramount used to be part of the same company - not only are they directly competing with each other but now CBS is paying Sony and helping strengthen its international negotiating power.

This is just the latest example of Redstone's two companies costing each other money. When the companies split and Viacom failed to renegotiate its pay-TV deal with CBS' cable channel Showtime, it partnered with LionsGate and MGM to launch a new rival cable channel called "Epix." Despite tens of millions of dollars of investment Viacom and its partners have poured into this channel, it has failed to secure the cable distribution to allow it to really compete with Showtime. (Check out my blog on Epix' launch)

Wouldn't Redstone want his two companies to collaborate with each other? Couldn't Redstone have implemented some partnerships or alliances, or at least strong relationships so CBS Films partnered with Paramount to produce films? Instead, CBS Films and Sony are together producing "Faster," an upcoming action movie starring 'The Rock.'

It seems that Redstone is the kind of father who wants his children to be locked in bitter competition, with the idea that it will push each to succeed and outshine the other. Does that ever work? Or, to continue the analogy, does it just create a lot of angry family dinners and backstabbing? (Redstone's track record with his own children isn't stellar).

As the movie industry struggles with declining DVD growth and sky-high marketing budgets, doesn't scale have its advantages? CBS and Viacom have rebounded from lows and made major gains so far this year, but both are down since the companies split up in 2006 - CBS is off nearly 50 percent and Viacom is off more than 20 percent. As we await news of a Comcast - NBC Universal merger, we can't help but scrutinize Redstone's decision to split up his empire.

Questions?  Comments?