Subscribe to execubook.com:e-summaries of books for business people

Buy the Full Book!www.amazon.com www.barnes&noble.com www.chapters.ca

FOR OPTIMAL ONSCREEN READINGSet Acrobat Reader’s VIEW menu to FULL SCREEN and use

your keyboard arrows to turn the pages

CONTENTS

Introduction .......................................................................... 2

Getting Started ..................................................................... 2

The Movie Content Business .................................................. 3

Understanding the Other Side ............................................... 5

Buying a Studio .................................................................... 6

A Passion to WinBy Sumner Redstone with Peter KnoblerPublished by Simon & Schuster, 2001ISBN 0684862247

© 2001 execubook inc.

2

A Passion to Win By Sumner Redstone with Peter Knobler

Introduction

“Viacom is me,” Sumner Redstone likes to say. His passion has

built the company from a small, family-owned firm operating a

few drive-in movie theaters into a global entertainment empire,

which includes MTV, Nickelodeon, CBS, Simon & Schuster,

Paramount Pictures, Showtime, Blockbuster and Comedy

Central. He has bet his life on his company — and succeeded.

Redstone not only has a passion to win, he has an ability to

grow his company through the right acquisitions and then make

those acquisitions work. A former lawyer, he also has a willing-

ness to litigate when he feels wronged.

Getting Started

Redstone was making a lot of money in 1954 as a lawyer —

about $100,000 a year, or over $1 million in today’s terms —

when he decided to go into business for himself. He joined his

father’s firm, Northeast Theater Corp., for an initial salary of

$5,000 a year.

He expanded the company immediately. He would fly into a

new city, get into a car and look for a new site, alone, confident in

his instinct. He would then act as his own lawyer to make the

deal. In this way, he built the chain up to 40 or 50 drive-ins, turn-

ing it into the industry leader on the east coast.

© 2001 execubook inc.

3

A Passion to Win By Sumner Redstone with Peter Knobler

It was an early lesson in the power of content. He would be in

the office at 6 a.m., getting the grosses from the night before,

knowing he had to be on top of the figures to be on top of the

business. The rest of his day was spent negotiating to get the best

movies at the best prices. That meant convincing the studios that

he was on the cutting edge of the future. It was a tough, adver-

sarial business and he learned that making a deal depended not

only on the merits of his arguments but also on developing per-

sonal relationships with the people he met daily.

But for all his efforts, he was having trouble getting first-run

movies into his drive-ins, which prevented him from showing the

biggest moneymakers at their peak. He pleaded with the studios,

insisting they were hurting their own revenues, but they refused

to change the way they did business.

So in 1958 he sued his suppliers. The trial was held before a

jury of Virginians, where his low-key, local lawyer argued that

drive-ins should be entitled to play the same movies as the first-

run theaters. The case went so well that the jury never got a

chance to decide. The studios settled, giving Redstone nearly

everything he wanted.

The Movie Content Business

By the early 1960s, with suburbs growing rapidly, he began to

convert his drive-ins into indoor theaters. Profits soared, as he

© 2001 execubook inc.

4

A Passion to Win By Sumner Redstone with Peter Knobler

was now able to play five movies at a site where he’d previously

played only one. But in the ‘70s and ‘80s, growth began to slow.

Although he continued to find good locations and build state-of-

the-art theaters, ticket sales were flat. Cable television was begin-

ning to change the entertainment landscape, and he worried

about the future of movie theaters.

Redstone saw content as the growth industry. Since he knew

movies, he began to invest his profits in motion-picture compa-

nies, making substantial investments in Warner Communications,

Disney, Loews and, ultimately, Fox and Columbia.

Among the companies he invested in was Viacom

International. In 1985, that media firm had gone on an acquisition

binge, picking up full interest in the premium cable TV network

Showtime/The Movie Channel, cable systems in Washington

state and St. Louis, and MTV Networks, which operated MTV,

VH1, Nickelodeon and Nick at Nite.

Viacom was the flip side of the movie exhibition industry, a

highly diversified entertainment company that owned various

other cable TV systems, five TV stations and eight radio stations.

As well, through its syndication arm, it produced or had rights to

favorites such as The Cosby Show and Matlock. Redstone had

described Viacom as “a sleeping giant about to explode.”

He bought Viacom stock, not expansively but increasingly,

from $26 to $34.50 a share. Then, on Sept. 17, 1986, he awoke to

© 2001 execubook inc.

5

A Passion to Win By Sumner Redstone with Peter Knobler

find that an investment group, led by CEO Terence Elkes and

including some directors, was trying to buy the company for $37

in cash and $3.50 in preferred stock, for a total of $2.7 billion —

too little in Sumner’s mind.

That stimulated his competitive instincts. He bought more

stock, disclosed that he’d raised his stake to just under 10%, and

began to look at a buyout. The first step was to buy some of the

stock owned by Conniston Partners, which controlled 12.4% of

Viacom. He couldn’t take it all, because that would push him over

the 20% level at which a poison pill would be triggered, giving

every shareholder extra shares and diluting his interest.

Understanding the Other Side

In every negotiation, Redstone stresses, it’s vital to understand

the other side’s goals. Paul Tierney, one of Conniston’s partners,

was clear: “Sumner, you’re in this thing for the company, we’re in

it for the money. We ought to be able to make a deal.” They nego-

tiated for an evening, and Redstone raised his stake to 18.3% of

Viacom, buying 2.9 million shares for $43 apiece.

But his efforts to make a deal with the insiders failed. It was

clear Elkes wanted the company for himself. Although Redstone

could have backed off and made good money, this was no longer

a question of money. It was about the desire to be the best and to

win — to have power.

© 2001 execubook inc.

6

A Passion to Win By Sumner Redstone with Peter Knobler

Redstone was also convinced that the company had a glorious

future. To understand the value of a business, in his view, it’s nec-

essary to be able to anticipate success, not just evaluate current

assets. Experience was telling him that entertainment was the

name of the game. He was particularly taken with MTV’s poten-

tial, even though he had no particular affinity for the music it

played. He sensed that MTV could be a cultural force in America

and ultimately a global brand. So he went for it, and after a pro-

longed battle in which some of the directors and CEO tried to

ignore the bids he made, trumping them with their own, he won,

paying $3.4 billion for Viacom.

Buying a Studio

Everyone said he’d overpaid. He’d certainly bet all his assets on

Viacom. But his vision proved correct. He grew the company —

and again fought for his interests in the courts, suing Time Inc.,

which was refusing to show Showtime and The Movie Channel in

order to protect its own channels, HBO and Cinemax. The risks

were great — his other channels might face retribution — but he

won the lawsuit in the discovery phase, where Viacom found

ample documentary proof of Time’s monopolistic attitude.

Now his vision was to turn Viacom into the number one soft-

ware-driven media company in the world. That meant getting

control of a movie studio. The one he had his eye on was

© 2001 execubook inc.

7

A Passion to Win By Sumner Redstone with Peter Knobler

Paramount Pictures. He was convinced that he could grow

Paramount as he’d grown Viacom. The problem was that every

time he edged close to a deal with CEO Martin Davis, Davis

would back off — he didn’t seem to want to sell. When he finally

did, it was to Barry Diller of QVC Network Inc. and cable baron

John Malone of Liberty Media.

Again, that led to the courts, as Redstone wrote a complaint

that began: “In the American cable industry, one man has, over

the last several years, seized monopoly power. Using bully-boy

tactics and strong-arming of competitors, suppliers and cus-

tomers, that man has inflicted antitrust injury on Viacom and vir-

tually every American consumer of cable services and technolo-

gies. That man is John C. Malone.”

Once more, he was suing somebody who controlled the vital

access his channels needed to the public. It turned the battle for

Paramount into open warfare — which he was to win, after mak-

ing another deal: buying Blockbuster Entertainment Corp. This

gave him access to the video chain’s large cash flow, and therefore

the resources to take over Paramount.

As it turned out, however, those resources were wobbly.

Blockbuster wasn’t well run, and Redstone eventually had to go

in personally and straighten it out. He found the economics of the

industry ludicrous, with stores unable to afford enough new

releases and resorting instead to “managed dissatisfaction” —

© 2001 execubook inc.

8

A Passion to Win By Sumner Redstone with Peter Knobler

renting customers their second or third choices. That led him back

to negotiations with the studios and the development of a break-

through revenue-sharing format — the studios took a percentage

of the video rental revenue rather than selling the videos to

Blockbuster at $65 apiece. That led to an increase in just-released

videos, since the studios had a stake in renting them out.

Redstone needed one more deal to complete his empire: CBS.

Unknown to him, its CEO, Mel Karmazin, had identified Viacom

as a candidate for a merger. He made an approach, even offering

Redstone ultimate control. Together, without investment bankers,

they negotiated the deal, with Redstone ending up CEO. The

owner of a couple of drive-ins now had the content colossus he’d

dreamed about. e

ABOUT THE AUTHOR: Sumner Redstone is chairman and CEO of

Viacom. Peter Knobler is co-author of numerous bestsellers.