A Passion to Win

Sumner Redstone, Peter Knobler

• Publisher: Simon & Schuster
• Year: 2001
• ISBN:
  9780743214391
• Topic: Business
• Subtopic: Business Biographies
• Index: Business

A titan of modern media, Sumner Redstone shares how he became the head of one of the world's great media empires and one of the richest men in the entertainment business. In one of the most fascinating and eye-opening business autobiographies written, Sumner Redstone shares the unvarnished story of how he overcame significant obstacles on his trek to build a vast media and entertainment engine. A Passion to Win gives a riveting look behind the scenes at the highly charged negotiations that won Redstone both Viacom and Paramount, revealing the intense business calculations and strong emotions of Redstone's head-to-head confrontations with adversaries such as Barry Diller and H. Wayne Huizenga.In a book that shows readers what it takes to win, Redstone shares the rollercoaster journey that led him to become the head of a wildly successful company and the mind behind the revolution of the video industry.

ONE

BLOCKBUSTER TANKS

Viacom is me.I have a love affair with this business and this company. The global competitive struggle, the creation of the most successful books and movies and television — and the creation of audiences for all of them — is exhilarating. My industry reaches the hearts and minds of tremendous numbers of people, and no one matches Viacom for its effect on lives all over the world. It is exciting to think that our brands — MTV, Nickelodeon, VH1, CBS, Simon & Schuster, Paramount Pictures, Showtime, Blockbuster, Comedy Central, Nick at Nite, TV Land — have far-reaching social as well as business dimensions. I love Viacom’s successes and I am stung by its failures. I enjoy being part of it every day. In 1987, when I acquired the company, I had bet my life on it and so far I was winning.

I had a vision of creating the premier software-driven media company in the world, and in 1993, Viacom had the opportunity to acquire one of the world’s premier movie studios, Paramount Pictures. However, I was locked in a titanic bidding war with Barry Diller, the chairman of QVC Network, Inc., that was jacking up the price unconscionably. I needed cash. In order to acquire Paramount I needed to acquire the world’s leading video rental company, Blockbuster. Its cash flow was extraordinary. I was looking for another $600 million and Blockbuster had it.

Taking on Paramount without Blockbuster would have been extremely difficult. Could we have done it? Possibly, but the acquisition of Paramount would saddle Viacom with a significant debt, and we needed a source of cash to service it. Otherwise, once we acquired the company, we would have had to sell off many of its assets, which would have defeated the point of the acquisition in the first place. I wanted all of Paramount’s important assets, including the movie and television studios and its library of films, Simon & Schuster publishers, Paramount Parks, several TV stations and hundreds of theater screens.

I was not interested in buying the company to liquidate it. Besides, there was no guarantee, in the event we did gain control, that we would be able to sell any of these assets at an acceptable price. We would be under significant pressure to divest and potential buyers could use that pressure to their advantage. We also needed cash flow in order to grow the company. A merger with Blockbuster, as part of my vision of Viacom’s future, was critically important.

Blockbuster, however, was not without its downside. The concept of video-on-demand via cable and computer brought the possibility that one day the video rental business might become obsolete. One Wall Street analyst, who spoke toThe New York Times only on the promise of anonymity, said, “Do you want Blockbuster? If you’re buying into this thing for the brave new world of convergence in the entertainment world, it looks like these guys are going to kind of get converged out.”

We took all that into account, but when we evaluated Blockbuster we didn’t think we were making a big sacrifice. According to the company’s figures, its cash flow was terrific, it was offering continuity in management, it was the leader in its industry, the company was expanding rapidly, and money was streaming into its coffers. We saw Block-buster as a growing company, worth the investment whether we ended up with Paramount or not.

We merged with Blockbuster and, after a tough fight, we got Paramount.

I put Blockbuster’s founder and chairman, H. Wayne Huizenga, and its vice chairman, Steven Berrard, on the Viacom board of directors. Huizenga was the visible leader, the business visionary who got and deserved all the credit for creating Blockbuster, but a tremendous amount of the work had been done by Berrard. I suspect, because of my age, Huizenga thought he was going to run Viacom someday. I had no intention of retiring, however. I would call and update him on company matters — he was a stockholder with a big position — but he frequently complained that he was left out of important decisions. That bothered me because it was not at all my intention, but in the daily stress of running Viacom, I was not focused on keeping him up to date on every aspect of what was going on.

About a year after the merger, Huizenga left Viacom and founded Republic Industries, becoming its chairman. He clearly wanted a company to run. Several top Blockbuster managers would later leave Viacom to go with him. Berrard, Blockbuster’s chief executive officer, stayed and was placed in charge. He indicated to us that because he would not make the move, he and Huizenga were no longer on speaking terms. He essentially told us, “I have no further relationship with Wayne Huizenga. I’m with you.”

That was fine with us. Steve Berrard was extremely competent, offered the strong continuity of leadership necessary for Blockbuster’s success and had been largely responsible for the company’s operational workings. Plus, I liked him. Blockbuster had a vastly expanding store network, many newly exploited territories and markets, and a large cash flow which was used to build more stores, further the expansion and bring in more cash. It was a beautiful growth story and I relied on Berrard to continue Blockbuster’s success. I paid him handsomely and placed great faith in him.

At the time of the merger, Blockbuster was involved in several expansion initiatives, all of which sounded good. A new Blockbuster store was opening every fourteen hours around the globe, 220 outside the United States including in countries new to Blockbuster like Colombia, Germany and Peru. There were plans for a Blockbuster credit card, a Blockbuster move into the music retail business with the opening of a hundred Blockbuster Music stores to rival Tower Records, a system for electronic downloading of both music CDs and video games at Blockbuster outlets. Discovery Zone, a playground network for kids, was already in operation. Block Party virtual reality centers were going to be the Discovery Zone for grown-ups. Blockbuster Park, an entertainment, sports and retailing complex planned for Florida’s Broward County, was going to compete with Disney World.

The first sign of trouble came when we began to see shortfalls in Blockbuster’s performance in relation to its budgets. We asked for an explanation and got a lot of rationalizations. The new initiatives sounded great while Blockbuster was being sold to Viacom, but by their very nature they took time to unfold. And as each initiative got to the point where we could assess its success, it began to unravel. We went through them one by one and found that each was either falling short of projections or sucking up money and becoming an unmitigated disaster.

It was time to get more immersed in the guts of the Blockbuster operation. It had made sense to give Berrard great autonomy. After all, it was a business in which we had no experience. But we were astounded. The company had overexpanded and could not sustain its rate of development with the necessary intelligence and business acumen. Such a premium had been placed on simply opening new stores that all controls had fallen away. It was as if they’d had a quota to meet — “I’ve got to get eight stores up and running this week” — and no one had the time to process them correctly.Is there enough traffic and business to sustain this location? Is the lease on the proper terms? As we ultimately discovered, too often the answers were no.

We visited Discovery Zones and were horrified. The food was spoiled, the kids’ milk was sour. The buildings were huge and the major business, birthday parties and other functions, was highly concentrated on weekends; during the week the places were empty. We had tremendous real estate expenses and no ability to amortize them. There simply wasn’t enough consideration given to the day-to-day practicalities of running the business. In each case the people at Blockbuster were doing everything to build revenue. Revenue, however, is not profit. They were thinking of the top line, not the bottom line. The concepts were good, the execution was extremely poor. It turned out that this was Block-buster in microcosm.

They were deal guys. Consolidators. Huizenga and his managers were great builders but far from excellent operators. There was high-concept hype combined with a total lack of concern about the long term. Plus, their hiring policies left a lot to be desired. People who had been hired by Blockbuster straight out of college four years earlier were being put into positions of responsibility for which they weren’t prepared. Because of the rapid expansion, there were so many new jobs to fill that bodies were being moved around without regard to qualifications.

How did they handle these difficulties? They didn’t. If there was a problem, they swept it under the rug and moved on to the next project. But as a natural consequence these problems started accumulating until they could no longer be ignored. Now we had to face them. There are very few people who can both make deals and operate, and at Viacom we prided ourselves on having that ability. We went to work.

We killed the plans for Blockbuster Park. The record companies rebelled against the idea of producing personalized CDs at Blockbuster Music stores; it turned out that the concept hadn’t been vetted sufficiently and was withdrawn. We shelved the plans for Block Party, dissolved its entertainment division and sold its two locations to Discovery Zone, which itself soon filed for bankruptcy. We closed fifty unprofitable Blockbuster Music stores, cut back on video store expansion and tried to get Blockbuster back to being Blockbuster.

Around this time, Huizenga called and asked me to invest in his new company, Republic Industries. I decided, despite what I was finding at his former company, that it would serve Viacom best if I maintained a decent relationship with the man. I told him I’d buy $1 million worth of Republic Industries stock. When the placement memorandum for the investment arrived, it listed other investors and there on the list was Steve Berrard, allocated something on the order of 600,000 shares. Neither Berrard nor Huizenga had disclosed this relationship to us.

Huizenga had left us with a leader who he said was going to stay and maintain continuity. Instead, the two men appeared to be engaged in some kind of seductive relationship which practically compelled Berrard and others to leave and for Huizenga to hire them. I felt betrayed.

Berrard had begun to seem disengaged from his job. Still, he was one of the people who had built the company and we needed him; we were married to his management, there was no one else. For a long period I tried very hard to keep him at Blockbuster. While we were at a management conference in Vail, Colorado, Berrard said he was considering leaving. But when I made several management changes and reminded him I had taken the role of Viacom CEO myself, which would put us in closer daily contact, he said it might lead him to change his mind. In fact, during an earnings teleconference, Berrard stated to the analysts that my assuming the role of CEO would quite probably lead him to remain. Berrard had a very attractive wife, and I told her, “You want to be a movie star? Get your husband to stay.” She seemed to have aspirations in that direction and I was only half kidding. Berrard agreed he would stick around for a while and keep an open mind.

I had sat for considerable lengths of time with Philippe Dauman and Tom Dooley, then my deputies, discussing our options. I was on the fence. I liked Berrard. I thought he had not been given enough credit within the company for what he had accomplished at Blockbuster. I also thought it was extremely important to maintain a good working and personal relationship with him; if it was necessary we would at least be in position to woo him back.

Tom and Philippe had questioned Berrard’s management. Now Philippe said, “Look, let’s let him move on. He’s not doing the job because his mind’s not there, so forget about the consequences of his leaving. He’s going to leave, and if he’s not going to leave, we should say goodbye anyway.” Tom was even more forceful. “The sooner he goes,”he said, “the better.”

We had a real problem: Who was going to lead Blockbuster forward? There was no natural successor within the company. We immediately contacted a corporate headhunter, but this was not a business in which we had any experience and it wasn’t as if we could reach outside for an executive who was running another video rental company; Blockbusterwas the video rental industry. There was no business like it from which to find parallel executives.

The stress was enormous and the search did not go smoothly. If Berrard had decided he wanted to stay, I would have let him. But finally, he told me he was definitely leaving. He would be CEO of AutoNation USA, a national chain of used-car showrooms, in which,The Wall Street Journal reported, he was already a major founding shareholder. Huizenga, of course, was also a major shareholder. We were rushing the headhunter to recruit a replacement and I asked Berrard to stay until we could find one.

I was looking for the preeminent man in retail and the name I heard most often was Bill Fields. Fields was second-in-command at Wal-Mart, among the largest retailers in the world, and was in line to get the top job. But along with his name came the phrase “You can’t get this guy.” I was told repeatedly, “This is the guy you should get, but you can’t get him.” So, of course, we went after the prize.

At first Fields wasn’t very interested, but we pursued him. Philippe made the pitch: “Blockbuster is an exciting company, there’s a great place for you, you’ll do a lot better in terms of compensation, and we are very excited about the possibility of having you on board.” Fields lived in Wal-Mart’s hometown, Bentonville, Arkansas, and ultimately — this sounds as if it took months, but actually it was a matter of days — he came to New York and met with Philippe and our human resources people. Fields talked about his wife and kids; he seemed very family-oriented, which I liked. Philippe found his strong Arkansas accent hard to understand, but otherwise was impressed. Fields told us he would think about whether he wanted to make the move and then flew back to Arkansas. We pressed him and he agreed to return to New York a few days later and meet with me.

Fields, Philippe, Viacom’s Human Resources Senior Vice President Bill Roskin and Steve Berrard met over lunch. They discussed compensation and responded to Fields’s concerns. Berrard answered questions about what the job involved and then they walked him over to my apartment at the Carlyle Hotel.

Bill Fields is a great physical specimen, tall and lean. I can’t say we exactly clicked on a personal level, but he had a remarkable résumé. He was the fourth college graduate Sam Walton had hired, he had been with Wal-Mart almost from the beginning and was widely credited with developing the company into the giant it is. While Berrard had Huizenga’s entrepreneurial zeal, our feeling was that now that Blockbuster had become substantial, we needed a seasoned operating executive. I offered Fields the job and he accepted. Bill Fields had all the qualifications we needed. He was the heir apparent at Wal-Mart and he was leaving to come to us. He seemed like God’s gift to Blockbuster.

Steve Berrard would not do us the courtesy of creating a smooth executive transition. I do not know whether Huizenga had pressured him, but on March 19, 1996, he announced that he was resigning from Block-buster and going to join his old boss at AutoNation. He wouldn’t even wait a couple of weeks while we buttoned things down with his successor. Many people, seeing that the company they are running is having trouble, would be motivated to stay. Berrard didn’t appear to care.

I flew to Blockbuster’s headquarters in Fort Lauderdale, Florida — also the home of Huizenga’s new companies — and addressed our employees, telling them they were still a key part of Viacom’s plans. Talk of a spin-off sale of Blockbuster had begun in the press almost immediately and I needed to quash that. It took nine days to iron out the details with Bill Fields, and for all that time Blockbuster was without a leader.

We gave Fields a lot of room. By reputation, he deserved it. “I think there’s opportunity for great growth here,” he told us, and brought in some of his former Wal-Mart executives, whom old Blockbuster hands referred to as Awl-Martians. He began to put in his own systems. He suggested moving corporate headquarters from Fort Lauderdale, where they had been since Huizenga founded the company, to Dallas, which was more centrally located to Blockbuster stores around the country, where the labor pool was far greater and where we could build a giant distribution center. It would also be a means of finally dissociating the company from Huizenga, who was then something of a hero in South Florida.

Despite the fact that he was no longer involved, Huizenga continued to have a strong impact on Blockbuster. He had hired many of our staff members and still had contact with them, his other businesses were located in close proximity to ours, and he was a strong presence in the community. I’m not suggesting that this was necessarily destructive, but he was no longer running the show and we could not truly take over Blockbuster in the full sense of the word, as we wanted to, because of his influence.

The move to Dallas was wrenching, and whether people stayed behind or relocated with us, it was not easy for them. In the end, however, the company was better off for it and the move was ultimately successful.

From the beginning, however, things did not go well with Fields. Wal-Mart sold everything under the sun and Fields began to remake Blockbuster as a concession stand. To utilize our sizable square footage of retail space, he stocked Blockbuster shelves with popcorn, T-shirts, games, bubble gum, excess videos and music that we couldn’t sell — everything but ladies’ underwear. Stores quickly became cluttered with all this retail merchandise, which had very little profit margin, while at the same time Blockbuster lost concentration on its basic business, which was video rental. In fact, the word “video” was deleted from the logo and taken off the marquees of our stores. Fields changed the focus of the company and he did it overnight.

He also changed our advertising slogan from “Make It a Blockbuster Night,” which implied that the Blockbuster customer was going to go home with a videotape, to “One World, One Word: Blockbuster,” which was so general it could have fit anything from organized religion to the United Nations to the circus. Whatwas this company?

Maybe we should have been more aggressive in overseeing his initiatives, but this was Bill Fields, the guy we couldn’t get, the heir apparent at Wal-Mart. That was why we were paying him the big dollars. We had just given him the top job in a field that was not our strength; even if we felt he was heading in an unusual direction, in view of his background and experience we had to give him the benefit of the doubt. We were not about to take away his self-confidence, certainly not in his first six months on the job. I held back. I am not usually like that.

Then there was the matter of Fields’s demeanor. I never got the feeling that he was engaged at Blockbuster. He had a very good contract, he had more autonomy than almost any other Viacom executive, he had a large budget to bring his ideas to life, but I felt no commitment. He certainly didn’t behave toward Blockbuster the way I and my other managers behaved toward Viacom.

I am often asked what I look for in an executive. In my experience, success has three essential ingredients: a passionate commitment to your goal, the courage to dream and to take risks, and the moral and intellectual character to realize the dreams worth pursuing and the best route to take to achieve them. Commitment, courage, character — a powerful combination of qualities that I believe you will find in every truly accomplished person. Fields was certainly accomplished, but he was showing me little else. He really didn’t seem to want to be at Block-buster.

Even the people who had known him previously perceived him to be behaving uncharacteristically. His family had remained in Arkansas, where his children were in school, and we felt it was understandable that he flew home on the weekends. But during the week he was a complete recluse. He didn’t invite his executives to dinner; he would eat alone in his hotel dining room. I hadn’t clicked with him on a personal level during our interview but had let that pass in deference to his résumé. He had lived in Arkansas all his life and maybe he simply had a demeanor that we were not used to. We didn’t know what to think.

We weren’t alone. A high-ranking member of his management team who had known and worked with him at Wal-Mart walked into his office one day and asked,“Where is the real Bill Fields?” He never got an answer and neither did we.

Viacom holds a winter holiday party once a year to which we invite all our top executives and their spouses from around the country, perhaps 125 people at the uppermost rungs of the corporation like Jonathan Dolgen, Sherry Lansing and Tom McGrath of Paramount; Tom Freston and Mark Rosenthal of MTV Networks; Jon Newcomb of Simon & Schuster; Philippe Dauman and Tom Dooley; Judy McGrath of MTV; Herb Scannell of Nickelodeon; John Sykes of VH1 and Matt Blank of Showtime. And from National Amusements, Jerry Magner, Ed Knudson, Bill Towey and George Levitt and, of course, my children, Brent and Shari. People important to the company and to me. It’s a way of fostering team unity and the sense that, despite each person’s focus on his or her own division, we’re all working toward one goal, the success of Viacom. It’s an elegant affair with a holiday spirit and we all enjoy it. Fields arrived and instead of involving himself with his colleagues went off by himself somewhere. I found myself in another room, face-to-face with his wife. I didn’t know her an...

Table of contents

• Cover
• Title Page
• Copyright
• Acknowledgments
• Dedication
• Prologue:The Fire This Time
• 1 Blockbuster Tanks
• 2 Breaking the Codes
• 3 National Amusements
• 4 Stick to What You Know
• 5 Viacom the Opening
• 6 Viacom the Battle
• 7 Viacom Running the Show
• 8 I Want My MTV
• 9 The Paramount Deal
• 10 The Deal from Hell
• 11 To Hell and Back
• 12 The Shakeout
• 13 We Are All Viacom
• 14 The Turnaround
• 15 Eye on the Future
• Index