The Lion In Sumner

Exe

cutives at the MTV networks stood and roared their approval at a budget meeting last November when Sumner Redstone, chairman and CEO of parent company Viacom, pledged $30 million of corporate cash to launch Logo, a gay channel that the MTV brass had regarded as a top priority. Under Viacom president and heir apparent Mel Karmazin, the channel had been delayed. But at this meeting, attended by Karmazin, Redstone openly said to MTV chief Tom Freston, "You want to do it? You have the money." Karmazin was silent. "It was a dramatic moment," Freston recalls. "All of a sudden, we got something we hadn't expected." The new channel is set to debut early next year.

This wasn't the only time Redstone took the lead in orchestrating a shift toward bigger risks on the content side of Viacom's media empire. At a meeting this year with executives at Viacom's Paramount Pictures, with Karmazin present, Redstone stunned his team with a commitment to bankroll more of the big-budget films that studio heads love but that Karmazin loved to avoid. The divide over how far to wade into expensive movies and risky programming was not gaping. Karmazin says he was eager, for example, to launch the gay network. But things weren't moving fast enough for Redstone. Ultimately, Karmazin realized he would never really run the company, and he last week announced his resignation.

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Redstone, 81, was quick to promote to co-president both Freston, 58, and Leslie Moonves, 54, who ran CBS, filling the vacancy left by Karmazin, 60. Redstone said he would finally call it quits within three years, setting up a horse race for the top job at Viacom, a la GE after Jack Welch retired in 2001. Critical to Redstone, Freston and Moonves are dyed-in-the-wool content guys. Freston, a free-spirited music lover who has served on the board of the Rock and Roll Hall of Fame, engineered the phenomenal success of MTV. Moonves, a hard-charging executive, has turned CBS Television into the top-rated network. Left out was Jonathan Dolgen, 59, chairman of Viacom Entertainment Group, who resigned a day after Karmazin. "My emphasis is on creativity," Redstone tells TIME. "You have to invest and not just be concerned with the next quarter."

Reports of sniping between Karmazin and Redstone began surfacing almost immediately after the media titans joined forces with the merger of CBS and Viacom in 2000. Even Karmazin's new contract, signed just last year, didn't put an end to constant rumors of feuding. But in contrast to Redstone's creative leanings, Karmazin's focus was on running a lean operation, and by last month Karmazin had evidently tired of Redstone's upstaging him. Karmazin denies any material conflicts and says he resigned because "there was too much about Mel and Sumner, and I didn't think it would go away." He says he was concerned that press scrutiny of their relationship was hurting the company's stock price.

Karmazin's departure wasn't the blow it once would have been. One analyst rushed out a report titled "Mel Who?", and the stock barely budged. Just a few years ago, Karmazin was a Wall Street darling, highly prized as a tough, budget-minded operator who could make the free-spending creative forces at Viacom toe the line. But his star faded as Viacom consistently fell short of financial targets.

Making matters worse, some of the most glaring problems have been at Viacom's Infinity Broadcasting division, which features radio stars Howard Stern and Don Imus. Karmazin built Infinity through deft dealing in the 1980s, before merging the company with CBS. So beholden to Karmazin is Stern that on his program, he promised to follow Karmazin out the door, and his website has a clock counting down the 19 months remaining on his contract. Karmazin had become vulnerable because of lackluster results at his prized Infinity, where profits rose a tepid 5% last quarter — embarrassing next to gains of 24% at Freston's MTV Networks and 38% at Moonves' broadcast-television division. By the time Redstone and the board got around to serious succession planning early this year, Karmazin's standing had slipped. Indeed, Redstone had been snubbing him for months — even deriding him in front of other executives. At a media conference in March, Redstone "pretty much ignored mentioning Mel," says Dennis Leibowitz, a partner at Act II Partners, a hedge fund.