The CBS-Viacom Merger: A Media Giant Pops Up

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CBS CEO Mel Karmazin, 56, wearing a navy blue suit, white shirt and red tie, wants you to believe. And when this former radio-advertising salesman who worked his way through Pace College tells you he didn't need to make this $70 billion deal to merge CBS with Viacom, for a moment you actually believe him. It's the way he leans into what he says and his disarming, wide-toothed smile and how hard he works to make you like him. That's how he does it. And in part, that's how he got to this corner-office suite with the view of Rockefeller Center--the former digs of legendary CBS founder William Paley as well as Karmazin's predecessor, Michael H. Jordan--and why, when Viacom completes its acquisition of CBS, he will be running the day-to-day operations of the newly minted media giant.

He'll also be the first to remind you that there's another reason he got here: because he delivers. "Wherever I've been, it was always about the shareholder, never about Mel," says Karmazin, folding his arms together over a mahogany conference table. "When you're a publicly traded company, your responsibility is to shareholders, employees, advertisers. It didn't matter if I was going to enjoy this deal or not. We didn't need this deal. CBS was a great company with terrific cash flow without Viacom." And Viacom, as company CEO Sumner Redstone will tell you, was doing just fine on its own, with $12.1 billion in 1998 revenue. The spry Redstone, 76, might also point out to you--and you too, Mel--that he will still hold the top job and isn't planning on going anywhere soon.

But last week the opportunity to pair the largely fuddy-duddy CBS assets--broadcast television, radio and outdoor advertising--with Viacom's hipper, younger, cable and movie-studio properties--MTV, VH-1, Nickelodeon and Paramount Pictures--was a deal too good for Karmazin not to persuade Redstone to believe in. "Look, we didn't need a studio," Karmazin says, smiling. "But nobody in the world can tell me it's a bad idea to have one."

That seems to be the thinking in media-company headquarters these days, in a landscape where to stand alone is to stand in a hole. "The reason you're seeing so much anxiety everywhere else is that everyone else wishes they'd done it," says Howard Stringer, CEO of Sony Corp. of America, a record company and movie studio that still lacks a broadcast network.

So in this case don't believe what Karmazin is saying. Believe what he's doing. CBS needed to make this deal. It makes sense. Relaxed regulations make it possible for a company to own both a TV network and a studio that creates its content. And until August, companies could own only one TV station in a market; now they can own two. This change sparked a new round of merger negotiations.