If there's anything odd about the just-announced merger between Viacom and CBS, it's that it seems utterly quaint to worry about whether the concentration of so many cable, radio, network TV, and Internet assets in one company is the best thing for the free flow of information in a democracy. FCC regulations may require the new Viacom to sell a few of its TV stations--because there's a rule saying one company can't own stations that serve more than 35 percent of the United States--and to either spin off or fold in the still-struggling UPN. But for all intents and purposes, the $35 billion deal is done.
When you think about whether it should have been done, you end up confronting again a central paradox of the media business today: The more fragmented audiences and consumer markets become, the more important scale appears to be. That's true both because the larger you are, the easier it is for you to re-purpose content across many different platforms (how's that for a jargon-laden clause) and the easier it is for you to promote that content in many different places. In the end, the ability to distribute content (and advertising) is probably as important as the ability to produce content, and even though in the age of the Internet and 95-channel cable systems you'd think anyone can get a message out there, successful distribution is still basically all about aggregating lots of people. In the old days, CBS could do that just by broadcasting All in the Family. Today, it has to use its radio stations, its billboards, its TV stations, and its broadcasts. But the fact that it can use all those different outlets is essential.
Now, you could think of this as synergy. And certainly Sumner Redstone, CEO of Viacom, likes that idea, as evidenced by things like Simon & Schuster's selling MTV books, Paramount's releasing The Rugrats movie, and so on. But in a way Redstone's "content is king" refrain seems a bit old-school next to the "distribution is king" refrain of Mel Karmazin, who is head of CBS and will be the operational head of the new Viacom. Redstone has done an excellent job of managing Viacom in the past couple of years, selling off assets, paying down debt, and generally focusing the company on its core operations. But it's Karmazin, who will be president and chief operating officer of the new company, who's really essential to Viacom's future, because it's Karmazin who recognizes that no matter what you make, if people don't see it or hear it, it doesn't matter.
Karmazin's relentless focus on shareholder value and his essential frugality as an executive have long distinguished him from the media moguls--like Redstone--who spent much of the '80s and early '90s borrowing huge sums of money to make questionable acquisitions and engage in hostile takeover battles. Karmazin came to CBS from radio chain Infinity Broadcasting (which CBS still owns), and brought to CBS a measure of economic rigor that for a long time was hard to find in the media business. When you listen to Karmazin, you get the feeling you're listening to someone who thinks that media companies should be judged by the same economic and business standards as other companies, as opposed to someone who thinks that media companies should be valued by the grandiosity of their dreams. Needless to say, this is a good thing.
The irony, though, is that while Karmazin is the new-model media exec ("mogul" being a word that doesn't fit), one of his greatest strengths is his ability to recognize the value of the seemingly mundane. Radio and outdoor advertising, for instance, are incredibly un-glamorous. But they're also fast-growing markets (unlike, for example, television or even the movies), and Karmazin has ensured that CBS has reaped great benefits from them. Local TV stations are similarly boring, but while they are not the cash cows they once were, they're still very profitable, and Karmazin has agitated (successfully) for a relaxation of federal regulations to allow CBS to own more than one station in a given market. Cable is not a booming business--though it may be in the future once we all go to digital cable--but it is a profitable one, and this deal gives Karmazin a host of cable networks to play with. All mergers should, given the historical record, be greeted with skepticism. But in acquiring the rights to Karmazin's services and CBS's assets, Sumner Redstone may have made the best decision of his business career.