Viacom Inc. on Tuesday said President Mel Karmazin has resigned, capping years of growing tension between Karmazin and Sumner Redstone, head of the media company that owns CBS and MTV.
The plain-spoken and aggressive Karmazin has been Viacom’s president and chief operating officer since 2000. Two of the company’s most powerful unit heads, MTV Networks CEO Tom Freston and CBS CEO Leslie Moonves, were named co-presidents and co-chief operating officers to succeed him.
Karmazin's resignation sent ripples through the media industry, and prompted Walt Disney Co. Chairman George Mitchell to express his confidence in Michael Eisner and the rest of Disney's management.
Dissident Disney shareholders Roy Disney and Stanley Gold immediately called for the board to look at Karmazin as a replacement for embattled Disney Chief Executive Michael Eisner.
“The board has complete confidence in the current management,” Mitchell said in a statement when asked to comment on Karmazin’s departure.
Redstone, Viacom’s 80-year-old controlling shareholder and chairman, said he will step down from the post of CEO within three years. He said Freston and Moonves were leading candidates to replace him as CEO.
“It is extremely likely that one of them will become my successor,” Redstone said, in a call with analysts.
For all the talk of a feud between Redstone and Karmazin, Redstone said Karmazin’s resignation was spurred by his frustration with the company’s share price.
“Nobody asked for Mel’s resignation,” Redstone said. “Two weeks ago he told one of our executives that he was frustrated by the stock. That was the first time I ever heard him talk about resigning.”
CNBC's David Faber reported Tuesday that Karmazin told him that the constant speculation about his relationship with Redstone led to his decision to resign, and that he would seek another job as a CEO of an established media company. Since there is no non-compete clause in Karmazin's contract, he is free to join a competitor, which will likely fuel speculation that he could land at a rival media company, such as Walt Disney Co.
In a statement, Karmazin cited “personal and professional reasons” for his departure and said he would “pursue other interests.”
The 60-year-old Karmazin will remain at Viacom as a consultant for another 60 days.
While Redstone called Freston and Moonves two of his favorite people, he left no doubt as to who’s steering the ship at Viacom. He said all business units would get a close look in the coming months and there would be “no sacred cows.”
Redstone said Viacom would consider options for its radio unit, which Karmazin headed and the one with which he has been most closely associated.
Redstone said the company would consider a “major acquisition” in cable programming, “big radio stations in big markets,” and “big television stations in big markets.”
He again said Viacom would consider no major acquisition until the stock price improves.
Karmazin headed CBS Corp. until it was bought by Viacom in 2000, and has long been respected on Wall Street as a skilled operator.
But he is said to have clashed with Redstone over the years over various issues, including Viacom’s acquisition strategy, the sluggish performance of its radio business, Karmazin’s sale of stock in the past, and advertising sales strategy.
Redstone a year ago had said he valued Karmazin after Wall Street worried that the No. 2 Viacom executive would leave amid tensions with Redstone over control and management style.
Redstone, at the time, however, had pointed to his voting control of Viacom and said, “If I didn’t want Mel to be here, he wouldn’t be here. I value Mel. He’s a great operator.”
One analyst said Karmazin’s departure could be viewed as positive.
“Ending an internal feud could be viewed as a positive not a negative,” Fulcrum Global Partners Rich Greenfield said.
Greenfield said Karmazin’s credibility had waned significantly in recent months as a result of the weakness in the company’s Infinity radio unit. Infinity was part of the CBS acquisition and an area of expertise for Karmazin, who has been a broadcast executive for over 20 years.
Redstone said he would work with the company’s board over the next three years to identify a successor as chief executive and other senior positions.
One person who won’t be considered, Redstone said, is his daughter, Shari Redstone, who is taking a wider role at the company.
“My daughter will not play an executive or operating role at Viacom, is that clear?” Redstone said.
Freston and Moonves operate units that constitute more than 70 percent of Viacom’s cash flow, including Blockbuster.