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Judge rules in favor of CBS ahead of afternoon board meeting

CBS shares plunged 6.5 percent on Thursday after a Delaware judge denied the company's request for a restraining order against its parent company, National Amusement.s

CBS had wanted to loosen the control of the Redstone family's National Amusements, which had been pushing for CBS to merge with cable programmer Viacom, which it also controls.

The court loss sets up an awkward board meeting today between CBS CEO Leslie Moonves and Shari Redstone, president of National Amusements. CBS had said it planned to vote at the meeting for a company dividend that would dilute the voting power of National Amusements.

Viacom class B shares declined 1 percent.

In a statement, National Amusements said: "We are pleased by the court's decision to deny CBS and its special committee's unprecedented motion to try to deprive a shareholder of its fundamental voting rights. The court's ruling today represents a vindication of National Amusements' right to protect its interests.

"As we intend to demonstrate as the case proceeds, the actions of CBS and its special committee amount to a grievous breach of fiduciary duties and show no regard for the significant risk posed to CBS and its investors."

CBS, in a statement, offered some confidence based on certain parts of the judge's ruling, which said the company could have a case that National Amusements has breached its fiduciary duty.

The CBS statement: "The judge today found that the allegations in our lawsuit 'are sufficient to state a colorable claim for breach of fiduciary duty against Ms. Redstone and NAI as CBS's controlling stockholder.' We could not agree more. While we are disappointed that the judge did not grant a TRO, the ruling clearly recognizes that we may bring further legal action to challenge any actions by NAI that we consider to be unlawful, and we will do so. We remain confident that we will prevail in the lawsuit previously filed by CBS and the members of its Special Committee.

"As previously announced, the CBS Board will hold a meeting at 5PM today to consider declaring a dividend of shares of Class A common stock to all of the Company's Class A and Class B stockholders, as is permitted under CBS' charter. This dividend would more closely align economic and voting interests of CBS stockholders without diluting the economic interests of any stockholder."

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Week in review: the TV upfront season in focus

This week, hundreds of advertisers came to New York to enjoy the thrill ride that is the broadcast network upfront season, featuring presentations of new fall shows — and in the process, promising to spend more than $9 billion on TV ads.

Programming themes: More reboots ("Murphy Brown"); shows with a deep emotional connection a la "This is Us ("A Million Little Things"); more actors of color, and more shows made by women.

Is TV money shifting to digital? Yes and no. Money that sloshes around in the year-round ad market is called scatter. Some of that money is now going to digital players such as Hulu so that advertisers can secure premium online shows, said two ad agency sources, who asked not to be named so that they could discuss financial matters. But even so, there's the same money in the marketplace as last year, the sources said.

The main concern: There are fewer viewers watching on traditional TV. But networks are arguing there's more viewing happening across the board.

The problem, according to TV companies, is that TV measurement needs to change. Time Warner-owned Turner took aim at measurement firm Nielsen.

"We are in a new era of media, and it's time to retire the Nielsen television metric," Turner President David Levy said at his company's upfront. "While it undoubtedly served its purpose, it no longer fully captures how to successfully measure an audience in today's landscape."

What's new this year: Fox and NBC said they will sell less commercials to keep viewers watching. Networks are trying to get credit for things such as co-viewing and out-of-home viewing of their shows to aggregate the uncounted audiences.

Quote of the week: "Les sends his regards," said Kelly Kahl, president of entertainment at CBS, of his boss, CBS CEO Leslie Moonves, who is in the midst of a face-off with the company's controlling shareholder. "But the number of questions he couldn't answer outnumber the ones he could, so he thought it was a good idea to sit this one out."

Buzzword of the week: OTT. David Cohen, president at media buyer Magna, said he heard the phrase (shorthand for internet-delivered TV) numerous times: "If this was a drinking game, I'd be horizontal by Friday."

What the advertisers say: Chris Geraci, OMG's president of media investment, said that network TV is consistently overshadowed by the digital migration but noted that "network TV remains the engine room of the entertainment industry."

Magna's Cohen added: "The increasing cost for fewer consumers is something that, as time goes on, the math equation is harder to understand. It's the genesis of why everyone is looking to aggregate [audiences]."

When it comes to exploiting successful shows down the line, Hollywood's independent production companies are now in a weak position. Deadline's Nellie Andreeva writes: "It took a couple of years, but we arrived to a point this year where broadcast networks own or co-own every new scripted series on their schedule that is not a revival."

Fox News names Suzanne Scott as chief executive

Hoda replaced Matt at "Today," and Christiane replaced Charlie at PBS. Now, Fox News has introduced a female management team.

On Thursday, the Rupert Murdoch-backed cable news network named former programming president Suzanne Scott as its new chief executive. She has been with Fox News since the beginning almost 22 years ago.

The chief executive slot has been officially vacant since the late Roger Ailes was ousted in mid-2016, although 21st Century Fox executive chairman Rupert Murdoch had effectively taken charge after that.

According to a press statement on the appointment, Scott is credited with creating a number of new  shows on the network that are fronted by women, including: "Outnumbered Overtime" with Harris Faulkner, "The Story" with Martha MacCallum, and "The Daily Briefing" with Dana Perino. "The Ingraham Angle" was also launched on her watch.

Her appointment caps a period of intense change at the flagship cable network of parent company 21st Century Fox. Fox News has weathered the ouster of its number one draw, Bill O'Reilly, and the departure of Megyn Kelly along with some advertising boycotts.

The Fox News management team is now almost entirely women. A year ago, it drafted a new head of ad sales, Marianne Gambelli. and tapped a new chief financial officer, Amy Listerman. Last month, Fox News appointed a new general counsel, Lily Fu Claffee. Dianne Brandi, who is the firm's executive vice president of business and legal affairs, is on temporary leave, though Buzzfeed reports she is back working at the company. One man survives — Jay Wallace was named Fox News president in today's announcement.

A spokesperson for Fox News said that Brandi is still on personal leave. "We value our relationship with Dianne [Brandi], who provides us with transition services as needed," the spokesperson wrote in an email.

Fox News has paid dearly for the numerous harassment allegations. Regulatory filings note that 21st Century Fox settled a $90 million shareholder action claim related to complaints about the workplace environment. That concluded in February. The company just announced a $10 million settlement with a group of people claiming racial and gender bias.

Meanwhile 21st Century Fox's latest earnings report underscored the continuing earnings power of its cable division, which is driven by Fox News and also houses Fox Business, Fox Sports, FX and National Geographic Channel. Operating income in the cable group rose 16 percent to $1.68 billion in its latest quarter.

GQ pokes some fun at Vanity Fair with its comedy cover

Conde Nast’s GQ just created a cover that’s on its way to being a social media hit. The men’s magazine poked fun at corporate sibling Vanity Fair with it’s latest comedy cover featuring multi-limbed jokers Kate McKinnon, Issa Rae and Sarah Silverman.

The cover references Vanity Fair’s Hollywood issue which, thanks to photoshop, included an Oprah with three hands and a Reese Witherspoon who appeared to have three legs. “Mistakes were made,” reads an amusing commentary on GQ.com, which promises an investigation into the photoflub and a mea culpa on Medium. We reached out to Vanity Fair for comment on whether it’s OK about being the punch line. No word yet.

 

Judge rules in favor of CBS ahead of afternoon board meeting

CBS shares plunged 6.5 percent on Thursday after a Delaware judge denied the company's request for a restraining order against its parent company, National Amusement.s

CBS had wanted to loosen the control of the Redstone family's National Amusements, which had been pushing for CBS to merge with cable programmer Viacom, which it also controls.

The court loss sets up an awkward board meeting today between CBS CEO Leslie Moonves and Shari Redstone, president of National Amusements. CBS had said it planned to vote at the meeting for a company dividend that would dilute the voting power of National Amusements.

Viacom class B shares declined 1 percent.

In a statement, National Amusements said: "We are pleased by the court's decision to deny CBS and its special committee's unprecedented motion to try to deprive a shareholder of its fundamental voting rights. The court's ruling today represents a vindication of National Amusements' right to protect its interests.

"As we intend to demonstrate as the case proceeds, the actions of CBS and its special committee amount to a grievous breach of fiduciary duties and show no regard for the significant risk posed to CBS and its investors."

CBS, in a statement, offered some confidence based on certain parts of the judge's ruling, which said the company could have a case that National Amusements has breached its fiduciary duty.

The CBS statement: "The judge today found that the allegations in our lawsuit 'are sufficient to state a colorable claim for breach of fiduciary duty against Ms. Redstone and NAI as CBS's controlling stockholder.' We could not agree more. While we are disappointed that the judge did not grant a TRO, the ruling clearly recognizes that we may bring further legal action to challenge any actions by NAI that we consider to be unlawful, and we will do so. We remain confident that we will prevail in the lawsuit previously filed by CBS and the members of its Special Committee.

"As previously announced, the CBS Board will hold a meeting at 5PM today to consider declaring a dividend of shares of Class A common stock to all of the Company's Class A and Class B stockholders, as is permitted under CBS' charter. This dividend would more closely align economic and voting interests of CBS stockholders without diluting the economic interests of any stockholder."

Judge says he'll rule Thursday on CBS attempt to escape National Amusements

A Delaware judge overseeing the audacious CBS effort to extract itself from its controlling shareholder, National Amusements, said he would rule Thursday on the case.

Andre Bouchard, chancellor of the Delaware Court of Chancery, said Wednesday that the unusual case had surprised him.

“I’ve never seen anything like what’s transpired here in terms of moving parts,” he said according to an article in the Hollywood Reporter.

The judge said he would rule ahead of a planned CBS board meeting on Thursday and in the meantime granted CBS a request for a temporary restraining order against the Redstone family’s National Amusements, which owns a majority of the voting power in CBS.

CBS surprised National Amusements on Monday with a request for a restraining order and an announcement that the company would seek to dilute the Redstone family’s controlling stake in the company.

In a counteraction on Wednesday, National Amusements changed CBS bylaws to require that 90 percent of directors must vote in order to pass CBS’s planned changes at tomorrow’s meeting. The move effectively blocks CBS's effort to become an independent company. National Amusement’s president, Shari Redstone, is a CBS board member as is her family lawyer, Robert Klieger.

According to Hollywood Reporter, Meredith Kotler, an attorney for National Amusements, said: “My client has a right to get in front of the train and prevent what’s happened. It was an ambush.”

The case has gripped the media and advertising world since the legal battle could result in two possible outcomes: the exit of CBS chief executive, Leslie Moonves, or the dilution of National Amusements' control of the voting shares in the company. That could have wider ramifications for other family-owned companies.

The timing of the case has largely overshadowed CBS efforts to draw media attention to its slate of new shows. Advertisers from around the country gathered on Wednesday afternoon to see the network's upfront show. They are expected to commit billions of ad dollars to the schedule without quite knowing whether Moonves, a legendary programming executive, will be in place.  

Moonves appeared at the CBS upfront to applause from the crowd. He had been absent from the programming press conference earlier on Wednesday. Meanwhile, CBS late night host Stephen Colbert made fun of the legal drama from the presentation.

Lachlan Murdoch to become 21st Century Fox CEO — if Disney deal goes through

The big brother won the succession battle.

Lachlan Murdoch is taking the reins at the new 21st Century Fox in anticipation of an agreed sale of Fox’s movie studio, global TV channels and other assets to Disney.

In a statement issued on Wednesday, 21st Century Fox confirmed that the 46-year-old Lachlan would become chief executive of the new company — once the Disney deal is completed.

The release did not address the future of his younger brother, James Murdoch, who is currently chief executive of 21st Century Fox and is expected to pursue his own investments once the deal is closed, according to a report in the Wall Street Journal.

In a statement, Rupert Murdoch, who will be co-chairman of Fox with Lachlan Murdoch, said: “The new Fox will begin as the only media company solely focused on the domestic market; focused on what Americans love best – sports, news and entertainment, built and delivered for a US audience.”

The company’s chief financial officer, John Nallen, will also take on broader duties as the firm’s chief operating officer. Newly reconstituted Fox will house Fox News, Fox Sports and the Fox broadcast network as well as nine local TV stations.

The Murdoch family also owns a big part of News Corporation, which houses newspapers including the Wall Street Journal and the New York Post, as well as book publisher Harper Collins and an Australian TV company.

The Fox/Disney deal isn’t done just yet. Comcast is considering a fresh bid in an effort to convince Fox’s shareholders to ditch Disney.

The future of Rupert Murdoch's media empire has been the subject of plenty of speculation over the years as to which brother would end up on top. James and Lachlan took over 21st Century Fox in June 2015, with James as CEO and Lachlan as executive co-chairman with their father Rupert. 

In an interview shortly after that move, James and Lachlan discussed growing up together and having the occasional spat.

"From a strategy point of view, on the board-level stuff, I don't think Lachlan and I have ever had any major — or really any minor — disagreements with respect to where the direction of the business needs to be and how we prosecute that," James aid. "But we're brothers, we used to fight like cats in a bag. But you know, we were young then."

Lachlan added: "I always won, which was good."

What's Graydon Carter up to? Meet Zig, a media app that just raised $1.6 million

What does a magazine legend like Graydon Carter do after stepping down from his 25-year run atop Vanity Fair?

Invest in the future of media, it seems.

Carter and a variety of other major media figures including music producer Quincy Jones, NBCUniversal vice chairman Ron Meyer, and Marc Cimino, chief operating officer of Universal Music Publishing have invested in Zig, an app described as the "Instagram of News."

The startup has closed a $1.6 million round, which includes money from venture capitalist Vivi Nevo, investor Alan Docter and LiveNation.

What is it? Zig is a web platform and app that serves up visuals (photo and video) from publishers based on users' interests as determined either by their social feeds or by users sharing a few interest groups. It's similar to Flipboard and Apple News. 

"Somebody is going to figure out a new way to get news to millennials and beyond," Carter said in an email. "My guess is that ZIG, in its mobile-first visual way, has a unique and compelling way to address this."

What's the business model? There are no traffic numbers yet but the company will sell ads and share ad revenue with publishers, Zig's co-founders say.

What's popular today? You don't need to be a brain surgeon to guess this trending list: royal wedding, President Donald Trump and the Kardashians.

How are they spending the seed money?

"The product comes across as effortless and simple and magical but behind the scenes we're crawling and gathering every piece of content published, cataloguing and making it personal, so its software engineering and data processing costs," chief executive and cofounder Joshua James said.

ESPN's upfront features pitches to younger tastes: avocado toast and social media

ESPN's upfront presentation at New York's Minskoff Theater featured trays of avocado toast, salmon bagels and green juice smoothies - evidence that Disney is in touch with younger tastes and that this is a company that can still afford to pay for luxuries when it comes to wooing advertisers.

As the crowd of ad executives waited in the theater for ESPN's new president Jimmy Pitaro to make his debut on a stage, a DJ, aptly named Dilemma, provided the bass-heavy music to generate some excitement.

ESPN's dilemma, of course, is two-fold:

1) How to grow its direct-to-consumer business fast enough to compete for sports rights with tech rivals that have cash piles in the multi-billions.

2) How to encourage cable customers to stump for new services without them cutting the cord. Disney cable income is on the decline, according to its most recent earnings report.

About that new subscription service: in a post-show press conference, Pitaro declined to offer any numbers on the re-launched ESPN app, which hosts ESPN+. He did say that both engagement and reach are up, and that he's pleased with the conversion rates to the new service.

ESPN opened its upfront with the three stars of its new morning show, "Get Up" in a video on their way to work. The show has been seen as a major new effort for ESPN, but ratings haven't been great. Reporters at the post-event press conference wanted Pitaro's take: He said change is hard and that ratings are up since the network has been tweaking the show.

How's Pitaro's vision is different from predecessor John Skipper: Pitaro says he's been thinking a lot about ESPN's audience and that the company can't get too caught up in the idea of a "fanatic."

"I think we're doing a fantastic job of serving the sports fanatic. But as we think about expanding our audience, what about the casual sports customer" Pitaro said. 

Best quote of the event: Kobe Bryant was on stage to promote his new ESPN+ show "Detail." Bryant said: "Determination wins games, details win championships."

Pitaro's top priority in two words: Audience expansion. "How do we become more relevant to more people, especially the younger generation?" Pitaro told reporters. 

The press conference ended quickly as organizers were told to break down the set so the Minskoff Theater could get ready for another Disney production: "The Lion King."

Avocado toast at the ESPN upfront. Claire Atkinson

CBS vs. Viacom: Les Moonves could win either way

Does Leslie Moonves want to get fired? Should he?

When Viacom's chief executive Philippe Dauman walked out of the door back in August 2016, he did so safe in the knowledge that his golden parachute was filled with $75 million. Dauman bowed out after losing an epic board room battle with Viacom's controlling shareholder, Shari Redstone.

Now CBS chief executive Leslie Moonves is taking his turn in the firing line by blocking Redstone's efforts to merge CBSA and Viacom. CBS on Monday filed a lawsuit in an effort to block Redstone from pushing forward a merger with Viacom, a rare move in which one company is suing its parent company. 

Is Moonves playing like he's got nothing to lose? Well, sort of. Investors may want to take a look at whether his compensation package is structured to give him the incentive to push as hard as he can for what he wants thanks to the money he could receive if he's removed from CBS.

Page 72 of the latest proxy statement from CBS includes details of "potential payments in the event of a termination, and certain other events." One footnote states that Moonves would have received payments totaling $131.1 million had he exited in 2017. According to filings dated February 28, 2018, Moonves also holds one percent of the Class B shares of CBS. Moonves is one of the highest paid executives in television and earned $69 million last year. His wife, Julie Chen, hosts the CBS show "Big Brother."

Redstone's National Amusements, which has the majority of the voting shares controlling both CBS and Viacom, fired back at the lawsuit with a veiled threat. The company believes the CBS action was in retaliation for "raising specific concerns about incidents of bullying and intimidation in relation to one CBS director, dating back to 2016."

National Amusements has not named the director.

Judge Andre Bouchard has set a hearing for May 16 to consider CBS’s request for a restraining order that would prevent Redstone from blocking a May 17 special shareholder, at which CBS plans to consider a dividend that would dilute Redstone's voting shares in CBS from 79 percent to  17 percent.

 

A screenshot of the CBS proxy statement showing some of the payments Moonves would be due if he leaves or is let go from CBS. CBS

U.S. Senators want to know more about AT&T's work with Michael Cohen

AT&T spends a lot of time and money polishing its brand and its reputation. It was ranked 49th in Fortune's Most Admired List, and number one in the global telecommunications category earlier this year.

So Chief Executive Randall Stephenson must be concerned about the negative publicity surrounding the company's $600,000 payment to Michael Cohen, President Donald Trump's personal lawyer.

Stephenson, who is waiting for a Federal Judge to rule that AT&T can proceed with its acquisition of content giant Time Warner, must have hoped that parting ways with Robert Quinn, the company's Washington D.C. chief, last week would at least help the company get back on the right track.

But on Monday, a group of Senate Democrats dug in, sending a letter to AT&T looking for more details of on the who-knew-what-when.

At the time Cohen began as a consultant, AT&T was seeking approval of its $85.4 billion acquisition of Time Warner, which months later was met by a Justice Department lawsuit. President Trump has said he did not believe the merger is in the public interest and has been highly critical of CNN and its chief executive Jeff Zucker. In April, Trump sent a tweet suggesting Zucker's job was in jeopardy.

The letter to AT&T was signed by Sen. Elizabeth Warren, D-Mass., Sen. Richard Blumenthal, D-Conn., and Sen. Ron Wyden, D-Ore. The Senators want to know if there's a pay-to-play going on. Take a look at the intriguing question number eight. Read the letter here

Wyden also sent a letter asking Novartis, which also paid Cohen, for details of their relationship. 

AT&T said it was aware of the letter and will be issuing a response.