by Keach Hagey
Phyllis would not have to wait long for her revenge. She hired a private detective, who on May 20 tracked down Sumner and Peters in Paris and snapped a photo of them walking hand in hand.31 Just outside the frame of the photo were Peters’s two daughters and mother, whom she was traveling with on a museum-hopping tour of Paris and her native Holland when Sumner swooped in on the private Viacom plane to take them all out to dinner.32 But the chaperoned context hardly mattered. Phyllis had the evidence she needed, and it soon appeared on the front page of the New York Post.33
Instantly, analysts began to fret about what the divorce meant for the CBS deal, and Viacom was forced to put out a statement that same day to placate them: “The Redstone family interests in Viacom’s parent company, National Amusements Inc., are structured in such a way that the personal matters between Mr. and Mrs. Redstone will not affect the ownership, control or management of Viacom, nor will they affect the merger with CBS.” Then, George Abrams, Sumner’s personal lawyer who served on the boards of both Viacom and National, delivered the shot across Phyllis’s bow: “In the interest of his family, Mr. Redstone chooses not to reply publicly to any allegations, no matter how false or misleading they may be. This is a personal matter which Mr. Redstone intends to resolve in a private way. Mr. Redstone and both his children are united on all matters affecting the family’s business interests.”34
The statement was a bluff, but it revealed Sumner’s weakness. As the owner of two-thirds of the voting shares of National Amusements, he effectively had control, but he did not own all of it. The other third was split between his children, Brent and Shari. Because Sumner did not know how the divorce was going to turn out, he suddenly needed his children in a way that he never had before.35
Chapter 14
The Hotshot
On a balmy December evening in 1999 not long after Phyllis filed for divorce, Sumner and Shari dined together overlooking the Pacific Ocean at the Ritz-Carlton in Newport Beach, California. Their companion for the evening was Paul Heth, a blue-eyed, baby-faced exhibitor buzzing with earnest, optimistic energy who had opened the first successful American-style movie theater in post-Soviet Russia. After talking for a few years, Heth and Shari had decided to go into business together—making Heth the first partner for the partner-averse Redstones since Mickey’s old bootlegging and bookmaking buddies. But Shari wanted Sumner’s blessing.
Heth was nervous as dinner got under way, but he relaxed a bit when he discovered that the outfit he had chosen for dinner with the man who had just announced the biggest media deal in history—a turtleneck and blazer—matched Sumner’s own. Determined to follow his mother’s advice to “just be yourself,” he started the meal in the way to which he had become accustomed since moving to Moscow: with a vodka cranberry. Sumner, inspired by his choice, ordered his old favorite, a vodka martini. (Shari, poetically, ordered a sherry.) Sumner proved a charming dining companion, grilling Heth on the status of the ruble and Boris Yeltsin’s latest antics. When Heth, whose grandfather revered entrepreneurship so much that he kept a collection of business cards with Henry Ford’s on top, asked Sumner who he thought was the best entrepreneur in America, Sumner replied, only half-jokingly, “You mean present company excluded?” and went on to say, “I believe I’m the best corporate lawyer, or one of the best corporate lawyers, in modern American history.”
But when the drinks arrived, Sumner—by now notorious for his impatience with waitstaff—was displeased. Settling into full professorial mode, he informed Heth that he was going to teach him a business lesson and called over the waiter. “I knew Bill Marriott, I’ve been eating at the Ritz-Carlton since the 1950s, and this drink is made wrong,” he said. The waiter called the manager, who called the maître d’, and then another manager. A disagreement ensued, and someone fetched a mix book. Sure enough, they found they had made it wrong (or said they did) and sent him another. “Paul, that’s a little demonstration that I believe in my convictions,” Sumner said. “So if you believe in Russia, or whatever you are going to do, you have to stand by your convictions.”
Heth passed muster, and he and Shari formed CineBridge Ventures to explore upscale movie theater features such as assigned seating that he had tested in Russia. Heth, whose financial contribution to the venture ran in the “tens of thousands,” was named president. Shari, who contributed most of the money through National Amusements, became, for the first time in her life, a chairman and CEO.1 (Although she’d been working at National Amusements for eight years and had been president, running its 1,350-screen theater chain, for the last four, her seventy-seven-year-old father still got the grosses faxed to him each morning and still claimed the CEO title there.) “Shari and I wanted to change how people do movie theaters,” Heth said. They visited boutique hotels to study their bars and lobbies and hired an interior designer from the pages of Vanity Fair to outfit their creation in sophisticated muted tones like “sand,” far from the garish red-and-black template of the typical movie theater. In 2001, they opened The Bridge, a seventeen-screen multiplex theater in a shopping center near the San Diego Freeway; it offered valet parking, assigned seating, a concierge, cocktails, and live entertainment—all for $9.95, a little less than twice the national average ticket price at the time. “We had flowers and jazz in the restrooms,” Heth said. “Really it was ahead of its time.”
The posh theater wasn’t quite as replicable as Shari and Heth had hoped, having promised “openings in selected cities in the U.S. with expansion to continue to European countries” in their launch press release.2 Only one other Bridge opened, in Philadelphia, though many of its features were rolled out across the United States in National Amusements’ “Cinema de Lux” brand. Still, The Bridge’s ambitious concept turned heads in an industry enduring one of its darkest periods, as National Amusements’ rivals, staggering under debt from a building spree of expensive suburban “megaplexes” they couldn’t fill, were going bankrupt right and left.
In some ways, Shari’s greatest victory at National Amusements was not in what she built but in what she didn’t. When she settled into her full-time role as the executive vice president of National Amusements in early 1995, the movie exhibition industry was in a building frenzy. The previous year, 1.3 billion tickets were sold, the most in thirty-five years, and the industry grossed a record $5.4 billion, lulling exhibitors into believing that rising competition from cable channels and home videos was not the threat that it had first appeared to be. In a way, they were right: all these new “windows” to see movies in gave the movie business new revenue streams, which in turn gave Hollywood studios the incentive to make more of them. A “tidal wave” of films, as the New York Times put it, flooded the market, inspiring theater owners to build more venues.3
They didn’t just build more, they built bigger. The biggest national chains, like AMC Entertainment, Regal Cinemas, and Carmike Cinemas, pushed past the multiplex to so-called megaplexes, defined as theaters with fifteen screens or more, that allowed hourly showtimes and so many choices that people could drive up to the theater without having made up their minds about what movie to watch. The extra theaters were great when blockbusters like 1996’s Independence Day, which grossed $306 million domestically, were selling out theaters, but a few exhibitors worried that they would turn into “expensive white elephants” during Hollywood’s inevitable next creative slump.
Shari was among the wary. “Overall box office is not necessarily increased by adding a megaplex to the market,” she told Film Journal International, emphasizing that they are only a good idea if they are built in truly underserved areas.4
True to her word, one of the first theaters she built was a fourteen-screen multiplex in East New York, a poor and largely African American neighborhood in Brooklyn that did not even have a major grocery store at the time, let alone a movie theater. (The neighborhood’s city councilwoman said she and her constituents were “screaming” with delight when they heard the news about the $30 million theater, saying, �
�I’m excited about the fact that, for once, it looks like people are coming back.”)5 National Amusements owns it to this day. Shari continued to build modestly through the late 1990s, opening a seven-screen multiplex in Worcester, Massachusetts. At the opening, she spoke of remembering when National opened its first Worcester theater in 1963, saying, “I grew up with this . . . it’s in the blood.” She also built a twelve-screen multiplex in Hicksville, Long Island, and announced a twenty-screen theater outside Cincinnati, Ohio, on the site of one of the company’s former drive-ins, but the project fell through in the end.6
But she focused on overseas markets, largely because nobody else at National Amusements was. “I got involved in acquisitions, development and strategy planning, probably because my father is so very focused on film,” she told Film Journal International. “It allowed me to find my own place in the company.”7 She picked up where her ex-husband left off on National’s UK expansion and began the company’s first push into South America with a fourteen-screen multiplex in Santiago, Chile, in 1998, where staff baked cookies in the lobby and moviegoers could order frozen yogurt with fresh fruit.8 By 1997, she had 360 screens in development in five countries, including Argentina and Brazil.9 From the time she joined National Amusements to 2002, she nearly doubled the number of screens, to 1,400.10
But while she was building, her competitors were building even more. From 1988 to 2001, the number of screens in the United States rose from 23,129 to 37,185, a 61 percent rise, according to NATO. But theater admissions only rose about 36 percent, to 1.47 billion during the same period. Forbes estimated that, by the end, the average theater was only 12 percent full.
Shari’s seat on the Viacom board gave her special insight into the folly of this strategy. She was privy to Viacom’s efforts to get Paramount to cut its film slate and rein in costs. “It’s interesting that while everybody talks about megaplexes, and focuses on making theaters bigger and bigger and bigger, the studios are announcing that they’re cutting back on production,” she told Film Journal International. By 1998, Shari was sounding the alarm about the industry’s overbuilding. “Once this frantic expansion activity subsides, there’ll be a lull while circuits assess the effect on the marketplace. Then you’ll begin to see the fall-out—consolidations and some closings.”11
Sure enough, the drumbeat of bankruptcies started in 2000. All of the big guys—AMC Entertainment, General Cinemas, Regal Cinemas, Loews, and United Artists—as well as smaller ones like Carmike Cinemas and Edwards Cinemas, either filed for Chapter 11 bankruptcy protection or warned investors they were mulling it. And the consolidation happened.12 AMC bought General Cinemas, Loews, and, eventually, Carmike. Bankrupt Regal merged with United Artists and Edwards. Theaters shut down across the country. National Amusements weathered the storm, in part thanks to the ballast of its real estate holdings. Although Shari strayed at times from her grandfather’s strategy of buying rather than leasing the land under their theaters and made a few bad bets on theater locations in the UK, by and large, she had successfully captained the ship through rough waters.
Her father, finally, took notice. “She exceeded my highest expectations,” he told Forbes in May 2002. “In a very difficult period of time, she did better than anyone else in the industry.” It was the first time that Sumner had ever publicly praised Shari, and in true Sumner fashion, he took it over the top. “Nobody in the entertainment industry is rising as fast as Shari,” he declared. “It’s like father, like daughter. She has no major weaknesses. She is a great businesswoman.”
Shari’s rise in her father’s estimation coincided with the decline of his relationship with Mel Karmazin. This surprised precisely no one. From the moment the Viacom-CBS deal was announced, the Wall Street Journal predicted that the “Mel and Sumner show” would be filled with debilitating drama.13 For Sumner, running Viacom was a social experience, filled with dinners with top executives at the Four Seasons Pool Room, Paramount movie premieres, and MTV events where he and Phyllis met stars like Bono and Puff Daddy. Reporters adored him for his fearless willingness to give good quote. Karmazin’s idea of a good time was grabbing a slice of pizza at the corner stand near his Manhattan apartment, and he avoided the press like the plague.14 “Mel and Sumner were like oil and water,” Tom Freston said. Like Frank Biondi before him, Karmazin “didn’t want to hang out with Sumner at all. Mel was another guy who went home at five o’clock at night,” though the workaholic Karmazin showed up at the office at the crack of dawn.
Karmazin made some key acquisitions, overseeing the purchase of BET in 2001 and buying the rest of Comedy Central from partner AOL–Time Warner in 2003, and Sumner appreciated his obsession with Viacom’s stock price. But Karmazin’s cheapness at times exasperated him. A little over a year into their corporate marriage, Karmazin proposed nixing the company holiday party for top Viacom executives as a cost-cutting measure. Sumner responded by paying for the lavish affair at Sotheby’s himself, bringing his personal friend Tony Bennett in for the entertainment. Karmazin made a brief appearance but, according to the New York Times, left before dinner.15
Karmazin had an even worse relationship with Sumner’s children. Shari had been opposed to the role that Karmazin carved out for himself in the Viacom-CBS merger. “She felt that Sumner was giving up too much control to Mel,” said one former Viacom executive. “Sumner overruled her.” (Other Viacom board members said these concerns were widely held on the board as it mulled the CBS merger but that ultimately the chance to acquire CBS with no premium was too good to pass up.) In the wake of the Viacom-CBS merger, Karmazin returned the favor, requesting that Shari and Brent stop attending Viacom operating meetings. When Sumner brought Shari around the executive offices one day, Karmazin “went down and said to Sumner, ‘Is this take-your-daughter-to-work day?’” Freston said. Sumner began referring to him behind his back as “Karma-fuck.”
Shari, meanwhile, was making the case for greater involvement at Viacom. From the moment she got to National Amusements, she was constantly seeking synergy, suggesting that the movie chain partner with Blockbuster to open “Block Party” adult entertainment centers with video stores, movie theaters, virtual reality arcades, and retail stores on National Amusements properties. She proposed Paramount commissaries in the movie theaters, joking that “we’re looking into a Klingon take-out service.”16 She even posed holding a bag of cross-branded popcorn between two monsters, Krumm and Ickis, from Nickelodeon’s show Aaahh!!! Real Monsters to highlight a promotional campaign for the show inside National’s theaters.17 She attended Viacom management retreats and grew friendly with the executives, particularly at MTV Networks. With teenagers at home, she had a connection to the channels as well as to its management. “She liked us, and we liked her a lot,” said Mark Rosenthal, chief operating officer of MTV Networks at the time. “She was always very careful not to be intrusive.”
Yet she was also not shy about voicing her desire to shape the future of the company. Even if she had “absolutely no desire” to be chief executive—the role that was promised to Karmazin in his contract should her father die—she told Forbes that, as a board member, she’d like to see Viacom make more content acquisitions. “Viacom is an extremely significant asset of National Amusements,” she said. “I’d like to take a larger role.”18
She would soon get one. A month after the piece was published, Shari and Heth announced a new joint venture to build the first American-style multiplexes in Russia. They called it “Rising Star Media,” after a line in the Forbes story calling Shari a “rising star.” Their first theater, an eleven-screen multiplex in Moscow in a development anchored by IKEA, was set to open by the end of the year under the name Kinostar, making National Amusements the first major American theater chain to enter the Russian market.19
One month later, Sumner and Phyllis finalized their divorce.20 In a lawsuit a few years later, Brent, who had always been protective of his mother, accused Shari of cozying up to her father during the divorce, in exchan
ge for his “extreme favoritism.” He alleged that a panicked Sumner, having promised investors that the surprise divorce would not alter his absolute control over National Amusements, pressured both of his children to sign over their voting rights to him in the form of an irrevocable voting trust. “If [Phyllis] were to get one-half of his two-thirds, she could go to court with him and force the sale of Viacom,” Keryn Redstone said. When Brent refused, Sumner went to Shari and offered her a revocable voting trust, which she signed. Ever since, Brent charged, Sumner had retaliated against him.21 In 2003, Sumner removed Brent from the Viacom board.
Sumner’s deal with Shari helped him get a divorce settlement that assured his continuing control of National Amusements and, therefore, of Viacom. In essence, instead of getting half of Sumner’s assets, Phyllis agreed to take half of the income from them. As part of the settlement,22 Sumner agreed on June 28, 2002, to put his two-thirds stake in National Amusements into a new trust, the Sumner M. Redstone National Amusements Trust, overseen by seven trustees: Sumner, Phyllis, Dauman, George Abrams, David Andelman (Sumner’s tax lawyer and a director of National Amusements and Viacom), Norman Jacobs (Sumner’s divorce lawyer), and Leonard Lewin (Phyllis’s divorce lawyer). During Sumner’s lifetime, he would be the sole beneficiary, though if he took any disbursements, he had to give half of the after-tax amount to Phyllis.23 If he died while Phyllis was still alive, half of the shares would go into a section of the trust for Phyllis’s benefit, while the other half would go into a section (the General Trust) for the benefit of Brent, Shari, and their children. After Phyllis died, the remainder of the National shares would go into the General Trust, which would be overseen by two family trustees and five nonfamily trustees. Initially, the two family trustees were to be Brent and Shari, and the nonfamily trustees the same as above. (Brent’s seat would change several times in future rounds of family infighting.) But from the outset, Shari had a more prominent role than her brother in the trust. So long as she was still a director of both National and Viacom at the time of her father’s death, the trust stated, “Shari shall succeed [Sumner] to the Chairmanships” of both National Amusements and Viacom and hold them “for at least a three year period.” The idea was to give Phyllis some comfort that her interests would be looked after at the main source of the family’s wealth after Sumner died.