by Keach Hagey
But his real love, outside of painting, was motorcycles. On May 24, 2004, he was heading toward the California State College, Northridge, campus on his yellow Ducati when a drunk driver pulled out of an El Pollo Loco and hit him, knocking him off his bike and crushing his rib cage.
Eddie and Madeline were asleep when the call came from the hospital. Madeline immediately knew something was wrong when she looked at the clock: eleven thirty p.m. “No one calls us that late,” she would later say. A woman from Northridge Hospital explained that Adam had been in an accident. Madeline started to scream, “We’ll be there, we’ll be there!” But Eddie already knew it was too late. “He started to collapse,” Madeline later recounted. For her part, Madeline had to wait for the voice on the other end to say it before it sunk in: “He didn’t survive.”
While Madeline snapped into action mode, talking to the coroner’s office and making arrangements, “Eddie was just comatose,” Madeline recalled. “He lost his daughter and now he lost her son.”2 Adam had been Eddie’s second chance at parenthood, and Eddie had been determined to correct the mistakes he had made with his own children, when he had been too busy with National Amusements to be a truly present father. He had left the isolation of his beloved Martha’s Vineyard for Concord so that Adam might have a chance at a “normal” childhood. They took him on skiing trips and on safari, and Madeline—the more athletically inclined of the couple—coached his football and baseball teams. When they began to suspect that his wealthy friends at Milton Academy had introduced him to drugs, they begged the school to drug-test him, and when he was later expelled, they whisked him to Hazelden, beginning a long odyssey of drug treatment programs. Even when those difficult years forced them to adopt “tough love” tactics, they never stopped believing he was a talented, good-hearted kid, eventually adopting him in 2002.3 His early years with the cult had left their imprint. He was afraid of men in suits and would speak of being locked in rooms and exposed to dogfights. But Eddie and Madeline were sure they could overcome any of this. “We were inseparable,” Eddie said. “I mean emotionally inseparable.”4
Adam’s death was more than just an emotional problem for the family. When Ruth Ann died, her untouched trust passed down to her son, but when he suddenly died with no heirs or estate, the documents were somewhat unclear about where, exactly, the money—by now worth nearly $25 million across three trusts—was supposed to go.5 A significant portion of it was due to go to Ruth Ann’s brother, Michael, whose toxic relationship with his father had never really improved.
On Thursday, May 27, Eddie and Madeline flew back to Boston with Adam’s body, where they sat shivah for five days at their home in the Four Seasons Residences, the swank residential tower overlooking Boston Public Garden. Friends and family flew in from all over the country to comfort and feed them. By Sunday, the day of the funeral, even the oft-warring Redstone clan had gathered in its near entirety at Adam’s graveside in the verdant, historic Temple Israel Cemetery in Wakefield, Massachusetts, near Congregation Kerem Shalom, the synagogue in Concord where Adam had been bar mitzvahed: Sumner and Paula; Phyllis, her sister, Cecelie, and brother-in-law, Ralph; Brent and Annie and their children, Keryn and Lee Lee; Shari and her children, Kim, Brandon, and Tyler; Madeline and Eddie and Madeline’s three children from her first marriage.6 The only person missing was Michael, who later explained that his son had his college graduation that day in Worcester. Madeline and Eddie were furious at his absence.7
A month later, they filed a lawsuit to block some of the money from Adam’s trusts from going to Michael, asking to first be paid back for some of the expenses they had incurred while raising Adam. “They had been paying Adam’s expenses because he was their son, and they wanted to keep the money [in the trust] for Adam to have. But once the money was no longer going to Adam, then they wanted to be reimbursed before it was absorbed back into all the other trusts,” explained Howard Castleman, Madeline and Eddie’s lawyer. The lawsuit wound on for years, roping in many members of the Redstone family and resulting in only a partial victory. Along the way, the discovery process dredged up documents revealing to younger generations the settlement that Sumner and Eddie had made when Eddie left National Amusements in 1972, and details about how Sumner went about buying out Michael’s and Ruth Ann’s National Amusements stakes in 1984.8 Those files would lay the foundation for future lawsuits that would threaten Sumner’s control of his empire and sunder his relationship with every member of the next generation of his family, except for his daughter, Shari.
* * *
After the family threw dirt on Adam’s grave, Sumner and Paula ducked out early, skipping the reception back at the Four Seasons. Sumner had work to do. Two days later, he was on the phone with analysts, trying to soothe their shock at the sudden departure of Karmazin. “Nobody asked for Mel’s resignation,” he said. Freston and Moonves, who were friends, vowed that their bake-off would be a “partnership,” not an episode of The Apprentice.9 The performance worked, and Wall Street mostly shrugged at the drama, sending Viacom’s stock down only a few cents, to $36.50.10
The problem was that it then barely budged for nearly a year—and that price was well below the $46.30 a share that Viacom was trading at on the day after the CBS deal was announced. “There are an awful lot of people here whose stock options are underwater,” one executive whispered to the New York Times. The biggest media merger of the twentieth century had destroyed shareholder value.11
A growing chorus within the building argued there was nothing left to do but undo it. Its leader was Bob Bakish, the former consultant who had been promoted from overseeing ad sales at MTV Networks to executive vice president with responsibilities for strategic planning in the reshuffle that followed Freston’s elevation. He was joined by an army of investment bankers from Morgan Stanley, Bear Stearns, Citibank, and Lazard, who argued that the best way to “unlock shareholder value,” as the corporate cliché goes, was to separate the high-growth assets like MTV Networks from the slow-growth assets like radio and the CBS broadcast network.12 This tidy plan had the benefit of sparing Sumner the unpleasant task of having to choose between Freston and Moonves. Each would get his own public company to run as CEO, and Sumner would remain controlling shareholder and chairman of both. One analyst dubbed the companies ViaGrow and ViaSlow.13
Bakish’s team mapped out which assets belonged on which side of the divide based on their growth rate. That meant that Simon & Schuster, which had been under Freston but was growing at the modest rate of a “mature” business, got handed over to Moonves. Ditto Showtime. This decision left more than a few analysts scratching their heads, since a movie-filled premium cable network had more obvious synergies with Freston’s cable channels and Paramount. Freston got Paramount’s film studio on the strength of his pitch that he would make movies out of MTV Networks’ intellectual property, but Paramount TV went to Moonves. Moonves put a positive spin on the situation, saying his slower-growing, cash-rich businesses would allow him to pay out more dividends, but privately he fumed at the characterization of his side of the company as a “value” stock.14
Sometimes it seemed like Moonves couldn’t catch a break. When it came time to divvy up the company’s two Bombardier Global Express private planes—identical save that one was old and the other brand-new with a five-year warranty—both wanted the new plane, which was worth about $2 million more. They decided to flip a coin. Freston won the new plane.
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With the split, finally, came a legitimate succession plan. The same day the Viacom board voted to cleave off CBS from the company, it voted to make Shari nonexecutive vice chairman of both Viacom and CBS.15 Rumors swirled that she had refused to bless the split until she was guaranteed such a post,16 but in fact Sumner had been pressing her to take the vice chairman role for years. Shari, wary of titles and the commitment to half a dozen board meetings a year in New York while still feeling she needed to be home to cook dinner every night for her kids back in Boston, had bal
ked in the past, going so far as to suggest having the conversation over dinner at Blu at the Ritz-Carlton in Boston, in hopes that being in a public place would make him less likely to make a scene when told no. But by 2005, with her kids out of the house, her father playing the newlywed out in California, and Karmazin’s star on the wane, she had already begun spending about half her time in New York.17 She was ready to take on the mantle, and her father finally seemed ready to give it to her. After years of hemming and hawing about how the matter “has not even been discussed,” Sumner began stating openly that when—not if—he died, Shari would take over his role as controlling shareholder. “Sooner or later, no matter how good I look and how good my vital signs are, I’m gonna die and control of the company is likely to pass to Shari,” he told the Los Angeles Times.18 It was at this moment that Shari, with her auburn hair, Boston accent, and fierce negotiating style, was given a nickname by a former Viacom executive in the Wall Street Journal that stuck: “Sumner in a skirt.”19
* * *
Once she had the vice chairman’s megaphone, she was not afraid to use it to disagree with her father. But she would learn that her dissenting opinions held little weight. It was the people who agreed with Sumner who got the power. Within a month of her becoming vice chairman, Viacom’s loss of MySpace to archrival Rupert Murdoch would deliver an object lesson in this dynamic, with disastrous consequences for the future of both the company and her family.
It wasn’t necessarily a given that MTV Networks would lose its young audience to the Internet. In early 1999, a year before the transformational AOL–Time Warner merger put all media companies on notice that they needed an aggressive online strategy, Freston gathered his channel chiefs and digital executives together to discuss the online future. “He believed that the Internet wasn’t just a transitory medium and that it was really going to be a powerful medium for the whole entertainment industry, especially in the music space,” Nicholas Butterworth, president of the MTVi Group, a division combining the online presences of channels like MTV with recent digital acquisition SonicNet, told MediaWeek in 2000. Despite the major challenge of the record companies’ reluctance to give MTV the digital rights to their music videos, Freston had some reason to be optimistic: MTV.com was the top music entertainment site on the Internet, VH1 showed up in the top 10 less than a year after it was launched, and pageviews for the group had tripled over the past year.20
With an eye toward the soaring valuations of online companies, MTVi filed paperwork that February for a $10 million initial public offering, projecting it would double its revenue to $40 million over the next year, even as its losses were widening. But just as they were starting out on their road show, the dot-com bubble burst. MTVi pulled its IPO and soon fired a quarter of its four-hundred-person staff. “We had, like, four different people reviewing the Nelly album,” explained a Viacom spokesman.21
The crash, followed by the apocalyptic collapse of the AOL–Time Warner merger, spooked Viacom, as well as many of its competitors, from the online space for years. The company woke up in 2004 realizing it didn’t have a digital strategy.
At the same moment, as chronicled in Julia Angwin’s Stealing MySpace, MTV Networks executives began to notice that fans of its shows were hanging out on MySpace, which had just surpassed Friendster as the largest social network by pageviews.22 In July 2004, MTV Networks digital executive Nick Lehman walked into his boss Jason Hirschhorn’s office and showed him that one of the most popular areas of MySpace was devoted to the MTV show Laguna Beach. He explained how social networks worked and told his boss that he believed they were the future home of MTV’s audience.
Hirschhorn agreed. “MTV of the future needed to be the platform where the audience told each other what was cool,” he said. When Freston and Moonves held a “digital show-and-tell” in August 2004 for all the divisions of Viacom to present their ideas for the company’s digital strategy, Hirschhorn included MySpace, as well as the gaming website IGN, on the list of companies he wanted to buy.23 Freston, who had declared he wanted 15 percent of the company’s revenues coming from digital in five years, told him to go for it.24 In early December, Hirschhorn called up MySpace cofounder Chris DeWolfe and requested a meeting. Soon a parade of MTV executives were tromping through MySpace’s hip Santa Monica offices, waxing nostalgic about how much it reminded them of the funky chaos of MTV’s early days.25 Like pre-Redstone MTV Networks, MySpace hated their corporate overlords at Intermix Media, a bizarre grab bag of a marketing company whose biggest winners included wrinkle cream and diet pills.26
For MTV Networks, it seemed like the perfect match. MySpace wasn’t just the biggest social network; it was a cultural fit. While Friendster had the feel of an earnest dating profile and still-emerging Facebook was born in a nerd’s Harvard dorm, MySpace was heavily used by bands, and its open code that allowed people to customize their pages with seizure-inducing animation and music gave the whole site a nightclub vibe.
But Viacom’s legal department, led by Michael Fricklas, had qualms. They worried that the company might be sued for copyright infringement for the remixes that people were posting to their profiles. They feared that advertisers would balk at placing ads next to user-generated content they didn’t control. And most of all, after New York attorney general Eliot Spitzer filed a lawsuit in April 2005 against Intermix, alleging it had installed spyware on its users’ computers without their knowledge, they worried that a lot of MySpace’s eye-popping traffic was bogus. Although Intermix settled with Spitzer by June, according to one person familiar with Viacom’s view, “that investigation raised a question about whether a lot of the so-called traffic was really spyware or malware sitting on people’s computers generating traffic.”
Nevertheless, Viacom, recognizing that Intermix controlled MySpace, decided to pursue a deal with Intermix, flying a team including executive vice president of operations Bob Bakish out to California for an initial due diligence meeting on July 7, 2005. Viacom had no idea that Intermix, wary that the closeness between MTV and MySpace might prompt Viacom to make a bid for the social network alone without its parent company, had given the same pitch a week before to Rupert Murdoch’s News Corp.
Sumner had long regarded Murdoch as his biggest rival. In part, it was because they were so similar. Each had taken his father’s regional media business and built it into a global media and entertainment colossus, all the while maintaining absolute control long into old age. Both by then had considerably younger wives. And both were grooming their children to take over their empires, though Murdoch seemed far more dedicated to this last point than Sumner ever did. What Sumner most envied about Murdoch’s family was not the way that he successfully prepared his children for operating roles in his companies but that his mother was still alive to see her son’s glory. “The thing that used to drive him crazy was Murdoch’s mother walking around, lucid,” said one former Viacom executive. (Dame Elisabeth Murdoch died in 2012 at the age of 103.) The only thing that drove him crazier was losing a deal to Murdoch.
Over a frantic two weeks in early July, both Viacom and News Corp pursued Intermix, with Viacom never knowing that News Corp’s new digital strategist, Ross Levinsohn, had gotten a few days’ jump on them. On July 12, 2005, News Corp beat Viacom to the punch with an “exploding” offer of $580 million in cash, meaning the terms would only hold until the end of the week. Intermix CEO Richard Rosenblatt called Freston, who was on vacation at the Four Seasons Resort in Maui, to alert him to the offer, thinking he was starting an auction. But Freston didn’t take the bait. Viacom’s deals team was still in the final stages of doing due diligence and planned to make an offer after the company’s board meeting in the middle of the following week. He didn’t believe that Murdoch could really get the deal done by the end of the week, since it was in Intermix’s interest to have multiple bidders. What Freston and the rest of Viacom did not know was that Intermix had an obscure clause in its arrangement with MySpace that gave it an incentive to take
the first offer that came along, lest it risk triggering MySpace’s right to go sell itself directly. On Monday, July 18, 2005, News Corp announced that it had agreed to purchase MySpace owner Intermix for a 20 percent premium over its stock price. MTV Networks executives were stunned. “He came in on a weekend, no due diligence, and just bought it for $580 million,” Freston recalls. “Just bought it.” (A person familiar with News Corp said they did do due diligence.)
Two days later, Freston and his fellow MTV Networks executives went before Viacom’s board to beg Sumner to counterbid. Freston noted that there was plenty of room to keep bidding as MTV Networks’ internal valuations were as high as $810 million. “What took so long?” Shari said, according to Angwin. “We should have had this already.” She said she supported a counterbid. Alan “Ace” Greenberg, one of Sumner’s most trusted investment banking advisers, also supported a counterbid, but Sumner did not. “Rupert is not afraid of overpaying,” he said. “He doesn’t care about the market, and he will outbid us.” Dauman agreed, and that was the end of it.27