The King of Content
Page 25
One of Dauman’s first moves as CEO had been to unwind a joint venture with Vice Media, the Brooklyn-based gonzo journalism outfit that had been one of the first movers in online video. Started as a free zine in Montreal in 1994, Vice had been transferring the feral spirit of its magazine into video travel reports like “The Radioactive Beasts of Chernobyl,” which caught the attention of a Viacom executive named Jeff Yapp. In 2007, Viacom and Vice launched VBS.tv, a joint venture that featured reporting from places such as an illegal arms market in Pakistan. “It scared Viacom to death,” Yapp said.23 It also led to a friendship between Vice CEO Shane Smith and Tom Freston, another globe-trotter with a taste for thrill-seeking. When Freston was fired just as VBS.tv was launching, Vice decided they wanted out. Viacom had loaned Vice $3 million with warrants to buy equity, and in the end, they decided not to exercise the warrants. Vice paid Viacom back its $3 million and went on its way.
As much as MTV’s and Vice’s audiences seemed a perfect match, Smith was glad to be out of post-Freston Viacom. “I used to take the elevator there, and everyone would shit-talk their own company,” he said. “It was a toxic environment.” Instead, Smith and Freston, who now had a lot of time on his hands, started hanging out, traveling to exotic locales. Freston recognized the same spark in Vice that he had seen in early MTV, and he was entertained by Smith’s audaciousness. He joined Vice as an adviser and opened up his Rolodex of rich and powerful friends. Today, with investment from companies like Twenty-First Century Fox and Disney, Vice is valued at $5.7 billion, making it the most valuable new media company.24 (Vice has since missed some revenue targets and had to apologize for its “boys club” atmosphere after a New York Times report revealed several settlements for sexual misconduct among its employees and a culture of male entitlement.)25
It took years for Dauman to fully rid MTV Networks of the influence of Freston and his band of merry, profit-making pranksters, but if there was a single inflection point, it came on Thursday, May 5, 2011, the day after The Electric Barbarellas premiered on MTV. That was the day that Judy McGrath, the woman who more than anybody else there made MTV look like, sound like, and mean what it did, announced her resignation. Dauman was gracious, calling her a creative force “that has defined and fueled a great deal of our creative and business success” and joking that “filling Judy’s Chuck Taylors will be a big task.” But he had no intention of filling them. He had her direct reports begin reporting to him and, in a symbolic but telling move, he changed the name of the once-autonomous MTV Networks to Viacom Media Networks.26 Viacom’s cable channels would never again reach the audiences or wield the influence they did when McGrath was in the building.
As Dauman tightened control, creative executives headed for the exits. The contract negotiations he led the next year with Comedy Central stars Jon Stewart and Stephen Colbert—comedians at the peak of their powers and the center of American discourse—were so nasty that they laid the foundation for both stars leaving the company two years later, part of a broader exodus of top Daily Show alumni, including John Oliver and Samantha Bee, to other networks. “I don’t think Philippe in any way saw what we do as special,” Stewart said in Chris Smith’s The Daily Show: An Oral History. “As far as he was concerned the star is the real estate, and whether or not we are the ones who carved out that real estate and made it valuable is not important to him.”27
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All this—and Sumner wasn’t paying a great deal of attention. By late 2010, his tawdry skirt-chasing had become a corporate liability. Brandon, who had grown tired of introducing his grandfather to girls and the payouts that often followed, decided his grandfather needed a steadier, classier girlfriend, and he hired Patti Stanger, host of The Millionaire Matchmaker on Bravo, to set him up. “He was looking for a quality girl he could have a serious relationship with,” Stanger said. “He tended toward the brunette side, but was open to anything.” He signed on for a year’s membership to her Millionaire’s Club for $120,000, which gave him the right to sample unlimited girls. Initially, “Sumner wanted to eat every single thing on the smorgasbord,” Stanger said. But eventually, he zeroed in on a forty-year-old brunette with feline, turquoise eyes and a caustic sense of humor named Sydney Holland.
Born Sydney Stanger (no relation to Patti), she grew up the daughter of a cosmetic dentist and a social worker–turned–star interventionist in La Jolla, an affluent beach town north of San Diego, where high school girls would often date surfer dudes in their mid- to late twenties. “Girls around here just go around with people who are a lot older,” a teenage Sydney told the Los Angeles Times after a friend of hers was in an accident with a twenty-four-year-old boyfriend. “It’s just the way it is around here. We’re more life-wise smart.”28
After graduating from La Jolla Country Day School, Sydney decided to forgo college to go into the fashion business, helping market luxury brands and eventually starting her own lines of lingerie and eco-friendly sportswear.29 Her father, who died suddenly of a massive heart attack when she was twenty, had always told her that she was a natural saleswoman and ought to consider becoming an entrepreneur. People who know her say his untimely death probably contributed to her taste for older men.
In 2000, she married Cecil Holland, a general contractor and former Hugo Boss model sixteen years her senior. They divorced three years later. By 2004, she appeared under her birth name in an ad with a business partner for a new business, the Inner Circle VIP Social Club. “New Matchmakers in town!” the ad declared.30 “A first-class dating service for exclusive gentlemen and exquisite ladies who seek to meet the love of their life!” She and her partner planned to use the service as the basis for a reality show, but it didn’t work out. Sydney fell into debt and went into recovery for alcoholism.31
But while attending Alcoholics Anonymous meetings in 2009, she met a rich, older man who looked like he was going to fix her financial troubles. Bruce Parker was fifty-three and divorced, a gifted salesman whose career at Callaway Golf—where he backed edgy ideas like using Alice Cooper to sell golf clubs—had made him a millionaire. Parker also liked the taste of cocaine and the company of beautiful women, according to his sister, Susie Parker, though he had gone into recovery. He and Sydney hit it off immediately, and after one month of dating, she moved into his Wilshire Boulevard condo. Being the woman in Parker’s life typically came with financial perks. “He used to send his girlfriends on shopping sprees,” his sister said. “That’s what he did. He was very generous.” But on the night of October 24, 2009, Parker snorted cocaine and dropped dead of a heart attack, leaving Sydney suddenly without a benefactor. She refused to leave the condo or give up the Mercedes he had leased for her, forcing Parker’s estate to sue her to get the condo back. “It wasn’t until Bruce died that her true colors showed up,” Susie said. After several months, Parker’s family agreed to pay her around $60,000 to walk away, according to two people with knowledge of the deal.
A few months later, in the fall of 2010, Sydney, thirty-nine, met Sumner, eighty-seven. In court papers, Sydney described their whirlwind romance: long drives down the Malibu coast listening to Tony Bennett and Frank Sinatra, sharing “Sumner’s favorite dessert” of chocolate mousse at restaurants, accompanying him to charity events, movie premieres, and parties celebrating the mogul. Even though he was dating other women at the time, it was Sydney he wanted to take him to the dentist as he gradually had his teeth replaced. “Before they knew it,” her lawyers wrote, “they were spending nearly every waking moment with each other.”32 Sumner was, by his own lawyer’s description, “infatuated with Holland.”33
By early 2011, he asked her to move in with him. She says he also proposed around this time, buying her a nine-carat canary yellow engagement ring.34 Sydney became his constant companion, organizing his life and carrying out his wishes with the efficiency of a personal assistant. This often meant helping him maintain relationships with other women. She was the one who ordered flowers or gifts for Delsa on special occasi
ons or called ahead to Dan Tana’s to arrange to pick up dinner for Paula, with whom Sumner remained on friendly terms. According to Sumner’s lawyers, Sydney also “arranged for other women to visit” Sumner during this period, though people close to Sydney say she merely tolerated visits that the strong-willed mogul arranged on his own. She handled Sumner’s correspondence with the Viacom and CBS top brass, even organizing a board meeting at the mansion at one point; arranged his regular Sunday movie-viewing parties; and managed his social calendar.35 And most important, she oversaw his medical care.
She was well compensated for her efforts. By March 31, 2011, Sumner had updated his will to give Sydney $500,000. By May, he had bought her a $1.8 million house. By the end of the summer, her payout in the will had climbed to $3 million, according to his lawyers. He began to fund her next business, a film production company called Rich Hippie Productions.36
All of this, according to Stanger, was classic Sumner. “He leads with money,” she said. “What he does is, he mentors women and says, ‘I’m going to put you in business.’ That was his style. You can’t call the kettle black if you lead with money. He liked women needing him.”
Around this time, according to emails leaked to the New York Post, Sydney emailed with her lawyer about how she was getting a “gorgeous diamond ring” and was “up to” $3 million in the will. They discussed the idea of marriage, but Sydney said she doubted Sumner “will ever marry me.” When the lawyer said that, together with her house and bonds, she had probably racked up between $9 million and $10 million from Sumner, he wrote, “Starting to get some comfort?” Sydney responded, “20 would be best!!! Just saying.” When the emails leaked in 2015, her lawyer said Sydney believed they were fake.37
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While Sydney was growing closer to Sumner, Shari was trying to forge her own path beyond his shadow. In 2009, when she unveiled a Cinema De Lux multiplex and luxury shopping complex, complete with an Apple Store, on the site of her grandfather’s original Dedham Drive-In, her speech christening “Legacy Place” pointedly omitted any reference to her father. “My grandfather was a visionary,” Shari said, adding that it was his foresight to buy the land under the theaters that had made the acquisition of Viacom and CBS possible.38
This same year, Shari began thinking about legacy in a different way, holding late-night brainstorming sessions with her son-in-law, Jason Ostheimer, about investing in media and technology start-ups.39 Jason met Shari’s daughter, Kim, at the University of Pennsylvania, from which they both graduated in 2004. They were married in the garden of the InterContinental Boston in 2007, with a lavish reception attended by the likes of Patriots owners Bob and Myra Kraft and Australian media mogul James Packer, finished off by blasts of heart-shaped fireworks over Boston Harbor.40 Kim, a classic beauty, worked as a lawyer at the Legal Aid Society until deciding, like her mother had, to stay home with her kids.41 Jason worked in private equity at the Blackstone Group but had always had an entrepreneurial itch.42
Shari got interested in the idea of investing in early-stage media and tech start-ups after a Viacom board meeting in 2009, just as Jersey Shore was becoming a phenomenon. “I asked, ‘Do we know who’s watching Jersey Shore’?” she said in an interview in 2015. “The answer was a mixed answer. No disrespect to Viacom, but this was a real opportunity.” The measurement company Nielsen had been tracking TV viewership for generations, but as viewership started to drift onto online platforms, it was having trouble keeping up. The kind of instant data that websites are used to having about their readers was simply not available for traditional television at the time. Shari felt there was an opportunity to invest in the next generation of what she and Ostheimer called “tools for the CMO,” or chief marketing officer, to track audiences in the digital age. They also shared an interest in emerging online video players, digital publishers, e-sports, and virtual reality companies.
In June 2011, Shari and her partners decided to sell Rising Star Media, the Russian movie theater chain that she had gotten in her settlement with her father in 2009, to Russia’s largest exhibitor for $190 million.43 Two months later, she took some of the $5 million she got in the settlement and, with Ostheimer, launched Advancit Capital, a venture capital firm focused on early-stage investments in media, entertainment, and technology.44 The first fund was modest, just $3.2 million. After a year, they recruited a third partner, veteran digital executive Jon Miller, the former chief of News Corp’s digital business and chief executive of AOL, and launched a $25 million fund.45 A third fund would aim to raise $40 million.46 Over the years, they invested in companies like Percolate, a marketing technology company; NewsCred, a content marketing company; Mic, a millennial-focused digital media company; and Maker Studios, a multichannel network of online videos that was bought by Disney. Shari retained the title of president at National Amusements, but it was ceremonial. She had decided to reinvent herself as a skinny jeans–wearing, Apple Watch–sporting VC. “I’m going to leave my day job, and this is what I’m going to do,” she said to herself. “It just seemed like the world was changing really quickly, and I thought, ‘What’s the best way that I could add value to National Amusements and Viacom and CBS? Really understanding the future.’”
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Just as Shari was launching Advancit, the first signs began to appear that Dauman might not have had such a great handle on the digital media ecosystem himself. In August 2011, Netflix launched a new feature called “Just for Kids,” which let kids browse the site by clicking on images of characters like SpongeBob SquarePants or Dora the Explorer.47 Almost immediately, Nickelodeon’s ratings tanked.48 Analysts who had fretted that licensing content to streaming services like Netflix would kill the golden goose of pay television seized upon the episode as confirming their fears. It certainly appeared that, when given the opportunity to watch old SpongeBob episodes on Netflix without commercials, kids were tuning into Nickelodeon a lot less. “This is pretty close to a smoking gun,” Todd Juenger, an analyst at Sanford C. Bernstein, told the Wall Street Journal.49
Dauman rejected this narrative, arguing during a tense earnings call that Netflix could not be blamed because the number of “content streams” that Netflix reported to Viacom was “pretty much the same” in both the fall quarter and the summer, before the ratings drop. He chalked up the drop to competing shows on the Disney Channel and a glitch in Nielsen’s new measurement sample.50 But when ratings sank 25 percent in the next quarter, analysts began asking bigger questions about the strategy of Nickelodeon and Viacom in general. SpongeBob, which debuted in 1999 and was the network’s biggest hit, had accounted for 40 percent of Nickelodeon’s airtime in 2011. They were running the sprockets off a sure thing, eroding its value, without investing in new hits to replace it.51 Anticipating this criticism, Dauman emphasized that the company was planning more SpongeBob episodes as part of a push to make five hundred episodes of new programming in 2012, a third more than the previous year.52 But the investment that spoke loudest was the buyback. The company said it spent $700 million buying back its own stock in the last quarter of 2011 and planned to continue at the same brisk pace in early 2012.53 At the time of this announcement, the stock was trading at around $48 a share.
Theoretically, media companies ought to have been able to move their television shows and movies onto new platforms like laptops, iPads, cell phones, and Roku boxes without totally blowing up their business models. After all, the new places to watch TV only increased the amount of TV that people watched. But during these crucial early years when the country’s broadband and wireless infrastructure was finally robust enough to let people watch live television anywhere, an obtuse standoff between channel owners, like Viacom, and their distributors, like Comcast, ensured that the lucrative, high-margin pay-TV business that fed both of them would fall to the barbarians from Silicon Valley.
The pay-TV industry’s name for its counterattack was the optimistically titled “TV Everywhere,” coined during an early experiment between Ti
me Warner Inc. and Comcast. In this early version, Time Warner agreed to give the digital rights to its channels like CNN, TNT, and Cartoon Network to Comcast, which then built a digital player for its subscribers to be able to watch the channels they were already paying for on their digital devices. There was just one deeply annoying catch: the subscribers had to type in a password to prove they were current on their Comcast bill that month. It wasn’t perfect, but it was a good start against the incursions of Netflix, which executives like Time Warner CEO Jeff Bewkes argued was appealing not so much because of what it offered (it was still, at this stage, mostly serving the warmed-over leftovers of the rest of the media industry) but how it offered it. Time Warner’s vision also had a key component: it offered these digital rights to its distribution partners free of charge. The idea was to encourage the Comcasts of the world to invest in the technology to make Time Warner’s channels available on more platforms.
But the nature of the relations between television programmers and distributors is that nothing gets done unless it is part of one of the big, long-term distribution deals they negotiate every few years. And so many TV programmers, eager as they were to do TV Everywhere, found themselves having to wait many years until their deal with a certain distributor was ready for renewal before they could make their channels work on iPads or Roku boxes. That’s how Viacom, which was one of the first to attempt to do TV Everywhere with a service called “Entitlement” on Time Warner Cable back in 2008, ended up being one of the last media companies to have its channels function on digital platforms. And while they didn’t explicitly charge distributors for the digital rights to their channels, they did use them as a sweetener for overall price hikes, further slowing the evolution of the ecosystem. Meanwhile, the long-promised advertising business on distributors’ video-on-demand services never materialized—it was too technically difficult to swap out old ads for more current ones and simply not worth the effort for the tiny audiences that watched.