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What’s Next for Viacom With Philippe Dauman as His Own Boss

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The more things change, the more they stay the same, the adage goes. With the television business morphing around Viacom, status quo is just what the board ordered.

In what analysts said was no surprise, Viacom CEO Philippe Dauman was named the chairman of the cable-network giant on Thursday, as 92-year-old founder Sumner Redstone stepped down from that role. The move mimicked the reshuffling on Wednesday at the other crown jewel of Redstone’s media empire, CBS.

A clear endorsement by the board, Dauman’s appointment makes him his own boss. It ensures his tenure leading the company at least in the short-term this year, despite dwindling ratings, activist investor calls for a revamp and a submerged stock price.

Dauman survived despite apparent opposition from Redstone’s daughter and Viacom vice chairman, Shari Redstone. And he remains one of seven people who will wield “super voting” power over the company when the elder Redstone no longer can.

“People were looking for a change,” Wunderlich analyst Matthew Harrigan told TheWrap. “What happened today is a nonevent.”

Trading in the company’s stock reflected a sense of business as usual. After rising as much as 6.3 percent early Thursday while the market anticipated leadership news from Viacom’s board meeting, the stock deflated after Dauman’s appointment, returning to its level before any of the Redstone resignations surfaced.

In recent trading, Class B shares were up less than one percent at $44.90. They have tumbled about 33 percent in the last year. (By comparison, Redstone’s other media giant, the Les Moonves-led CBS, has declined 14 percent.)

All TV companies are navigating fundamental shifts in their business, but Viacom has a more treacherous path to blaze than most.

Increasingly, viewers are pulling out their phones to watch clips on sites like Google’s YouTube or firing up a box to stream an on-demand show from online service like Netflix. The behaviorial changes have pressured traditional TV ratings and widened defections from pay TV, as more households cut their cords.

These trends, however, are also most stark among younger viewers. And with youth-skewing channels like MTV and Nickelodeon, Viacom is more exposed to these changing habits than rivals.  

Though Harrigan gave Dauman credit for making progress on issues like advertising technology, investors have campaigned for more meaningful changes.

Mario Gabelli, Viacom’s largest holder of voting stock outside the Redstone family, has called for deals with e-commerce giant Alibaba or cable company AMC. A small investor, activist hedge fund SpringOwl, demands a total leadership purge.

But Viacom’s “super voting” power structure gives investors who aren’t named Redstone little recourse than to shout into the wind. Redstone controls about 80 percent of the voting stock of Viacom through his conglomerate, National Amusements. When he dies or becomes incapacitated, a seven-member trust will take on that voting power.

“Every shareholder — including Mario Gabelli, who’s one of the smartest — understands that nothing happens at Viacom unless Sumner Redstone or the trust decides it,” said Needham analyst Laura Martin to TheWrap. “And Philippe’s on the trust.”

His influence there may not go unchecked. Shari Redstone will also be a member of that trust. A day before the board’s decision, she hinted at opposition to Dauman, saying that no member of the trust should be chairman of Viacom. At the board meeting Thursday, directors offered her the role of non-executive chairman, and she turned it down.

“By saying no trustees should be executive chairman, she precluded herself from taking that job,” Martin said. “The problem is: The rest of the board obviously didn’t feel that way.”