Redstone, Sumner M.

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Redstone, Sumner M.

(1923-)
Viacom Inc.

Overview

Entertainment industry leader Sumner Redstone is known for his bold personality and fiercely competitive business style. As chairman and CEO of Viacom Inc., the Boston-born, Harvard-trained executive oversees an empire that includes MTV and Blockbuster Video. Though he admittedly shuns the limelight and perhaps is not as famous as other Hollywood studio heads, Redstone is known as a formidable foe. Some point to his training as a lawyer as the underlying reason for his infamous love of lawsuits, but others note that this son of a small-time drive-in theater mogul was instilled with a competitive spirit from an early age. Worth an estimated $5.6 billion, Redstone appears regularly on the Forbes magazine list of the wealthiest Americans.

Personal Life

Redstone was born Sumner Murray Rothstein in Boston, Massachusetts in 1923, and grew up with his younger brother in that city's West End section, home to Boston's prosperous Jewish families. Like many others, the Rothsteins (who later changed their name to Redstone) weathered financial hardships during the Great Depression. Father Michael Rothstein first sold linoleum out of a truck and later became a liquor wholesaler. It was this profession that led him into the nightclub business, and by the 1940s he owned two popular Boston venues, the Latin Quarter and Club Mayfair. He also owned some movie houses and drive-in theaters beginning in the 1930s.

The Redstones instilled a spirit of competition between Sumner and his brother Edward, and stressed the importance of excelling on a daily basis; according to Redstone, his mother sometimes turned the hands of the clock back to trick him into practicing the piano longer. Redstone attended Boston Latin School, the oldest public high school in the United States and an institution famous for its rigorous academic demands. He told Institutional Investor writer Ida Picker that these years were "the most stressful time in my life." Head of the debate society, admirer of classical literature and history, and earner of the highest grade-point average in the history of the school at the time, Redstone graduated first in his class in 1940. From there he went on to Harvard University, where he studied languages. He would later note that, after attending Boston Latin, Harvard was no great challenge to him.

Some of the languages studied by Redstone included German and Japanese, and during his college years the United States was at war with both countries. In 1943 he was hand-picked by a Japanese language expert at Harvard to join a team of cryptographers in successfully deciphering the secret code used by Japanese military and diplomatic corps. Redstone rose to the rank of first lieutenant in the U.S. Army during his two-year stint, and after the war used his G.I. discount to purchase surplus military goods such as office supplies and tools, which he then sold to department stores at a healthy profit.

Redstone decided to become an attorney and earned his law degree from Harvard in 1947. That same year, he wed Phyllis Raphael, with whom he would have two children, Brent and Shari. But a 1979 near-death experience forever altered Redstone's life. He was inside the Copley Plaza Hotel in Boston when a fire broke out. He escaped the flames and smoke by exiting his window; hanging on to the third-story ledge with one hand until rescued. Forty percent of his body was burned, with his legs burned down to their arteries. Doctors told him he would never walk again. Redstone underwent some 60 hours of surgery, and it was said he seemed to recover with a vengeance. Afterward, he admitted to battling depression, but realized that the incident had brought him to a turning point in his life, and that he both needed and wanted more challenge. This led him to enter the ranks of Wall Street corporate raiders in the takeover mania of the 1980s, and would eventually make him one of the most powerful executives in the entertainment industry.

His 1979 injuries failed to hinder his love of sports or curb his workaholic tendencies. He plays tennis with a special hand strap on his racket and jogs daily. He and his wife still reside in Newton, Massachusetts, in a three-bedroom home they bought in the 1950s.

Career Details

One of Redstone's first jobs out of law school was serving as special assistant to United States Attorney General Tom Clark. In 1951, he entered private practice in Washington, D.C., but left after three years. He had quickly wearied of the field that he had entered as an idealistic young man realizing that it was instead a profit-driven business like any other. He joined the family firm, Redstone Management, which by then owned a chain of about a dozen theaters. He helped build up the business, working with brother Edward, and it became known for its drive-ins throughout the East Coast. At the time, drive-ins were considered second-class movie theaters by the major studios, who tightly controlled distribution; usually drive-ins received only second-run movies, which made it difficult for businesses like Redstone Management to turn a profit. To remedy this, Redstone took one studio to court in a case that paved the way for drive-ins to have access to first-run films. During this part of his career, Redstone later told Institutional Investor, "I learned everything I had to learn: Negotiate, negotiate, negotiate."

In 1958 Redstone was named one of 10 "outstanding young men in New England" by the Boston Junior Chamber of Commerce. His reputation, as well as the revenues of his family business, continued to grow. He served as assistant president and then president of the Theatre Owners of America in the early 1960s and chaired the board of the National Association of Theatre Owners from 1965 to 1966. By 1968 he had become president and chief executive officer of the family business, now renamed National Amusements, which had grown into a chain that owned several dozen movie screens throughout the United States and Great Britain. One difficult point in his career came in 1972 with a disagreement with his brother, which led to Edward Redstone's resignation.

As the decade progressed, Redstone realized that drive-ins and small, intimate movie houses were becoming obsolete. He began converting the drive-in properties to massive, multi-screen theaters, which he coined "multiplexes." (Redstone even owns the trademark on this term.) Such palaces also featured plush seating and far superior sound. National Amusement's rivals, Cineplex Odeon and AMC, copied this strategy. Soon, Redstone's earnings helped him invest in the providers of entertainment themselves, and he began buying stock in film studios. Because he was dazzled by the 1977 George Lucas film Star Wars, he purchased five percent of the stock in 20th Century-Fox, the studio that had made the picture, and sold it a few years later at a huge profit. It was a strategy he used in other stock purchases, watching the box-office receipts at his theaters and acquiring stock in what seemed to be the most profitable studios.

Redstone also purchased stock in Columbia Pictures, and continued to build National Amusements into an 800-screen powerhouse. Its success with the multiplex strategy was so profitable that, in 1987, Redstone was able to buy Viacom Pictures in a $3.2 billion leveraged buyout. At the time, Viacom's only real asset was MTV, the cable-television music video channel, whose imminent demise was predicted by many entertainment-industry watchers. Redstone himself was a newcomer: "No one knew who he was," Thomas Freston, later the chair of MTV, told Institutional Investor. "He was just some fella from Boston operating out of a hotel room."

Redstone took the Viacom stock public the next day and made a small fortune. Still, it was considered a risky move, for Redstone then took on a huge debt, but he had made Viacom profitable just five years later. Part of that success came as a result of Nickelodeon's becoming the top-rated non-premium cable channel, with its acclaimed shows such as You Can't Do That on Television and a bizarre animated series called Ren & Stimpy.

In 1988, Redstone battled fellow corporate shark John Kluge for Orion Pictures, a fight that Redstone lost but still earned him $18 million when he backed out. In 1993, he dueled with Barry Diller (head of the QVC cable network) for control of Paramount Pictures. A court battle resulted, and to shore up his resources Redstone acquired the extremely successful Blockbuster Entertainment Corporation, America's giant video retailer and rental chain. Redstone triumphed over Diller in the end and in 1994 Viacom merged with Paramount in a $10 million deal. It had a successful year with the summer's release of the Oscar-winning Forrest Gump.

With his Paramount holdings, Redstone gained control of an illustrious movie studio, several television and radio stations, and cable television franchises, as well as the eminent book-publishing house Simon & Schuster, sports teams, and even theme parks. The deal made him one of the most influential media executives in the United States. His holdings also included half of National Amusements, which he retained in order to pass it on to his children. Also attorneys, they both work for the company at the executive level.

Social and Economic Impact

One of the leading American bankers, Felix Rohatyn of Lazard Freres, who once engineered a deal to save New York City from bankruptcy, told Institutional Investor that Redstone was "one of the toughest men I know." The 1994 Viacom-Paramount deal made Redstone one of the directors of the fifth-largest media provider in the world, and the conglomerate was seen as standing at the forefront of the business strategy known as "vertical integration." It could take a Simon & Schuster bestseller, turn it into a movie, reap a profit on the video rentals, and finally sell it to cable. The company also was tied to another upstart broadcast provider, the United Paramount Network.

Chronology: Sumner M. Redstone

1923: Born.

1943: Served two years as codebreaker in U.S. Army.

1947: Earned Harvard law degree.

1954: Entered family theater business.

1967: Became president and CEO of National Amusements.

1979: Survived near-fatal fire.

1987: Acquired Viacom Entertainment.

1994: Merged Viacom with Paramount Pictures.

According to U.S. News & World Report, five-time grandfather Redstone is "America's Hippest Grandpa" for his involvement in cable content providers such as MTV, Nickelodeon, and Showtime. He served as chief executive alongside Marvin Davis, head of Paramount, and over the next few years took the company into the frontier of interactive communications. He forced Paramount to put out fewer films of better quality and was considered the executive who shepherded MTV into maturity. Ten years after Redstone's Viacom purchase, the cable network had become an influential media force for the under-21 generation; he also applied its formula to several overseas editions, beginning with a 50 percent stake in MTV Europe purchased just days before its previous owner, media mogul Robert Maxwell drowned at sea.

Redstone has weathered criticism for his sacking of Viacom's CEO Frank Biondi, Jr. in early 1996; the longtime executive was seen as the heir apparent to Redstone at the company. Later that year Viacom-Paramount signed a television distribution deal with a German media powerhouse, the Kirch Group. Two years later Paramount reaped huge profits from the hugely successful film Titanic, which it co-produced with another studio. Also in 1998, the company announced that it would put most of Simon & Schuster up for sale as a result of poor performance. In an effort to reduce its debt it had also sold part of USA Networks, one of its cable holdings.

Redstone is active in numerous philanthropic activities as well as liberal politics. He sits on the Presidential Advisory Committee for the John F. Kennedy Center for the Performing Arts, and is also involved in the late president's Library Foundation. Redstone is a founding trustee of the American Cancer Society and is involved in the Will Rogers Memorial Fund. An occasional visiting professor, Redstone is the recipient of several humanitarian awards and honorary degrees, and sits on the boards of the Combined Jewish Philanthropies of Greater Boston and Boston's Museum of Fine Arts. "I don't consider myself a media mogul, and I don't seek the limelight," Redstone told Jim Impoco in a 1993 U.S. News & World Report interview. In 1993 his wealth was estimated at $5.6 billion. "To all the qualities I attribute to Sumner Redstone—toughness, vision, drive, smarts—I'd have to add luck," Rohatyn told Institutional Investor.