Saturday, August 26, 2006 Online Edition: Home

Mission accomplished: the man who beat Tom Cruise

Sumner Redstone, the mogul behind Paramount, this week terminated his company's contract with Hollywood's once golden boy - and delivered a withering put-down to boot. David Usborne reports on the 'old fart' who took control

Published: 26 August 2006

It is 20 years since Tom Cruise erupted into our celebrity-obsessed lives with Risky Business and we know him pretty well by now. We have been subjected to every detail of his break-up with Nicole Kidman, his latest marriage to Katie Holmes and the recent arrival of baby Suri, cutely called TomKat by the tabloids. As for the pictures of the baby we still haven't seen, they will emerge soon enough.

Even before last week most of us had heard quite enough about Tom's batty period one year ago when he bounced about on Oprah Winfrey's sofa to declare his love for Ms Holmes and got into spats with journalists about his commitment to Scientology and his scorn for anti-depressants. Now there is the latest saga: his being fired by Paramount, the studio he had been tied to for 14 years.

But this new chapter has two protagonists, Cruise and the man who did the firing, Sumner Redstone. Who is this "old fart" - as one studio executive unkindly (and anonymously) called him last week - who has the power to show the door to one of the industry's most bankable stars and to do it with such absence of grace?

He is, of course, the chairman and majority shareholder of Viacom, the world's third-largest entertainment conglomerate with subsidiary units that include not just Paramount but a host of brands including CBS, Nickelodeon, MTV, VH1 and Simon and Schuster. It is an empire that he has forged over decades, through countless takeover battles and bloody corporate crusades, from what began as a modest chain of cinemas run by his father in his Massachusetts.

Redstone, if you like, is America's home-grown Rupert Murdoch. Both are ruthless patriarchs married to much younger women - Sumner's wife, Paula Fortunato, is a 42-year-old former school teacher - who enjoy huge personal wealth and for years have left the media guessing over where their own families will fit into their eventual successions. (Redstone was listed number 63 on the Forbes list of the world's richest people this year.) There are differences between them - Redstone lives on the West Coast while Murdoch's new pad has views of Central Park.

Murdoch, at 75, is virtually an adolescent alongside Redstone, who recently turned 83. No wonder, then, that some people in Hollywood are speculating that in sacking Cruise, who over the years has generated ticket sales for Paramount in excess of $2.5bn (£1.3bn), the guy has finally mislaid his marbles. But those who know Redstone even a little will scoff at such talk. He has always been unafraid to make enemies and to speak his mind, even if what he says goes against the tide of everyone else's thinking. At a party celebrating an honour conferred on another studio head six years ago, for instance, this writer found himself talking to Redstone about Time Warner's merger with America Online. The entertainment world was agog at a move that seemed to place Time Warner on the cutting edge of the digital era. What Redstone essentially replied was that the people at Time Warner were utter idiots and the merger would prove a disaster, as, indeed, it later did. Even now the fiasco of that marriage is not entirely mended.

It will take time, however, before we can judge whether it was Redstone who was the idiot last week. Nor is there any consensus yet on what motivated him to cut Cruise off at the knees. Was it his well-publicised obsession with Viacom's share price that swayed him or a desire to win some headlines for himself? Or was he just in a foul mood?

We have this story thanks to a Wall Street Journal reporter who, aware that Paramount and Cruise had been at odds about money, on Tuesday managed to get Redstone on the telephone. Redstone dropped the bomb and it landed within minutes on the Journal's web site and thereafter on front pages the world over. He was breaking his ties with Cruise, he said, and, by the way, it was all the star's fault for acting the fool. "We don't think that someone who effectuates creative suicide and costs the company revenue should be on the lot," he blurted. "As much as we like him personally, we thought it was wrong to renew his deal. His recent conduct has not been acceptable to Paramount."

By anyone's standards, Redstone's remarks were shocking. First, they seemed unnecessarily personal. We now know that talks between Paramount and the production company owned by Cruise and his business partner Paula Wagner, called Cruise/Wagner Productions, had already imploded. Wouldn't it have been better to have left the man who is meant to be running Paramount on Redstone's behalf, Brad Grey, and the chief executive of Viacom itself, Tom Freston, to have arranged a more dignified exit of Cruise at the end of August, when his contract with them was to expire anyway?

Instead, Paramount woke up on Wednesday to a media maelstrom. For starters, there was the implication that Redstone had undercut his own managers, Grey and Freston, while uncalculated damage had been done to Paramount's relations with the Creative Artists Agency, CAA, the actor's agency that counts Cruise as one of its clients. "Paramount has no credibility right now," declared Richard Lovett, CAA's president. "It's not clear who is running the studio and who is making the decisions."

The affair has shredded morale at Paramount, after a year when management tumult seemed to have been settling down and executives were celebrating a string of box-office successes.

Nor was it long before the Cruise camp fired back. Ms Wagner called Redstone's words "offensive". More outraged was Cruise's veteran publicity agent, Bert Fields, who preferred "disgusting". "He has lost it completely, or he's been given breathtakingly bad advice," fumed Fields. "That a mogul like Sumner Redstone could make a statement so vicious, so pompous, so petulant ... it tells you more about Sumner Redstone and Viacom than about Tom Cruise."

It is unlikely that a man as thick-skinned as Redstone, who studied law at Harvard and served in the Second World War as a cracker of Japanese codes, is much disturbed by any of this. His list of run-ins in the name of business is a long one. Former lieutenants who have fallen out with Redstone or have been fired by him include Frank Biondi, a former chief executive of Viacom until 1995, and Mel Karmazin, who left the same job last year, apparently worn down by Redstone endlessly looking over his shoulder. He attacks the government for over-playing its hand regulating broadcasting and is currently suing Howard Stern, the shock jock who last year decamped from CBS's radio arm to work for a satellite rival.

The battles even extend to within his family where the matter of succession is a source of tension. When Redstone eventually steps down, the job of chairman will probably pass either to Freston, or to Les Moonves, who heads CBS, which was spun off from Viacom in January. But to maintain blood control in the boardroom, Redstone has let it be known that the 70 per cent of Viacom voting shares he owns will pass to his daughter, Shari, 52, who is already on the board. Redstone has a son, Brent, whohas been effectively frozen out of Viacom. In a fit of pique over succession arrangements he filed a lawsuit against his father and Shari this year in an attempt to reclaim what he believes should be a $1bn slice of the family pie.

Even being taken to court by his own offspring doesn't impress the old man. "The lawsuit doesn't bother me," he told Newsweek. "It has absolutely, unequivocally no merit. It has no effect on the new CBS or new Viacom. But it is painful to me. I know it's painful to my daughter."

Meanwhile, if a reporter dares inquire as to when he might relinquish the reins at Viacom, he is colourfully dismissive, noting that he continues to feel physically fit, doing 30 minutes on an exercise bike every morning, completing lengths of his pool and eating sparingly. "Starved cats live longer than fat cats, and I would prefer to be a starved cat," he told BusinessWeek recently, adding with no irony: "There's no chance of me retiring." He told another interviewer: "You gotta remember, resurrection doesn't appeal to me."

Sure enough, when Redstone surfaced a second time last week, he showed no remorse for his outburst, but rather congratulated himself, noting that it resulted in Viacom's shares rising on Wednesday, outperforming those of its sister company, CBS, after months of decline and stagnation. "It's the first time in a long time that Viacom was up more than CBS, which means that Wall Street liked the message," he crowed. "I don't see that any damage was done by what I said."

"Show me the money" was the mantra that briefly became popular vernacular after the release of another Cruise hit (though not with Paramount), Jerry Maguire in 1996, and money - and share prices - is indeed what this spat is really all about. Cruise wanted too much and Viacom, for the first time, balked, thus sending a wider message that it and perhaps other studios too have had enough of cosseting stars.

In short, Paramount had been paying Cruise/Wagner almost $10m a year for the privilege of getting first dibs on all their projects. But the arrangement was more expensive than that. Cruise was not demanding traditional acting fees for the films he appeared in, but insisted on taking a cut first of the box-office receipts of each film and of DVD sales. The terms with Paramount were so generous that, after the relatively disappointing performance of the most recent Mission: Impossible film, the studio discovered it was left with less profit than Cruise, who instantly took 25 per cent of the gross ticket sales, roughly $75m.

Redstone is a man who never ignores Wall Street. In his mind there was no longer any persuading investors that the torrents of cash going Cruise's way were justifiable. To try to trim its costs, therefore, Paramount insisted that the annual fee paid to Cruise/Wagner be slashed to $2.5m. Cruise said no and negotiations broke down.

If it was money that was bothering Redstone, why didn't he just say so, instead of impugning Cruise's character publicly? The answer is the same - because that was about money. There is no question that Cruise's strange behaviour has been a public relations disaster for him. As The New York Times put it, he has somehow managed to "morph into something no movie star can afford to be: a guy you wouldn't want to know". That translates into lower tickets sales. Redstone believes that, were it not for Cruise's antics, Mission: Impossible III, released in May, would have made $100m to $150m more than it did. Even for Redstone that is a lot of change to lose, so he did what he does always, he protected his business.