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Annals of communications
The New Yorker - July 27, 1998

THE INVISIBLE MANAGER

Can the reclusive executive who helped bring back the N.F.L.—and is pushing Howard Stern—reinvent CBS?

by KEN AULETTA

Not long ago, Mel Karmazin, the president and chief operating officer of CBS, got a call from Rupert Murdoch, the owner of the Fox network and the chairman and C.E.O. of the News Corporation. “I wanted to introduce myself,” Murdoch reportedly said. “We’ve never met, but I’m looking forward to meeting you.”

Karmazin’s reply: “Rupert, we’ve met three times. I just wasn’t important, so you don’t remember me.”

Karmazin, who is fifty-four, has not put much effort into making himself memorable. The walls of his office are not filled with industry testimonials or photographs. He has few social engagements; most nights, he walks to his apartment, on Central Park South, and orders pizza. He is so private that, several years ago, friends did not know he had separated from his wife. His contracts with Howard Stern and Don Imus stipulate that they not mention his name on their programs. Don Hewitt, the founder and executive producer of “60 Minutes,” says, “If someone asked me two years ago ‘Who the hell is Mel Karmazin?’ I wouldn’t have known.” 

As for Murdoch, Karmazin says that  he was “very gracious,” but Karmazin has not pursued the invitation, because, he says, “there’s nothing to meet about.” Murdoch, he points out, is neither an advertiser nor a shareholder; if he were, the call would have been “important to my life and the company.” Instead, Karmazin says simply, “I’m not a schmoozer.” What he doesn’t need to point out is that he is considered the likely successor to Michael H. Jordan, the CBS Corporation’s chairman and C.E.O.

Karmazin, a pear-shaped man with fluffy white hair and a tanned, round face, is described by a close friend as “a working machine.” He does not play golf or tennis or get lost in big books. By his own count, he has not taken more than a five-day vacation since 1976, and he says that he went stir crazy at his beach house, on the Jersey Shore, over the July 4th weekend. “This is relaxing,” he says of work in the office, where his days often begin at 6 a.m.

“He has not an ounce of poetry, yet he is a beguiling figure,” says the radio personality and novelist Jonathan Schwartz, who worked under Karmazin at WNEW in the mid-seventies. “He has unusual, almost theatrical energy. Because he’s in such control of any conversation, he pays no real attention to subtle manners of exchange. Like punctuation. You feel that any conversation with him is already on its way to conclusion. So if there’s a point you want to make you know you have little time. Around Mel there is an immense twenty-four-second clock.”

Karmazin does have a get-to-the-point impatience. He rarely grants interviews; when I first pressed him for a meeting, he asked, “What would it do for my stock?” He grills everyone. The CBS anchor Dan Rather says, “He is like a fighter who is always cutting the size of the ring on you. He corners you quickly.”

Those who find themselves cornered by Mel Karmazin quickly realize that his vision of CBS is quite different from that of his predecessors. For Karmazin, the CBS that William Paley founded and that was once known as the Tiffany network—home to people like Edward R. Murrow and Lucille Ball—is history. He believes that the future is in the local stations, all of them profitable; the network will continue to play its traditional role—providing programming to affiliates and local CBS-owned stations—and to earn most of its revenue from national advertising.The CBS network earned more than three billion dollars last year, but actually lost money. (Of the four networks, only NBC earned a profit in 1997.)

With this approach, ever since his arrival, in January of 1997, Karmazin has had a dramatic effect on CBS. The company’s stock price has climbed each time C.E.O. Michael Jordan has given him more authority. To CBSinsiders, however, Karmazin’s ways have sometimes been alarming. “I wish I could convince the board to change the name of the company from CBS––the stock would be up to fifty dollars,” Karmazin told an investor conference in early June. Some of Karmazin’s decisions, such as syndicating a Howard Stern show to compete against NBC’s “Saturday Night Live,” have enraged those who still invoke the Tiffany tradition. Frank Stanton, now ninety, who was president and then vice-chairman of CBS from 1946 to 1973, says, “It’s so contrary to the standards we fought to maintain.”

CBS, to be sure, still attracts stars and media attention, as it did in Stanton’s era. According to Jordan, ninety per cent of CBS’s profits come from the radio and television stations that CBS owns and operates—which is Karmazin’s domain. When Jordan hears the phrase “Tiffany network,” his bushy eyebrows lift and his teeth grind. “It’s a nice sort of historical thing, but it implies either turn-of-the-century Art Deco or a complacency and an unwillingness to change,” he says. “Yes, we want to hold on to journalistic and other standards. But I don’t aspire to that Paleyesque role. This is a business.”

 In a sense, the recent history of CBS—and the rise of Mel Karmazin—began in 1993, when Jordan, after a career at places like PepsiCo and its Frito-Lay division and McKinsey &Co., became the chairman and C.E.O. of the Westinghouse Electric Corporation. The Pittsburgh-based company had two essential parts: a second-tier defense-and-technology business and a cluster of radio and TV stations known as Group W. Jordan set out to reduce the company’s fifteen-billion-dollar debt, and ultimately urged his board to concentrate on broadcasting, a business in which he was a neophyte.

In November of 1995, Westinghouse bought CBS, for $5.4 billion. “We really didn’t understand the network business,” Jordan says. “We acquired CBS for the stations, not the network. They were the great hidden asset.” Jordan moved into the same corner suite, on the thirty-fifth floor of the so-called Black Rock building, on West Fifty-second Street, that had belonged to William Paley. He also spent a good deal of that first year in Pittsburgh, or at homes he has in Dallas and Santa Fe. He rarely talked to the press or to many employees.

Jordan’s growth strategy was a local one. This became clearer in December of 1996, when Westinghouse/CBS paid $4.9 billion for the Infinity Broadcasting Corporation, forging a combined radio group that consisted of seventy-nine stations, sixty-four of them in the top ten markets. Infinity’s president and chief executive officer was Mel Karmazin, and Jordan announced that Karmazin would run the combined CBS radio group, join the Westinghouse/CBS board, and become his largest individual shareholder.

What Karmazin and Jordan shared was a belief that the federal government would ease regulatory restrictions on media companies, such as the number of radio stations a company could own, and when this happened, they believed, size would confer leverage over advertisers and allow the company to streamline costs and enhance revenue. Karmazin, more than Jordan, was viewed by Wall Street as a champion of shareholders. (People knew that he had been reared in a Queens housing project by a father who drove a cab and a mother who worked in a curtain-rod factory. He attended Pace College at night, working days at an advertising agency.) He showed that he was willing to pay for talent, as he did for Imus, when he ran Infinity. Investors were also reassured by the fact that he sacked managers who did not meet budget goals, and that he refused to hear that managers were victims of a recession or of a strong competitor: hence the one sign in his office—a variation on the international “No Smoking” sign, with the line, in this case, drawn through the word “Excuses.” The payoff for Infinity shareholders was that its stock price climbed nearly sixty per cent in each of the four years between the company’s going public, in 1992, and its sale to Westinghouse/CBS, in 1996.

 By the end of 1997, Westinghouse had changed its name to the CBS Corporation. At the same time, the company announced that it would buy American Radio Systems, for $2.6 billion, which would expand the radio group to approximately a hundred and seventy-five stations. The networks, though, were clearly suffering. In the 1979-80 season, ninety per cent of viewers regularly watched a prime-time show on one of three networks, while at the end of the 1997-98 season less than sixty per cent did. With fewer viewers, it was more difficult to attract enough people to sample new shows; the result was fewer hits, which accelerated the erosion of network viewership.

In January of 1998, CBS agreed to pay five hundred million dollars a year for the next eight years to televise a package of National Football League games. The price was steep—about twice what NBC paid under the previous contract—but Jordan and Karmazin, typically, were thinking about the stations and the demographics. The average age of the CBS viewer is just over fifty, a dozen or so years older than the average NBC or ABC viewer and twenty years older than the average Fox viewer. Jordan says, “The average viewer age went up five years when we lost the N.F.L.”—in 1994, when Fox outbid CBS.

 This past April, Karmazin became both president and chief operating officer of the company, and Leslie Moonves, who had joined CBS just months before Westinghouse acquired it, was named president and C.E.O. of CBS Television, which put him in charge of sports, news, and entertainment. Again, CBS’s stock price rose; Karmazin, not Jordan, was cheered at the annual CBS shareholders’ meeting.

Karmazin has not been involved in programming decisions, although he is often blunt in his opinions. Over the past few seasons, Moonves made some high-priced gambles—on shows with Tom Selleck, Ted Danson and Mary Steenburgen, and Danny Aiello—and they failed. In over-all viewership, in 1997 CBS came in second to NBC for the second year in a row, but the network was fourth in attracting the most desirable age group (eighteen to forty-nine).

Karmazin stayed away as Moonves and other executives planned the 1998-1999 season, and some of the strategic differences between the stations and the network emerged. Jonathan Klein, the executive in charge of the fourteen CBS-owned stations—all in major markets—was given a larger voice in planning the new schedule, and he pushed for urban shows. “I wanted no more Winnebagos on CBS,” he says.

A big debate this year was over whether to grant a second season to Steven Bochco’s “Brooklyn South,” a police show from the creator of such hits as “NYPD Blue” and “HillStreet Blues.” Two years ago, CBS lured Bochco away from ABC with a contract that made them partners, giving CBS exclusive rights to three of Bochco’s creations. But the Monday-night drama reached just over twelve per cent of all possible viewers when it premièred, in September of 1997, and steadily fell to less than half that number by the following April. Bochco lobbied hard to keep the show on the air, promising that he would personally help shape most of the second-season episodes.

Despite these assurances, the show was cancelled. Moonves says, “The show did get better,” and adds, “It was a very difficult decision,” but he feels that he was left no choice when the audience kept shrinking. Bochco said that he had to call Moonves for two days straight before he finally got the bad news. He contrasted Moonves with NBC’s Fred Silverman, who kept “Hill Street Blues” on the air in 1981 after a dismal first season because “he believed in the show.” “What I see is a desire to get big ratings fast and, if they don’t get them, move on,” Bochco told me. “That seems not to acknowledge the possibility of shows improving in the hands of writers and producers they believe in. If Les had said to me three, four months ago, ‘I don’t like the show,’ I might have had my feelings hurt but I’d understand. What I was hearing was ‘The show is getting better.’”

Bochco seemed to take the rejection personally. “I said to Les, ‘I’m not a supplier. I’m not a guy who comes in with a sample case and says, “Buy this show. Buy this show.”’ I’m a tiny little company in partnership with a network. I’m not saying that what I do is better, but it’s more personal. We sort of handcraft this stuff. When I go in to my partner, I’m not talking as a salesman but as a guy who writes it and produces it and casts it.”

Though Bochco’s contract officially requires the development of two more programs, he says, “I’ve expressed to Les some very serious misgivings about our professional relationship.... I’m not sure he can do anything that would alter my feeling about the seriousness of our problem.” Moonves disputes Bochco’s account and says, “I look forward to doing two more seasons with him.”

 In the spring, a dispute arose between CBS management and “60 Minutes.” Moonves let it be known that he and his colleagues, looking at NBC’s ratings success with “Dateline,” a magazine show that aired on four nights, wanted to extend the most successful TV-magazine brand—“60 Minutes”—to at least two nights. One “60 Minutes” correspondent, who requested anonymity, expressed concern that the idea was being promoted by businessmen enamored of the concept of “brands,” and that pushing for a second night risked diluting the brand.

The issue simmered for a while, then came to a head in May at an eightieth-birthday lunch for Mike Wallace given by Moonves and Michael Jordan in the upstairs room at Patroon, a midtown restaurant. The guests included the five correspondents; Andy Rooney; the executive producer, Don Hewitt; and several other producers. (The CBS News president, Andrew Heyward, did not attend, because he was on jury duty.) In the middle of the table was a large tennis ball—Wallace is a fervent tennis player. As Hewitt remembers, Wallace asked, “Is this a proper time to bring up what’s on all of our minds?”

“No, but go ahead,” Moonves said with a smile.

“Instead of that tennis ball on the table, everyone knows it’s an elephant,” Wallace recalls saying. “Everyone knows it’s there, and no one wants to talk about it.”

So for the rest of the lunch they did. “We got into it,” says Moonves, who did most of the talking for the network, and seemed unmoved. When Wallace wanted to appeal this move, though, he didn’t call C.E.O. Jordan. He phoned Mel Karmazin, who came to the “60 Minutes” offices for a June 8th meeting. Soon afterward, Hewitt, who had assured the press that he had yet to sign off on a second “60 Minutes,” was calling colleagues with strategic concepts for a second show. Last week, CBS announced that “60 Minutes II” will début in early 1999.

The relationship between Karmazin and Jordan is a great subject of rumors around CBS. “My suspicion is that it’s peaceful coexistence,” a Jordan friend suggests. The two men are not intimates. They talk or meet for an average of about three hours a week, Karmazin says, and he admits that he knows “very little” about Jordan, who, like Karmazin, grew up in modest circumstances. He praises Jordan and complains, “Mike is the C.E.O. of the company and should get more credit” for CBS’s successes. Yet he also says that he is pretty much free to do what he wants: “I can’t think of anything I wanted to do that Mike didn’t want me to do.”

Jordan often talks with his arms folded; Karmazin is usually in motion. “Mel pushes,” Jordan observes. “He’s a guy who pushes and challenges everything. I’m more of a selective pusher. And maybe a little better listener.” He keeps a distance, focusses on corporate strategy. Roger Altman, whose Evercore Partners has often served as an investment-banking adviser to CBS, says of Jordan, “I don’t see many C.E.O.s who control their ego as he does. He has a quiet sense of self-confidence.”Karmazin inspects every detail. “If you’re going to jump out of an airplane, you want to pack your own parachute,” he told me.

Jordan and Karmazin say they are optimistic about CBS’s future, yet when CBS’s stock dipped from thirty-six dollars to thirty dollars a share at the end of May, Jordan told the Wall Street Journal, “The network is such a minuscule piece of our business.” This quote was circulated among alarmed CBS employees. “The rumor around here is that they’d like to sell the network and keep the stations,” Don Hewitt told me in mid-June. The seventy-five-year-old impresario of “60 Minutes” says that in fifty years at CBS, “I don’t remember anyone who runs a network saying something like that.”

Asked about this, Jordan responded, “The network, in our mind, is vital to the development of the money-making part of our business, which is the stations.” Karmazin says, “When the worst CBS programs reach five times the audience of the highest-rated cable network, you have a vehicle that is very desirable to advertisers.”

Frank Stanton, the former president of CBS, acknowledges that he “never had to face” the broadcast and cable and Internet competition that the networks do today. But he believes that by positioning itself as a station-driven company CBS will find it more difficult to attract talent. Success, he thinks, means taking risks. “That’s what drove General Sarnoff of NBC crazy. He was an engineer. That’s why he lost Jack Benny to CBS”—along with “Amos ’n’ Andy,” Red Skelton, and Edgar Bergen.

Moonves declares that CBS has to “grow our revenue sources”—for example, by figuring out ways to sell merchandise off its shows. In addition, the twenty-seven-year-old federal rules preventing the networks from owning and syndicating shows were relaxed in 1995. It is no coincidence that CBS has a financial interest in six of the seven CBS shows that will début in the fall season. The other networks have been similarly involved.

Another strategy to improve revenues is to diversify. ABC and NBC have done this smartly with such successful cable ventures as ESPN and CNBC, respectively, but CBS, which under William Paley was an early investor in cable, abandoned the business before it grew. Under Jordan, CBS has bought two successful cable networks: TNN, The Nashville Network, and CMT, Country Music Television. When I asked Karmazin what he would say to those who claim that CBS has too much invested in over-the-air broadcasting, he controlled his urge to jump up from the conference table and said, “I think we’re the best-positioned media company out there. We have assets that generate tremendous free cash flow—over a billion dollars from our radio group, over eight hundred million dollars from television and from our cable group.”

As Jordan, the C.E.O., sees it, “This is more like running Frito-Lay. You’re selling the consumer and deciding whether to spend a hundred million dollars to launch a product and deciding, Will this succeed?” Jordan, who is sixty-two, is silent about whether he will retire before he turns sixty-five. Will Karmazin be his successor? “We’re certainly fortunate—and I told the board that—to have a person of that calibre,” he says.

One Jordan adviser thinks that the succession will come fairly soon. “I think that in about a year from now Karmazin will be the C.E.O.,” this person said. When I asked Karmazin if he expected to be the next C.E.O. of CBS, he looked startled. “I don’t know,” he said. “It’s not something I want to be.” He doesn’t need to be, one intimate says, “as long as he can do what he needs to do. But I think Mel doesn’t feel he can do everything he wants to do.” ©

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