• by Paul Gough , February 12, 2003

Viacom Chairman Sumner Redstone said contract issues haven’t yet been settled with President/COO Mel Karmazin but it’s being worked out.

Speaking during a conference call with analysts discussing the media giant’s Q4 and 2002 results, Redstone said he and Karmazin were working with a group of Viacom independent directors to resolve the situation.

“We’re very sensitive to the fact that a timely resolution is desirable but we believe it’s better to get it right,” Redstone said.

Redstone, who didn’t elaborate on the issues, said it wasn’t going to effect Viacom’s operations.

Karmazin headed CBS when Viacom purchased the network in 1999. His contract expires at the end of 2003 and the media has been rife with rumors of disputes between Redstone and Karmazin. In February 2002, a Viacom statement denied there were any problems and said that the pair were working “productively.”

“In the meantime, we’ll continue to work together as we always have for the benefit of Viacom and its shareholders while not losing sight of our mutual desire to resolve any possible issues quickly,” Redstone said.

For his Karmazin was silent about the contract negotiations and there were no questions from analysts. Yet he cautioned not to read anything into the fact that later this week he would sell $10 million in Viacom stock. He said 10-year options were about to expire and he wanted to do it to pay tax liability; all of the proceeds would go to that. He said it represented about 2% of his stock holdings.

“I didn’t want you to think there was anything going on,” Karmazin said.

Viacom announced Q4 revenues of $6.8 billion, up 12% over Q4 2001, and a 14% increase in advertising sales. Eighty-nine percent of Viacom’s operating income is coming from cable, TV and Infinity Broadcasting. Forty-six percent of its revenue comes from advertising.

“I think we had a pretty good year in what was a very difficult environment,” Karmazin said.

He anticipated that, despite the looming prospects of war with Iraq, Viacom was anticipating strong advertising revenues in 2003.

“Viacom is extraordinarily well positioned to take advantage of this very strong advertising market … We’re seeing dollars move from promotion and other forms of marketing to advertising,” Karmazin said. He said the growth was led by automotive, packaged goods, entertainment and telecommunications.

He said CBS was leading in total households for 14 weeks of the 20-week TV season and that CBS is doing well in the February Sweeps with the Grammys, Survivor: Amazon and the premiere of My Big Fat Greek Life still on the wing. He also said that the AFC championship ratings were higher than the NFC’s this season, the first time that’s happened. CBS has the Super Bowl in 2004 and the NCAA basketball sales are strong.

“We feel very good about our commitments in sports,” Karmazin said.

Karmazin said the Q1 scatter market is very strong in demand and experiencing “extremely low” cancellation of options. He said there was very limited inventory available and the pricing is 50% higher than the upfront.

He said the outlook was good for cable channels as well.

“The broadcast networks will have limited inventory for the second quarter and that will greatly benefit cable networks,” he said. He denied reports that scatter dollars were being pushed forward into the upfront last year.

“We said then and say it again today that that’s not the case. The upfront was very strong across the board in broadcast, cable and syndication, and that scatter is even stronger and that bodes well for an even stronger upfront for this year,” he said.