The Redstone Saga
Falling out puts future of cinema chains run from Dedham in doubt
Today, for the first time in months, Shari Redstone and her estranged father, Sumner Redstone, head of the family's entertainment empire, will face each other in person.
Their family squabble reached a breaking point recently as details of internal clashes over succession, corporate governance, and the future of the family's cinema chains spilled into the public arena. Now, the fate of Shari Redstone, vice chairman of Viacom Inc. and CBS Corp. and once the heir apparent to her octogenarian father, may hang in the balance -- and with it the future of the National Amusements theater chains she runs out of Dedham. The battle could come to a head later today at a board meeting of Viacom.
For Shari Redstone, 53, the falling out with her father threatens to undermine the cinema business she has built over the past 13 years. National Amusements operates 1,500 theaters globally under brands such as Showcase, IMAX, and Cinema de Lux. If Sumner Redstone ousts his daughter from the family empire, it is likely he will sell off the cinema chains, according to company executives and entertainment analysts.
"If it's in Sumner's hands, there won't be a business for National Amusements. Sumner has said he'd like to sell it," said Jerry Magner, National Amusement's chief financial officer, who was hired by Sumner Redstone 38 years ago. "He doesn't believe in the future of the business. His crown jewels were bought in 1987. And to him, anything else is superfluous."
As president of National Amusements Inc., Shari Redstone is the third generation of her family to lead the private company that has grown from a single drive-in established by her grandfather, Michael Redstone, a onetime linoleum peddler in Boston. Sumner Redstone asked his daughter to join the business in 1994, as her marriage was ending to Rabbi Ira Korff. Shari Redstone, a former corporate lawyer and defense attorney who earned her law degree from Boston University, was taking care of her three children at the time and studying for a master's degree in social work. But the opportunity to continue the legacy of her grandfather roped her into the family business.
A quick learner with her father's shrewd sense of business, Shari Redstone pushed the company's international expansion into Latin America and Russia. Foreign markets are increasingly important for movie houses these days, making up the fastest growing portion of revenue.
"She had a lot of foresight. You can't exist anymore in the United States alone," said Larry Weinberg, the academic director of Boston University's film program in Los Angeles.
As rival chains filed for bankruptcy protection in the 1990s and shuttered hundreds of theaters across the country, National Amusements stood strong under Shari Redstone's leadership. Rather than lease as many theaters as possible, National Amusements selectively purchased locations in markets where they already dominated.
In more recent years, as the industry continued to combat slumping sales, Shari Redstone has been at the forefront of transforming traditional movie theaters into entertainment destinations. These initiatives include introducing VIP reserved seatings, martini bars, interactive gaming, and broadcasting Red Sox games live in high-definition in theaters. Last month, National Amusements signed a deal to digitally broadcast live and prerecorded special events at 25 of its theaters. Past performances include the Met's "The Barber of Seville" and the 20th anniversary celebration of "Dirty Dancing."
"What Shari brings to the business is the same ferocious competitiveness as her father of making something better out of what they have," said Tom Sherak, a veteran movie executive who knows both Redstones. "Sumner has a certain style. Her style is ferocious, but just more contained. You would never want to get in Sumner's way. That's why he's a living legend."
But almost from the beginning of her tenure at National Amusements, Shari Redstone, who lives in Boston's western suburbs, has operated in the shadow of her father's doubt about the viability of the cinema business. In interviews over the years, he has expressed skepticism about the future of traditional movie-going. In a newspaper interview last year, Sumner Redstone said he did not believe the theater chain would be valuable in five to 10 years and that it should cash out and concentrate on expanding into new areas with more growth potential, such as casinos.
The Redstones control an empire worth an estimated $50 billion that includes the CBS network, MTV, Paramount Pictures, and Comedy Central, among other enterprises. National Amusements is the parent company of CBS and Viacom, and Sumner Redstone controls these assets through an 80 percent stake in National Amusements. Shari Redstone has a 20 percent share. While Shari Redstone has spent more time in recent years on CBS and Viacom board issues, her primary focus is running the theater circuits.
"They have differing opinions on the long-term prospects," for the theater business said a Sumner Redstone associate who declined to be identified because of the sensitivity of the dispute. The 84-year-old media mogul turned down interview requests.
In a letter recently posted to Forbes magazine's website, Sumner Redstone said, "While my daughter talks of good governance, she apparently ignores the cardinal rule of good governance that the boards of the two public companies, Viacom and CBS, should select my successor."
Shari Redstone also declined to be interviewed. A personal representative, Nancy Sterling, issued a statement on her behalf: "Shari has no desire to be 'bought out' of National. If Sumner wishes to settle matters that way, Shari would consider a resolution that fairly reflects her 20 percent ownership of National, which has been publicly valued at $8 billion. Shari intends to continue to resolve this matter in a way that is fair to the companies and their employees, and to future generations of Redstones."
Sterling added that Shari Redstone is "concerned about the future of the family's theater business."
The Dedham headquarters employs more than 200 people. The company is building a new headquarters on land behind its current site along with one of its premium Cinema de Lux theaters and a large retail complex.
There's still a chance that Sumner Redstone may negotiate with his daughter to separate the theater business and run it under a different name, according to published reports. Some analysts say it could be more challenging without the colossal Redstone backing, which, because of its ties to CBS and Viacom, may have brought more opportunities. On the other hand, BU's Weinberg said Shari Redstone may have an easier time securing financing for improvement and upgrades to the theaters with her father -- and his reluctance to support the exhibition business -- out of the picture. Otherwise, it's likely the theater circuits will be sold off to one of its rival conglomerate exhibitors, according to industry executives.
Public rifts are nothing new among Redstone family members. Last year, Sumner Redstone's son, Brent Redstone, filed a lawsuit looking to force a break-up of his father's empire, accusing Sumner Redstone of favoring his daughter and shutting him out of the company. Sumner Redstone recently settled the lawsuit by buying out his son's one sixth interest, and a judge last week dismissed a lawsuit by his nephew, Michael Redstone, because the statute of limitations had run out.
Jenn Abelson can be reached at abelson@globe.com. 