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In the Hot Seat

During Goldman Sachs’ Communicopia media investor conference last week, a top executive privately confessed, “I’m so glad I don’t have to do that any more.”

His company went private within the past few years, so he no longer has to perform for swarms of money managers hammering away at every conceivable flaw in the latest securities filing.

Executives at most large media companies don’t have that luxury. The largest companies are public, and even the most powerful ones are forced to dance to impress Wall Street.

It’s not pretty. The audience at these investor conferences is dominated by hedge funds with increasingly short-term outlooks. They hold positions for days or possibly weeks, rather than months or years. Often because of high turnover, a CEO is not familiar with the analyst or portfolio manager du jour.

In recent years, this fascination with quarter-to-quarter gains has turned CEOs into contortionists trying to bend to Wall Street’s whims. These CEOs have seen Time Warner’s Dick Parsons and Jeff Bewkes squirm under the pressure from Carl Icahn and his hedge-fund friend, SAC Capital head Steve Cohen. And, of course, one reason Viacom CEO Tom Freston lost his job is the company’s poor communications with Wall Street.


Still, the show must go on. Last week, the most uncomfortable executive in the house was DirecTV CEO Chase Carey. Just a week earlier, news broke that News Corp. CEO Rupert Murdoch was considering trading away his 38% stake in DirecTV to resolve a dispute with Liberty Media. Murdoch is unhappy over growth prospects at DirecTV and its inability to deliver high-speed Internet service.

“I guess I’ve been in entertainment and media long enough to be accustomed to the life of rumors and the type of crap that has revolved around us this week,” Carey says, without elaborating on the talks.

Carey expresses confidence in DirecTV’s core video business. However, he acknowledges that the broadband issue is “the big overhang” on DirecTV’s long-term prospects. DirecTV can’t really offer fast data service on its own and is dependent on telephone companies to “bundle” their DSL service in with satellite TV. It’s hard to imagine that telcos will remain strong marketing partners, given that they’re getting into the video business on their own and want to steal DirecTV’s customers.

Comcast President Steve Burke seemed to be most at ease in the spotlight. His company’s shares have zoomed 35% so far this year as consistent financial growth has finally beaten down investor anxiety. Burke says that, a year ago, “you would have a meeting with an investor or an analyst and the first question was 'are the RBOCs going to put you out of business?’ The second question was 'isn’t Internet [video] going to mean that nobody needs cable?’ I think that, last year, those issues have calmed down and people are more balanced.”

Instead, investors are wowed by Comcast and other cable operators’ success selling telephone services over their wires. “We will gain 10-20 times as many phone customers,” Burke says, “or 30 times as many phone customers as they gain video customers.”

The smoothest executive: CBS Corp. CEO Leslie Moonves. Years of coping with inflated Hollywood egos have made him a natural at the investor schmooze. He sweeps away worries about Web video’s threat, confidently declaring that “we’re looking at the Internet as our friend,” one that will strengthen CBS by allowing more-flexible distribution of programming, rather than simply cannibalizing CBS’ network and—far more important—its TV stations.

Moonves exudes so much confidence that you almost forget that CBS’ revenues and operating cash flow are expected to increase less than 2% this year. Or that the CBS network’s ratings actually fell 5% last season. Or that the future of CBS’ radio and billboard units is far from riveting.


The conference marked the coming out of Viacom CEO Philippe Dauman, who is filling the slot held by Freston until three weeks ago. His debut left investors wanting more—much more.

Like Moonves, Dauman works for Sumner Redstone, chairman and controlling shareholder of both CBS and Viacom. But Dauman isn’t half the salesman that Moonves is. The firing of a CEO signals the need for change to outsiders, but Dauman’s pitch, incredibly, was that all is well.

Freston’s replacement should have a big plan for change, right? How about a dramatic change in MTV Networks’ approach to digital, which Redstone has criticized? “In the digital area, I think we have had a good strategy,” Dauman tells investors.

Despite the theatrics, conferences like these are more important than ever, because it’s a fearful time for media executives. Slow overall growth has investors generally sour on every media sector except cable operators. So CEOs need to communicate how their companies are reacting to competitive forces. Still, what matters most is the steak, not the sizzle.

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