"I don't know when I've had this much fun," says Fredric Reynolds about his work as CFO of the newly retooled CBS Corp. Since the company split from Viacom Inc. at the start of the year, Reynolds has sold off the company's parks business for $1.2 billion, put 38 radio stations on the block, and reported a net profit of $226.9 million for the company's first stand-alone quarter. But it's not all about divestitures: the 55-year-old Reynolds, who served as CEO of Viacom Television Stations Group prior to the split, says the company future depends on investments in talent and programming. "Our business is all about content," he explains. "We can't afford not to have the best."
There were such high hopes for the original Viacom/CBS deal in 1999. What happened?
When we first merged, the fastest-growing area of our business was radio; next was cable networks, then outdoor, followed by everything else. You flip forward five years and cable is still growing fast, outdoor is still growing OK, but radio is not.... So the world has changed.... And with our new realignment we really re-sorted the assets in what I think is a brilliant way. We have every asset we need to be successful.
You split the company between broadcast television and cable studios. How did it work?
To get there, we aligned similar businesses. For example, the TV networks worked with TV stations and with Showtime because of its long-form programming, which can be repackaged in so many ways. Adding content businesses like CBS Paramount TV and King World [which produces Oprah and Jeopardy] to the mix also made sense. And since we are now a TV-station business, we knew having local stations was pretty important....
Then, once we had the assets aligned, we asked what would drive value to shareholders. For our part, we said CBS can grow revenues, profits, and cash flow year in and year out, and because our businesses do not require a lot of capital spending, we could return value to shareholders primarily via a dividend. On the [cable] side, however, MTV alone is in [approximately] 500 million homes worldwide and should grow even faster, redeploying cash flow back into growth, and extending the brand.
It sounds like a giant chess match.
Literally, it came down to deciding who went to which building. So while we were making all these lofty strategic decisions, we also had to figure out who got the sound stage for Dr. Phil.
Was it difficult to negotiate with colleagues?
There had to be protection of both sides, because we would have two different shareholder bases. Even though we had the same owner in Sumner [Redstone], we had to make sure neither side would get something it shouldn't.
With the divestitures, you may generate something close to $2 billion. What'll you do with it?
Absent an attractive acquisition, we'll return it to shareholders and fund up our other liabilities. Earlier this year, for example, we took $50 million as a discretionary pre-funding of a qualified pension plan. We may do more.
You spent four years as a division CEO and you almost left to become CEO of Evercore Partners last year. Was it hard going back to CFO?
I thought it might be, but it hasn't been anything like I thought. The world is different in many ways, whether it's dealing with Wall Street, public filings, or the businesses.... [Besides,] after running the TV stations, I have a keener sense of [how] to make our businesses work better.
Is the lesson that you can go home again?
Yes. I love CBS. When we bought it at Westinghouse [Reynolds was CFO of Westinghouse Electric Corp. from 1994 to 1997], people asked, "Why is this Rust Belt company buying the Tiffany network?" It was a dream, a vision, and it gets in your blood. They'll have to carry me out.
Your CEO has predicted that Katie Couric will give you a significant uptick in profits. How so?
Most people have focused on [her signing] as an incremental cost. It isn't. There were people pretty well paid in the anchor jobs before. What's changed — and this is the genius of [CEO] Leslie Moonves — is the broadcast-news landscape. The morning changed because Katie Couric held the number-one seat in the number-one show and now she doesn't. In response, Good Morning America changed. The nightly news also changed because now [all the longtime anchors are gone. We've] taken advantage of that by putting someone in the slot who can really make the evening news different. With one move, it's almost like the dominos fell across the whole news landscape.
What do you say to those who contend that the nightly news has become a dinosaur?
The news of record at 6:30 P.M. still speaks to the nation. Can it be done better? Yes. And maybe we should be leading [the charge] because we are not number one. When CBS prime time was not number one, we made changes: We did Survivor, the first reality show of any significance. That certainly turned people's thinking around. So we can be more bold and more aggressive in the news. And if we are right, we will get more viewers.
What about the proliferation of digital platforms? Is it an opportunity or a threat for CBS?
Technology is our best friend. In the past, we made our money on the original airing of an episode and its rerun. Now [new rules allow us] to own our content, and of our 22 hours of prime-time programming, we own 19. It can be repurposed in syndication, on line, via cell phones, or on a digital platform. After all, a device is just a device until it comes alive with content. Thank goodness for the digital world.
There aren't many CFOs who have built and then disassembled the same company.
I'm a trail-blazer? Like Lewis and Clark? Which one killed himself, though? I think it was Lewis. I want to be Clark.