FORTUNE 500 2006  
FORTUNE 500    
Leslie Moonves's Role of a Lifetime
The former actor excels at spotting talent and picking shows. Now he has to sell Wall Street on CBS stock.
By Devin Leonard, FORTUNE

(FORTUNE Magazine) - Leslie Moonves has spent his entire career trying to get people to watch television. He's been pretty good at it too. When he was president of Warner Bros. Television in the early '90s, he oversaw the development of hit shows like Friends and ER, which became part of NBC's Thursday night "Must-see TV" lineup. He leaped to CBS in 1995 and proceeded to break the Peacock network's hold on Thursday night with phenomenally popular shows like Survivor and CSI.

These days the 56-year-old television impresario has embarked on a new mission. He has people at CBS (Research) slicing and dicing CSI episodes so that they can be viewed as short clips on the tiny screens of cellphones. The company is creating abbreviated versions of Entertainment Tonight to beam to wireless customers so that they can watch Sarah Jessica Parker dish about her junk-food cravings. CBS is also developing a soap opera that will be available only on cellphones.

FORTUNE 500 2006
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The reason for Moonves's newfound passion for wireless technology is clear. He may be his generation's most gifted programmer of network television, but he's now the CEO of CBS Corp., a public company with $14.5 billion in revenue last year. He's not selling television shows or network advertising any more. He's trying to sell his new company's stock to investors. Moonves would certainly be in a stronger position if he could convince them that CBS Corp. is poised for growth because of new-media initiatives.

Granted, every traditional-media company's CEO is trying to do something similar. But Moonves is being especially aggressive. The conventional wisdom is that he got the worst of the deal when Viacom CEO and controlling shareholder Sumner Redstone decided to split the company into two parts (New Viacom CEO Tom Freston certainly seems to feel that way).

Even so, Moonves is determined to dispel the notion that CBS is the new Viacom's uncool stepsister. His strategy is to turn CBS from a broadcasting company into a "content provider" that sells hit programs like Survivor through a variety of old- and new-media distribution channels.

Moonves has his boosters on Wall Street. "Les Moonves is clearly one of the most successful leaders in the television business today," says Fred Moran, a media analyst at Stanford Group. In late March, however, the stock was trading at about $25 a share, 4% below where it was when the Viacom split was completed in January. This is happening even though CBS has promised to pay its shareholders $480 million in dividends (64 cents a share) in 2006 to make up for the fact that it can't match the new Viacom's growth rate.

Investors have reason to be wary. Outside of the pornography industry, nobody's making much money selling conventional content on the Internet yet. So for now, CBS must depend on its traditional assets. But the audience for broadcast television is eroding, and radio faces threats of its own.

Broadcast networks have lost nearly 40% of their audience in primetime since cable television began to take off in 1985. Under Moonves's leadership, the CBS network has slightly increased its total primetime viewers over 11 seasons, from 12.7 million to 12.9 million, according to Nielsen Media Research. NBC and ABC, over the same time, have lost six million and 2.8 million, respectively. But how long can CBS defy gravity?

CBS Radio is in a much more difficult situation. The division is reeling after the departure of its best-known personality, Howard Stern, who defected to Sirius Satellite Radio in December. (Now Stern and Moonves are engaged in a high-profile legal battle, with the shock jock blasting his former boss on CBS's own Late Show With David Letterman.)

Moonves has been in tough situations before and prevailed. His rivals scoffed when he set out to resurrect the moribund CBS network. The world, however, was simpler back then. All Moonves had to do was get people to flip the channel to CBS on Monday nights to watch Everybody Loves Raymond. He didn't have to contend with the Internet, instant messaging, satellite radio, iPods, and videogames--all of which have radically altered the rules of his business.

"I don't like being treated like Con Edison," says Moonves. It's early one morning in March, and the CEO is complaining about how some people see his company as little more than a utility that pays a dividend but can't offer much in the way of stock appreciation. "I think we have incredibly attractive, sexy assets," he says.

Moonves is sitting in his office in Television City, the Los Angeles headquarters of the CBS network. He is dressed casually in black shirt and black pants. These days, though, he spends most of his time in New York City, wearing a suit and tie, attending board meetings, and trying to get analysts to see things his way.

"I think the reason you should buy our stock is that we have very successful businesses that continue to produce a lot of cash," says Moonves. "We'll pay our dividend. You are going to get money from buying our stock. The dividend is going to continue to go up too. And on top of all that, these are businesses that initially are going to be growing and will continue to grow because of new media."

He concedes that CBS is a slower-growth company than the new Viacom. But the notion that it is somehow less glamorous clearly irks him. No, he didn't get Paramount's movie studio. But part of the reason he is in Los Angeles is that CBS is in the final week of casting for its new fall primetime shows.

He also attended the Vanity Fair Oscar-night party to talk to people on the star-studded guest list about possibly starting a movie studio at CBS. It would be fairly easy because CBS already has a television studio, an international syndication division that could sell foreign rights, and a DVD division. Says Moonves: "We basically can go into the movie business with little or no risk."

Perhaps Moonves would like to compete with Freston's studio. But that's the last thing Wall Street would like to see when CBS has to maintain its dividend. Knowing that investors are skittish about movie studios' volatile profits, he is quick to add that CBS would not make films with $125 million budgets.

Moonves makes his investment pitch for CBS with all the persuasiveness he can muster. "I own a lot of our stock," he concludes. "I believe in our stock, and I ain't selling." Still, he doesn't sound as confident as he did in the past when he was touting the CBS network. He concedes that selling stock isn't as much fun as looking at a rough cut of a television pilot. "But it's a new challenge," he adds.

On the way out of his office, Moonves brightens up. He stops in front of a framed cover of New York magazine that hangs by the door. It's from 1995, when he was in his last months at Warner Bros. A younger, slimmer Moonves is flanked by the studio's biggest stars at the time--Jennifer Aniston of Friends, George Clooney of ER, and Teri Hatcher of Lois & Clark.

More than a decade ago Moonves cast them all in those roles. Now they are bigger than ever. Moonves jokes that he's just glad he didn't ask their less successful co-stars to join him for the photo shoot. "I could have picked Courteney Cox [of Friends], Anthony Edwards [of ER], and Dean Cain [who played Superman to Hatcher's Lois Lane]. I guess I did want two pretty girls."

Never mind what Courteney Cox might make of that remark. The magazine cover is a reminder of two things. First, Moonves has an uncanny ability to spot television talent. And second, he himself is a peerless showman. Both skills can be traced back to his years as a struggling actor in New York.

Moonves grew up on Long Island and went to Bucknell University, where he was pre-med. In his sophomore year he realized he hated the sciences. So he switched his major to Spanish and acted in a few plays. After graduating in 1971, the future CEO moved to Greenwich Village in Manhattan. He landed a few forgettable television roles, playing tough guys on Cannon and The Six Million Dollar Man before deciding on a career change. "I was mediocre," he says.

So Moonves went into the production side of the business. He distinguished himself as a specialist in a now dimly remembered genre: the network television movie of the week. At 20th Century Fox he produced a miniseries based on Hemingway's The Sun Also Rises and oversaw the development of Second Serve, the story of transsexual tennis pro Renee Richards, starring Vanessa Redgrave.

"I remember being in a room in London with Vanessa Redgrave, trying to get her to sound like a New York Jewish person. A New York Jewish man," Moonves recalls. He ended up at Warner Bros., where he had a record 22 shows on the air in the 1995--96 season.

In 1995, Moonves jumped to CBS, where he masterminded a turnaround that ranks with the ones Fred Silverman engineered at ABC in the 1970s and Brandon Tartikoff executed at NBC. CBS had six of the ten most-watched primetime shows in the final quarter of 2005--CSI; Without a Trace; CSI: Miami; Survivor: Guatemala; NCIS; and Cold Case.

At CBS, Moonves also proved himself a masterful seller of advertising time. Under his predecessors, CBS used to unveil its primetime schedule to advertisers during the annual "upfront" presentations at the dowdy New York Marriott Marquis in Times Square. Moonves moved the event to Carnegie Hall and turned it into a spectacle that was heavy on both hype and shtick.

Last year Moonves played an up-and-coming boxer trained by Morgan Freeman in a spoof of Million Dollar Baby, knocking out an actor playing Donald Trump, the host of NBC's The Apprentice. "Do you realize that more people have seen me in that film than in my entire career as a working actor?" Moonves joked afterward. "You know, this is my tenth time playing Carnegie Hall. I believe that is a new record for a Jew without an instrument." He got a rise out of his audience of advertisers, and CBS saw ad revenue increase more than 6% over the previous upfront season, according to Merrill Lynch.

Rewarding Moonves for his successes, Viacom (Research) chairman Sumner Redstone in 2004 named him co-COO, along with Freston. Moonves was in charge of CBS, UPN, Paramount's television studio, and radio and billboard assets. Once Redstone began mulling the split of Viacom last year, there was little question that Moonves would end up in charge of those same divisions. "I have confidence in Les," says Redstone. "He's a great leader. He's a showman. He's a competitor. He's everything you would want in a guy to lead your company."

In the weeks before and after the split, CBS Corp. announced a flurry of deals. The company said it would offer shows though Comcast's video-on-demand service, Google Video, and In November, Moonves announced that CBS was paying $325 million in cash and stock for CSTV, a college-sports cable network that operates athletic websites for 250 colleges and universities. CBS executives are hoping the sites will become a MySpace-like destination for college sports fanatics.

The idea is to take CBS content and use it to create several different revenue streams. "You are going to see us making money from the same exact assets in three different ways," Moonves promises. The first is traditional TV distribution. The second is by charging people to watch via the Internet and cellphones, and the third is by selling ads on those new distribution channels.

Moonves insists the new-media initiatives won't cannibalize existing properties. He notes that the average viewer of CSI, which airs Thursday nights, misses a couple of episodes each month. So why not catch those shows on Google? Moonves says this will only increase fans' loyalty. But CBS executives confess they don't know when these businesses are going to generate substantial revenue growth. "I don't think anybody can predict this, honestly," says Nancy Tellem, one of the executives overseeing the company's new-media efforts.

That puts the burden on CBS's television and radio divisions. These businesses continue to throw off a lot of cash, but their futures are uncertain. Radio is the biggest problem. Analysts say Stern's departure cost the company $50 million in Ebitda--earnings before interest, taxes, depreciation, and amortization (CBS says the number is closer to $20 million).

CBS has replaced the self-proclaimed King of All Media with a team of new morning-show hosts, including former Van Halen frontman David Lee Roth and onetime Jimmy Kimmel sidekick Adam Corolla. But Joel Hollander, CEO of the radio division, acknowledges that it will be a while before the company fills the vacuum created by Stern's departure. "Howard Stern was on the air for 25 years," he says. "You are not going to replace someone like that in a month."

But even with new drive-time personalities, terrestrial radio stations are under pressure from iPods and satellite radio. The Telematics Research Group predicts that by 2011, 28 million cars in the U.S. will be equipped with iPod adapters. Satellite radio is also proliferating. It's standard in many new cars sold in the U.S. Now two manufacturers are going even further. Hyundai will be putting satellite-radio receivers in all its new cars. Rolls-Royce is doing the same--and throwing in free lifetime subscriptions.

It may take years for the rest of the auto industry to catch up to Rolls-Royce. But Jason Bazinet, a Citigroup analyst, says premium features have a way of filtering down. He cites AM-FM radios, air conditioning, and airbags as examples. "We believe ubiquitous satellite-radio equipment with a free subscription would reduce CBS's Ebitda by $1.2 billion," Bazinet wrote in a March report. Hollander says he's not worried, dismissing satellite radio as nothing more than "a boutique business."

There are also questions about the future of CBS's television properties. In January came the announcement that the company was merging its money-losing UPN with Time Warner's struggling WB to create the CW network. In the fall the CW will start airing the top programs of both networks, like UPN's Everybody Hates Chris and the WB's Gilmore Girls.

Executives at CBS and Time Warner (parent of FORTUNE's publisher) expect the CW to be profitable in its first year. In addition, Moonves is wooing Today Show host Katie Couric to take Dan Rather's old anchor chair on the third-place CBS Evening News. (Editor's note: A deal was announced April 5.)

The CBS network remains the most watched of the Big Four broadcasters, and keeping it No. 1 may be Moonves's most important task in the short run. Bazinet estimates that the CBS television network accounted for $4.5 billion of the company's total $14.5 billion revenue last year. "While management deserves a lot of credit for turning around CBS several years go, now that they are on the top of the heap we think there aren't too many places to go except for down," he wrote in March.

Bazinet has a point. NBC may have been sidelined by its ratings collapse, but ABC has rebounded with hits like Lost and Desperate Housewives. This season ABC has attracted more 18- to 49-year-old prime-time viewers than CBS. That's the demographic most coveted by advertisers.

It's up to Nina Tassler, president of CBS Entertainment, to make sure the network doesn't lose any more ground. Unlike her boss, she's not formidable-looking. She jokes that she is so small she looks like Lily Tomlin's Edith Ann when she sits in one of the comfy chairs in her office. "My feet don't touch the ground," she says.

But like Moonves, Tassler has flair. She started out in the theater as an actress, and she knows how to pitch the new shows in the upcoming fall season. She has high hopes for The Class, a comedy about a group of former Philadelphia-area schoolmates who are reunited for the first time since they were all in third grade. It's the first new show by Friends co-producer David Crane. Tassler says there are so many characters in The Class that CBS has asked Crane for "companion narratives" about some of them that can be watched by wireless and Internet users. "The growth of the audience for wireless and the Internet is staggering," she says. "We want to participate."

Now that Moonves is the face of CBS Corp., he feels someone else should represent the broadcast network. So he'll be in a supporting role while Tassler takes center stage at Carnegie Hall in May to sell the programs to advertisers. Tassler sounds nervous about her increasing prominence. But she has worked with Moonves since his Warner Bros. days. What better preparation? "I went to LMU--Leslie Moonves University," she says, "I did my postgraduate studies there too." An even more nervous-sounding emissary from Moonves's office interrupts. "Sorry, it's him," Tassler says. "I have to go." It's final-casting week, and Moonves has a pressing question about one of the new shows.

Moonves may spend a lot of time touting CBS's wireless strategy to investors these days, but he still approves the leads of all the new shows. That bodes well for CBS Corp. The last thing this company needs is for its CEO to forget where he came from.

Tom Freston, Mr. MTV, grows up. Read the full storyTop of page

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