July 26, 2010 / 5:17 AM / 9 years ago

The elderly media mogul and the bisexual rockers

LOS ANGELES (Hollywood Reporter) - An MTV reality show about an aspiring raunchy girl band remains in development despite an embarrassing controversy last week involving its cheerleader, 87-year-old media mogul Sumner Redstone.

The show revolves around the bisexual young women in the Electric Barbarellas on their quest for fame and fortune. It comes from the production company behind MTV’s “Laguna Beach.”

Redstone, the chairman and controlling shareholder of MTV’s Viacom parent, has been at the center of a media firestorm over his taped phone message demanding that reporter Peter Lauria of the Daily Beast reveal the source of his story about the billionaire’s attempts to force reluctant MTV executives to create a show for the band.

In the message, Redstone offered to reward the reporter for disclosing the source, adding that Viacom management wouldn’t “kill” the responsible party.

Redstone’s control of Viacom remains unchallenged, but his conduct is not going unnoticed on Wall Street. Mystery persists around the disclosure that 29-year-old band member Heather Naylor sold $157,000 worth of Viacom stock in March. Since Viacom has been tight with option grants and has rules for awarding them, the revelation that Naylor possessed the stock raises questions about corporate governance.

A Viacom spokesman declined to comment on the stock issue. But the news has irked some company insiders.” People are upset that (apparently) this woman just got options handed to her and cashed them in already,” said one person with Viacom connections.

While declining to comment on the stock sale, a Redstone spokesman said the mogul now regrets having left the phone message that now has been heard around Hollywood. “It was Sumner being Sumner,” the spokesman said. “People who know him know he’s a seize-the-day kind of guy. He feels bad that he was impulsive in making that phone call.”

That does not sync with the response several Redstone friends have observed. “He thinks everything’s fine,” said one. “He says, ‘I just want the truth, and there’s nothing wrong with finding out the truth.’”

If Redstone minds the attention at all, said sources who know him well, it’s because he believes rival Rupert Murdoch likes to foment trouble against him and is taking a role in fanning the flames. A cartoon in the Murdoch-owned New York Post last week must have reinforced Redstone’s suspicions: It depicted Redstone shaking pills from a big Viagra bottle into his hand as his secretary announced that the young women from the Electric Barbarellas had arrived at his office.

But friends and former associates said the twice-divorced Redstone is delighted to be at the center of a story that links him to a far younger woman because he believes it reinforces his reputation as a ladies’ man. “He thinks he’s Paul Newman,” said one former colleague. “He thinks women are just fatally attracted to him.”

But some who have been close to Redstone said he has long since crossed into unconscious self-parody, making graphic sexual comments over social or business meals. “He acts like a 15-year-old kid at summer camp,” said a top executive at another media giant.

Several longtime Redstone associates acknowledged that the phone message and the Electric Barbarellas affair make them wonder whether the mogul is losing his grip. But Redstone’s close friend, producer Arnold Kopelson, dismissed that idea.

Although Kopelson said he hasn’t discussed the infamous phone call with the Viacom chief, he said Redstone “knows exactly what he’s doing.” (Kopelson sits on the CBS board, which Redstone chairs.) “He’s in extremely good physical condition,” Kopelson said, noting that Redstone’s complexion is smooth and has a healthy pink glow. “He eats only foods with antioxidants. He swims every day, I think, for about 45 minutes. The man keeps himself in really great shape. (And) he is divorced; he is dating other women.”

But questions surrounding Redstone’s conduct generally and the stock sale in particular are likely to persist. (Redstone was also reported to have spent $500,000 flying the band to various meetings.) One Viacom insider suggested that Redstone should review Viacom’s own literature on business practices, which states: “It is your primary responsibility to work in the best interests of your company and Viacom. You must avoid all conflicts between them and your own personal relationships or interests at all times.”

Wall Street analysts expressed feelings ranging from amusement to concern that headlines about Redstone’s behavior could distract management and investors. But few expected immediate fallout for Redstone beyond bad publicity. The episode is “bothersome but doesn’t impact (our) valuation/opinion,” said one investment adviser who wanted to remain anonymous.

Some analysts said the episode helps explain why they believe Viacom’s stock price does not measure up to its potential. In a report to investors, Wunderlich Securities analyst Matthew Harrigan reiterated his “buy” rating and $42 target price on Viacom before noting, “The Daily Beast’s revelation that chairman Sumner Redstone recently demanded a reporter’s source for a story on Redstone’s ardent backing for an MTV show on the Electric Barbarellas admittedly supports a continued 10% control discount on our S&P 500 linked valuation model.”

Like other analysts, Harrigan discounts his price target on Viacom and other media companies controlled by moguls whose interests are different from shareholders’. For example, he has a 7.5% discount on Roberts-family-controlled cable giant Comcast and a more than 10% discount for Dolan-family-controlled Cablevision. But Harrigan still believes Viacom stock is “very cheap,” adding that Redstone’s actions are “not remotely material financially.” The price to be paid in other currency remains unknown, for now.

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