Redstone Family Clash: How Will It Affect Viacom and CBS?

The Redstone family just can't seem to get along. Sumner Redstone, the chairman of Viacom (VIA) and CBS Corp. (CBS) is once again battling with his daughter Shari Redstone, CEO of privately held National Amusements.

The father and daughter have long clashed. He controls 80 percent of the movie theater chain, and she controls 20 percent and he's made it clear she's not going to succeed him as chairman of the two media giants. Last year Sumner also said that he was negotiating to buy out Shari's stake in National Amusements. This latest clash speaks to Viacom and CBS's low stock prices (and valuations) and the credit crunch facing media companies, and everyone.

Here's what happened: On Monday National Amusements was forced to sell $233 of stock in Viacom and CBS. On Monday the Wall Street Journal reported that National Amusements needed to raise cash to comply with debt covenants on a $1.6 billion loan, used in part to expand the business. On Tuesday the company said the sale was prompted by market conditions, and not at all by the company's operation or expansion. The loan was likely based on the value of CBS and Viacom stock-- the fact that Viacom and CBS stock prices are at all time lows meant the company had to sell some stock.

Now Viacom's CEO Philippe Dauman is rushing to reassure shareholders, unhappy not only about chunks of the company being sold and the stock price, but also about the company warning a few days ago that earnings would fall short of expectations. Wednesday Viacom CEO Philippe Dauman said his relationship with Sumner Redstone remains "strong." Dauman also defended the company's ability to weather a recession, saying the company is less dependent on local ad sales than competitors.

S&P seems to feel pretty good about it by raising its recommendation of Viacom's class B shares to "Strong Buy" from "Hold." The upside for VIA stock is valuation, and strength internationally. Meanwhile Paramount is cutting back on the number of movies to about 20 a year, from its previous roughly 27 or 28 releases annually. The goal is to save about $50 million a year and better compete in this crowded marketplace. A few years ago Disney (DIS) cut down the number of movies it releases, taking a "less is more" philosophy. In this less forgiving economic environment let's see how it all works, and what it'll take to move Viacom's stock.