Shari Redstone is facing off against Les Moonves in a battle to run CBS-Viacom

What’s worth more? A combined CBS-Viacom with Les Moonves as CEO? Or a CBS-Viacom under another executive?

That’s the gamble Shari Redstone is making, as she considers firing Moonves if he doesn’t agree to her terms for a merged company, according to a report from CNBC’s David Faber.

Redstone, who controls both businesses through her family’s holding company, has urged the boards of each business to examine a merger, which means a deal will happen. The problem is over leadership (as well as price).

Everyone agrees Moonves should be the CEO of the merged company, but Redstone also wants Viacom CEO Bob Bakish to be Moonves’s second in command and get a seat on the board. Moonves prefers his current management team with COO Joseph Ianniello continuing as his primary deputy. He also doesn’t want Bakish to be part of the new business.

That’s an astounding position to take — on both sides. Redstone’s truculence is reminiscent of her father Sumner, who built his media empire around Viacom cable networks MTV and Nickelodeon, later adding CBS and Paramount film studios.

Shari Redstone’s hardline position is a big deal given how much Wall Street favors Moonves. He turned CBS from a faltering broadcast network into the most-watched channel on television. Bakish, who used to run Viacom’s international business, doesn’t cut a prominent profile among the media ranks.

To answer the above question, a company with Moonves is easily worth more. CBS lost $422 million in market value today and Viacom lost $213 million after CNBC’s report.

That tells us a few things:

• Redstone might be willing to take a hit to the stocks of CBS and Viacom if that means she can have more day-to-day control over the combined enterprise. Bakish, in some quarters, is seen as her proxy, sources say. The Hollywood Reporter’s Kim Masters writes that Redstone may have “developed a taste for control.”
• Redstone may also be factoring in Moonves’s tenure. He’ll turn 69 in October, and his contract runs through June 2021. If Redstone figures he won’t stick around much longer, it might be better to replace him now.
• As for Moonves, his reluctance to do this deal is well known. This is the second time Redstone has tried to combine the two. On the first attempt two years ago, Moonves had more clout and the media business wasn’t in as much disarray. His insistence on his own management team could be seen as his way of ensuring the best possible execution of a bad combination. It’s more probable he wants to keep Redstone out of his hair.
• Redstone is likely to be sued by shareholders if she goes through with firing Moonves. But that still wouldn’t change her ability to make the deal happen since she has clear control of both companies.

The context: The media industry is melting away as fewer people pay for television, and that’s sparked a series of big mergers. AT&T is fighting in court to buy Time Warner and Disney has bid to buy most of Fox. Comcast, by the way, is looking to spoil Disney’s deal by considering purchasing a key Fox investment, the European pay TV operator Sky. In other words, there are only so many major players left to partner off, and CBS and Viacom — which used to be one company — could only be left with each other.

A smarter idea: CBS should be sold to Amazon, and Viacom’s channels should be sold off to different buyers.

The background: Viacom and CBS used to be one company, but in 2005, then-chairman Sumner Redstone said splitting the two would provide more value. Viacom was seen as the faster growth business as cable networks were entering a bull cycle. CBS was the laggard then. Sumner also said he wanted to try to find a way to keep Moonves and Tom Freston — who both wanted to be CEO — so he split the companies. Freston was given leadership of Viacom.

The price: CBS’s offer for Viacom is an all-stock deal valued at $11.9 billion, which is below Viacom’s market value (now about $12.3 billion). Viacom countered with a higher bid of $12.7 billion. The thing to note is that Viacom is now the shrinking business (which explains CBS’s low-ball offer) while CBS has stayed relatively strong thanks to owning major sports rights such as the NFL. That agreement, however, will come up again in 2021-2022 when a renewal deal will come at a high cost and when tech players with big pockets could keep the NFL out of CBS’s reach.

The lesson: Redstone controls both CBS and Viacom through an unusual holding structure that gives her nearly 80 percent of voting rights for each company, despite both being publicly traded. Other media companies have similar ownership structures under the conceit that entertainment and news products sometimes require management decisions outside of investor pressure. But as is clear in this case, it can also be a liability. By the way, a bunch of publicly traded tech companies also have power concentrated in a few individuals, including Google, Snap and, yes, Facebook.

Here’s the media chart that explains it all:

This article originally appeared on Recode.net.

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