Multimedia giant Viacom has cornered the market on both marketable hipness ? through Generation X-friendly holdings like MTV Networks and Nick at Nite ? and on more traditional American entertainment, through companies like Blockbuster Music and Video and Paramount Pictures. Globetrotting septuagenarian CEO Sumner Redstone rules his brainchild with an iron hand, yet Viacom manages to stay on the cutting edge of the entertainment industry. In the pop culture pantheon, Viacom's best creations ? from lively cartoon characters Beavis and Butthead to Forrest Gump ? have achieved the gilded status. For Viacom's studio, Paramount, 1998 was a banner year. Sodden cinema sensation Titanic became the highest-grossing film in history and raked in 11 Oscars. Another strategic risk-sharing partnership with DreamWorks SKG produced summer hits Deep Impact and Saving Private Ryan. In 1999, Viacom announced a blockbuster merger with CBS, which will create the world's second-largest media company.

Offspring of CBS

CBS created Viacom in 1970 in response to a FCC ruling that said TV networks could not own cable stations and TV stations in the same market. The newly formed Viacom took control of CBS's program syndication division, and started Showtime (1978), a pay cable station. In 1987, Redstone purchased 83 percent of Viacom's stock for $3.4 billion. In 1993, Redstone made a deal to acquire Paramount Communications for $10 billion. And Redstone was not done with his high-profile dealing: the next year he purchased Blockbuster Entertainment Corp. for $8.4 billion. But for a while after that purchase, Viacom was a deeply troubled company. A badly slumping Blockbuster, depressed ratings at MTV, poor box office at Paramount, along with a host of other problems put Viacom's stock in a free fall ? down 13 percent in 1997 ? despite the booming market.

But in recent years, the media conglomerate has rebounded. In 1998, Viacom announced the sale of Simon & Schuster, its publishing arm, to UK media conglomerate Pearson for $4.6 billion. Viacom will keep Simon and Schuster's trade division, a cash cow which publishes serious fiction like Angela's Ashes, as well as hack novels about Star Trek and Beavis and Butthead. The successful sale made a dent in Viacom's massive debt, estimated to be between $8 and $9 billion at the time, and cleared the way for the company to focus on its entertainment divisions.

The company also revamped Blockbuster, boosting the number of hot-ticket recent releases available for rental, offering a free rental to customers who rent an older movie they didn't enjoy, and giving a dollar off rentals that are returned early. As part of its strategy with Blockbuster, Viacom maneuvered a revenue-sharing deal with film companies, which enabled the chain to triple the volume of popular titles in stock. Stores have since reported increased rentals and membership. Some industry observers believed that Viacom was simply plumping up Blockbuster for sale, since the company had already sold Blockbuster's music chain to Wherehouse Entertainment for $115 million - Viacom eventually sold off a minority interest in Blockbuster through an IPO in August 1999.

Together again

In May 2000, Viacom and CBS rocked the media and business world when they finalized a merger that created the world's second-largest media conglomerate behind Time Warner. The largest media merger to date, the $34.8 billion deal was announced about a month after the FCC loosened the regulations concerning television station ownership. Talks began shortly after the change, which allows companies to own more than one station in the same city. The new company, which will retain the Viacom name, will vertically integrate several major cable stations, the number one broadcast network, the largest outdoor advertising company, one of the largest movie studios, one of the largest radio companies and, a major video rental chain. Viacom's CEO, Sumner Redstone remains at the helm of the organization and CBS CEO, Mel Karmazin, is now president and chief operating officer. Karmazin is the heir apparent to Redstone but industry insiders are skeptical about how the two headstrong executives will get along in the meantime.

Now that Viacom has also obtained UPN from Chris-Craft Industries, 19 Viacom stations and 16 CBS stations are being combined in a new unit within CBS Television. As the largest station group, these 35 stations reach 40 percent of the nations households. According to FCC regulations, no single company can reach more than 35 percent of the nation's viewers, meaning Viacom might have to sell off some of its stations.

Trouble at MTV