The long drawn-out management drama that ended months of speculation, gives Karmazin a contract extension that cedes ultimate authority to chairman-CEO Sumner Redstone. Viacom has also announced a new contract with Redstone.

The Wall Street Journal was the first to break the news that Karmazin was indeed staying. Viacom's board met Wednesday afternoon to thrash out the final terms of the deal.

Viacom's Big 2 Sumner Redstone (left) and Mel Karmazin - keeping egos aside to work together. (Picture courtesy news.bbc.co.uk)

The 79-year-old Redstone, who owns a controlling stake in Viacom, gave Karmazin effective operating control of the company when the two were negotiating Viacom's acquisition of CBS. The 59-year-old was CBS's chief executive before the merger, which was completed in May 2000 and is now considered one of the few media mergers that has been a success, agencies report.

The deal removes a major distraction at a time when Viacom's business is under pressure as the advertising market appears to be weakening ahead of the impending war with Iraq. The company gets about half its revenue from advertising, making it more exposed than most other media firms.

In a statement Thursday, Redstone was quoted as saying: "I am very pleased that Viacom will continue to benefit from Mel's leadership and talent. The CBS merger brought many great assets together under the Viacom name, and Mel has done a masterful job of integrating those businesses and operating them at peak performance. I look forward to continuing our successful partnership and taking Viacom to new heights in the years to come."

The company release quoted Karmazin as calling Redstone a great visionary.

New York-based Viacom had 2002 profits of $726 million on $24.6 billion in revenues, reversing a $224 million loss in 2001.