A half-dozen security guards stand watch outside the Vibrato Grill Jazz, a supper club in Los Angeles, as a stream of black SUVs, Bentleys, and Teslas pull up to the valet parking stand. It’s a clear May evening, and a handful of journalists and paparazzi loiter in the vicinity, hoping to witness an increasingly rare sight: Sumner Redstone in the wild. They watch as Hollywood dignitaries in formal attire arrive—producer Robert Evans, philanthropist Barbara Davis, former studio executive Sherry Lansing.

For the past year, Redstone, the chairman and controlling shareholder of two media conglomerates, Viacom and CBS, has largely retreated from view. The disappearance of Redstone, once a candid, quarrelsome, constant public figure, has fueled speculation about his health and what will become of his media empire. A week before the party, the Hollywood Reporter wrote that Redstone could likely be seen on that day venturing outside his Beverly Hills mansion near dusk to celebrate his 92nd birthday. Invitations, citing his “passion to party,” called for guests to arrive at 6 p.m.

At the designated hour, there’s no sign of Redstone. His handlers have managed to slip him in through a back door, obscured from would-be peepers by a makeshift black curtain. Once again, there will be no opportunity for the press to assess Redstone in person.

The party is short-lived. By 7:30, guests emerge to retrieve their cars and assure the reporters outside that Redstone is well and the soiree terrific. Tony Bennett sang jazz standards. There was cake. “Everybody showed up,” says billionaire Ron Burkle. “Any time with Sumner is a highlight,” says Michael Milken, the former junk-bond king. “I’ve known him a long time. He looks great.”

Yet concerns about Redstone’s health persist, because while he may show up for a party in his honor, he isn’t defending Viacom as he always has. And while CBS is thriving, Viacom, which includes 23 major and minor cable-TV networks in the U.S. and Paramount Pictures studio, is in trouble.

This season, according to Nielsen, the TV industry’s chief measurement agency, ratings have declined by double digits at Viacom’s most popular cable networks, including Comedy Central, BET, VH1, Nickelodeon, Spike, and TV Land. At MTV, the company’s flagship network, prime-time ratings are down 21.7 percent from last season and 25 percent in the 18- to 34-year-old demographic the network targets.

Viacom’s poor ratings have managed to stand out, even as the collective pay-TV industry suffers an unprecedented ratings slump. In May, according to data compiled by MoffettNathanson Research, overall cable-TV ratings among 18- to 49-year-old prime-time viewers dropped 7 percent from last year. At Viacom, ratings fell 19 percent.

While Viacom is still profitable—last year it earned $2.4 billion in net income on $13.8 billion of revenue—the ratings collapse is alarming because the company is one of the least diversified of the U.S. media conglomerates. Its fortunes are heavily dependent on TV ratings, which help determine how much money it collects from advertisers and how much cable, satellite, and online distributors pay to carry Viacom programming.

In February the company’s prospects worsened when Jon Stewart, the star of Comedy Central’s The Daily Show, announced he would soon be leaving the network. Stephen Colbert has also jumped ship. Recently, a few cable operators have questioned whether they need to carry Viacom’s channels at all. Since the beginning of 2014, Suddenlink Communications and Cable One, two small operators, dropped the company’s lineup entirely.

In early April, Viacom announced it would write off $785 million in the second quarter, in part to cover the cost of older shows that are no longer as valuable. Across the company, large numbers of employees have been dismissed. During an April earnings call, Viacom said its domestic ad revenue had fallen 5 percent in the previous three months, the third straight quarterly decline.

In January, Todd Juenger, a Sanford C. Bernstein analyst, delivered a grim prognosis for Viacom. “Given our view that the audience abandonment of ad-supported TV is structural, and worst among kids and young-adult demographics, we believe the future is more likely negative than positive,” he wrote.

For years, even as the Internet razed much of the profits at newspapers, magazines, books, music labels, and movie studios, cable-TV networks kept making big money. More recently, as consumers shifted their viewing time from live television to various on-demand options, anxiety has risen. The standard subscription cable- or satellite-TV bundle—so lucrative for so long for TV programmers such as Viacom—is under duress because of the growing popularity of YouTube, Netflix, Hulu, and Amazon.com. At the same time, cable distributors, whose profits are becoming more dependent on selling speedy Internet access, are experimenting with cheaper, slimmed-down menus of programming that allow customers to purchase a few popular TV channels instead of paying for them all. As a result, poorly performing networks can’t count on the package deal to bail them out.

Nowhere is the mounting pressure on pay-TV more evident than at Viacom, whose 23 networks include several such as CMT, Centric, MTVU, and Palladia that few people watch but many pay for as part of bundles.

Philippe Dauman, Viacom’s chief executive officer and president, calls concerns about the company overblown: The problems, he argued recently, are the result of faulty measurement, not faulty programming decisions. In the meantime, Redstone’s 61-year-old daughter, Shari, is waiting in the wings, ready to lead a turnaround should the opportunity arise. “The threat to the core of Viacom is profound,” says Patrick Keane, a longtime media executive and current president of Sharethrough, an online advertising company. “The changes are hitting Viacom harder than virtually any traditional media company on the planet.”

Redstone grew up in Boston as a socially obtuse, high-achieving student. After graduating from Harvard Law School in 1947, he eventually joined and took over his family’s movie theater business. Once in charge, he proved an adept manager, successfully expanding the company while navigating tricky changes in American movie culture, such as the shift from drive-in theaters to multiplexes, a term he coined. By the 1980s, convinced that content rather than distribution was the key to succeeding in the entertainment industry, Redstone segued from investing in large media companies to seizing control of them. He quickly earned a reputation as a negotiator who seemed to relish sparring with rivals, firing top managers, and starting feuds. Over a quarter century, he built a media superpower that on its best days rivaled Walt Disney.

In recent years, Redstone talked up his own vitality, regaling journalists with tales of swimming laps naked in the pool of his Los Angeles mansion and dishing on his romances with far younger women. He frequently retold the story about his brush with death when a fire broke out at Boston’s Copley Plaza hotel in 1979. He survived by crawling out a window of his hotel room, kneeling on a ledge, and hanging on, even as flames charred his arm, until a firetruck arrived with a ladder. The moral of the story: Redstone never lets go.

Over the past year, however, Redstone’s imperious grip has slipped. He hasn’t spoken on a Viacom earnings call since last fall. In March, for the first time in years, he didn’t attend Viacom’s annual shareholder meeting. In May, he missed the annual meeting of CBS shareholders. Lately, the best glimpses into his reclusive lifestyle have come via court filings.

In August 2013, Sydney Holland, Redstone’s 44-year-old girlfriend, filed a civil suit against Heather Naylor, an affectionate mentee of Redstone’s, whose all-girl rock band starred in a hapless MTV series, The Electric Barbarellas. Holland alleged that Naylor had conspired with others to steal her laptop. In a cross-complaint last year, Naylor alleged that Holland had changed Redstone’s phone number and was attempting to “control Redstone for her own economic advantage.” Both sides denied the allegations, and in April, Holland dropped the suit. The episode did nothing to alleviate the impression that Redstone’s authority has slackened.

Redstone controls Viacom and CBS through National Amusements, a private company in which he holds an 80 percent stake. When he dies, the companies will be in the hands of a trust. CEO Dauman is one of the seven trustees. So is Shari, who in the past several years has backed through her investment firm, Advancit Capital, a portfolio of startup media companies—with mixed results.

For now the direction of Viacom is in the hands of Dauman, 61, who took over as CEO in 2006 after Redstone fired Tom Freston for losing out to Rupert Murdoch in a competition to acquire Myspace and for failing to boost the company’s stock price.

Dauman provided a sharp contrast to his predecessor. Freston was an avuncular executive and skillful salesman, steeped in every aspect of cable television since he co-founded MTV. He green-lighted The Real World, Beavis and Butt-head, South Park, Behind The Music, and SpongeBob SquarePants. Dauman, on the other hand, was a former corporate lawyer who’d spent the bulk of his career in Redstone’s shadow, coolly servicing the magnate’s feverish ambitions. Last year, even as Viacom faltered, Dauman was paid $44.3 million. He declined to be interviewed for this article.

Dauman has taken an unusual tack when he’s spoken to analysts about Viacom’s recent performance. The lower ratings for its programming, he says, aren’t the result of the rising popularity of YouTube or poor creative choices at Viacom. Instead, the loss of viewers is an illusion, he says. The fans are there in growing numbers. They just aren’t being properly counted. According to Dauman, Nielsen’s ratings fail to account for the TV that people consume via apps on their smartphones, streaming devices such as Roku, desktop websites, or various video-on-demand services. “Inadequate measurement undermines innovation,” Dauman said during a recent earnings call, “and disproportionately impacts those leading programmers like us who effectively provide the multiplatform experiences that viewers demand.”

It’s an argument that exonerates Viacom’s management for its ratings slide and absolves it from the need for reinvention. As Viacom continues to pay the ratings service for its data, knocking Nielsen is a low-risk strategy; Nielsen’s unlikely to punch back at a major client. (A Nielsen spokesperson declined to comment for this article. CEO Mitch Barns recently told the Wall Street Journal that struggling TV companies are at times “using us as a scapegoat.”) If, as Dauman says, nobody is correctly measuring the new TV landscape, then nobody can adequately judge Viacom’s market share.

“When you’re looking at Nielsen, you’re only factoring in a small part of the way our audience is consuming our programming,” says Stephen Friedman, the president of MTV. “We’ve been really aggressive about being platform-agnostic in terms of where we put our content. It’s much more important to be where they are than to worry about an antiquated rating system.”

So far, investors on Wall Street aren’t convinced. Over the past year, Viacom’s stock has fallen 24 percent. “The Nielsen thing is a red herring,” says Porter Bibb, managing partner at Mediatech Capital Partners. “Management is the real problem.”

With Redstone missing in action and Dauman reluctant to do interviews, it’s fallen to lesser-known executives to support Dauman’s criticism of Nielsen—and to quantify Viacom’s potential. One of these designated visionaries is Kern Schireson, a verbose, 42-year-old marketing strategist who joined Viacom last year from his private consulting firm, Schireson Associates. Schireson is responsible for buttressing what Dauman calls Viacom’s “non-Nielsen monetization strategy” by better measuring and monetizing the company’s uncounted, unconventional viewers.

Schireson says that thanks to companies such as Rentrak and FourthWall Media, which collect and sell data gathered by cable, satellite, and Internet distributors, Viacom has access to richer information about its viewers than ever before. This wellspring of data, he says, reveals that Viacom’s shows are more popular than Nielsen ratings suggest. At the same time, the Rentrak and FourthWall data give Viacom the ability to more precisely match advertisers with viewers, which will make the company’s ad space more valuable, he argues. “This is a monetization problem,” Schireson says, summing up Viacom’s chief talking point for Wall Street. “This is not a content problem.”

The challenge of how to accurately measure TV’s rapidly fragmenting audience—and how ad buyers should be charged for unconventional ad placements—is affecting everyone in the industry, not only Viacom. Efforts to resolve it are under way. Nielsen is capturing many of the newfangled ways in which people consume TV on various digital devices as part of a more comprehensive measurement framework called Total Audience. Since the fall of 2014, Nielsen has been working to galvanize the industry behind an updated set of ratings rules. Negotiations between buyers and sellers are expected to pick up in the months ahead. “It’s a massive year for us,” Nielsen’s executive vice president for global product leadership, Megan Clarken, said at a TV-measurement conference in Manhattan in April. “It’s a massive year for the industry.”

In the meantime, Viacom is trying to adjust to the splintering TV landscape. To prevent young viewers from turning away during ads, it rolled out an initiative last year called MTV Always On, which is staffed by a team of pop culture savants (including Richard Turley, former Bloomberg Businessweek creative director). Inspired by trending topics from the daily news cycle, the Always On crew whips up batches of short-form videos, GIFs, and memes, which are then hastily injected into MTV’s advertising blocks, adding a jolt of immediacy. The blips of timely visual ephemera are designed to be so alluring that viewers can’t help but keep their eyes fixed on the TV screen during commercial breaks rather than checking their smartphones—something Nielsen now attempts to measure. One year later, Viacom executives say the program has exceeded expectations. “It’s how you reinvent live TV,” Friedman says.

But despite how you tweak live TV, says Ian Schafer, founder and chairman of Deep Focus, a digital marketing agency, the chief problem is not going away: Younger viewers are increasingly seeking out video that isn’t ad-supported. “Whether they are binge-watching on Netflix or skipping ads on YouTube, they are actively trying to get beyond the reach of advertising,” Schafer says. “So no matter how well you match up advertising to programming, there are going to be more and more people trying to avoid it.”

There’s another theory: The shows are bad. Some former staffers say that several years of cost-cutting under Dauman have crippled Viacom’s creative culture. “I’m tough on Viacom because I grew up there and have great affection,” Jason Hirschhorn, the former chief digital officer of MTV Networks, wrote recently in his daily newsletter, MediaRedef. “It’s unrecognizable to me now. Devoid of strategy, culture and risk taking. Keep burning the furniture for heat.”

One of the company’s top products this year has been Paramount Pictures’ The SpongeBob Movie: Sponge Out of Water, which has racked up more than $310 million in global box-office sales. The movie is based on the popular TV series that has aired on Nickelodeon since 1999. Likewise, many of Viacom’s top entertainment franchises date back to an earlier era. MTV’s last cultural juggernaut, Jersey Shore, premiered in 2009.

Bibb, of Mediatech Capital Partners, criticizes Dauman for failing to restock the company’s arsenal. Rivals such as Disney have been aggressively acquiring cultural assets like Pixar, Marvel Entertainment, and Lucasfilm. And other media conglomerates, such as Time Warner and 21st Century Fox, have been hedging against the rise of Internet video-on-demand by investing heavily in TV programming that reliably attracts large live audiences—namely, sports. Bibb sees Dauman’s idiosyncratic blame-the-scorekeepers strategy as little more than a tactic to distract attention from the stasis that’s enveloped Viacom since Redstone’s involvement has faded. “Dauman is protecting Sumner’s estate, not building a business,” Bibb says.

In recent years, according to David Miller, an analyst at Topeka Capital Markets, Viacom has been risk-averse, choosing to spend more than $15 billion on stock buybacks since 2010 while shying away from making big bets on live-sports rights or bulking up Paramount Pictures’ slim annual output of films. “Strategically, we think Viacom is somewhat in trouble, although it can be fixed with appointment programming, a la what AMC Networks has done or what HBO has done,” Miller says. “Thus far, Viacom hasn’t come up with anything compelling.”

Doug Herzog, head of the Viacom Music and Entertainment Group, who first joined MTV in the 1980s, points to promising new shows such as Comedy Central’s Broad City and Spike’s Lip Sync Battle as evidence that the company can cultivate fresh talent. “That’s what this company has always done,” he says. “Like anybody who has been around a long time, you’re going to have your ups and your downs.”

Many Viacom competitors are attempting to strengthen their connections with young viewers and capture more of the ad dollars flowing online by acquiring multichannel networks, or MCNs—Internet companies that have amassed huge, loyal followings on YouTube. Last year, Disney acquired Maker Studios, a fast-growing MCN. Recently, 21st Century Fox purchased the digital advertising technology firm TrueX and invested in online video companies such as Hulu and Vice Media. Although Viacom explored deals with a trio of smaller comedy sites—The Onion, CollegeHumor, and Funny or Die—the deals went nowhere.

Viacom’s ability to navigate the upheaval in youth entertainment is riding heavily on the improved performance of its cable-TV brands. These days, networks are growing more reliant on creating lavish, big-budget, scripted series. Viacom has yet to create any new zeitgeist-defining shows on par with AMC’s The Walking Dead, Fox’s Empire, or HBO’s Game of Thrones.

MTV’s Friedman is hoping that will soon change. In late June the network premiered Scream, a slasher series based on the hit horror movies of the 1990s. It’s also developing a fantasy series called The Shannara Chronicles, adapted from the best-selling books by Terry Brooks. Shannara, which is being shot in New Zealand, promises to catapult MTV into the land of elves and dragons. “It’s a huge undertaking for us,” Friedman says. “I think our audience is looking for moments to be emerged in a different world—and to put down their phones.”

On a Tuesday evening in April, a crew of MTV personalities strolls to the front of Manhattan’s Beacon Theatre. Bursts of febrile music bounce off statues of Greek goddesses flanking the stage. The performers are here to kick off the network’s annual “upfront” presentation, designed to convince a gathering of soon-to-be-inebriated media buyers that MTV remains the best place for brands to woo American youth.

Gazing out over the marketers, Carly Aquilino and Nessa Diab, a pair of comics on an MTV talk show called Girl Code, offer a word of warning. The rapidly expanding universe of youth entertainment, they explain, is rife with copycats. “All the TV networks want to be digital, and all the digital guys out there, they want to be us,” Aquilino says.

“All those MCNs telling you TV is dead?” Diab says. “Yeah, they’re in our offices every day trying to get their shows on MTV.”

Aquilino says that in 2014, MTV was named the No. 1 youth brand in the world—by whom, she doesn’t say. The only thing holding back broader acknowledgment of MTV’s dominance, she says, is the industry’s inability to accurately gauge it.

For the next hour, MTV pours on the swagger. At one point, an executive onstage gives thanks to Dauman. For one brief moment, the spotlight catches the diffident CEO, who’s watching from the balcony. Dauman rises out of his seat, reaches his arms skyward in a triumphant salute, and blows the ad world a celebratory kiss. 

— With Chris Palmeri