Barry Diller has become Warren Buffett. This is quite a remarkable transformation: to emerge from the swamp of the entertainment industry as a preternaturally savvy, vastly successful, even beloved businessman. The Oracle of Coldwater Canyon.
In fact, I don’t think anyone ever before has made the leap from Hollywood, that inversion of Main Street business ethics, that primordial Enron, to blue-chip, chamber-of-commerce, I-always-make-money-for-my-partners status.
Just as he has gotten free, he is, however, being pulled back again.
Jean-René Fourtou, the new chairman of Diller’s nominal employer, Vivendi, where Diller is the part-time head of Vivendi Universal Entertainment, was in Hollywood last week. Fourtou was undoubtedly trying to entice Diller into some event (complicated financial deals are often called events, as in seismic events) that would give Diller more control over the enterprise and put more money into Vivendi’s vastly depleted coffers (depleted partly because Jean-Marie Messier, Vivendi’s recently deposed architect and chairman, was handily outmaneuvered by Diller when he bought Diller’s USA Network properties at an extravagant premium).
Will he do it? and Does he want to do it? are the big media questions of the moment (with not necessarily the same answers).
I have known Barry Diller for almost 25 years now. He was in his thirties when we first met – when he threatened to kill me if I didn’t write what he wanted written – and, by nearly all assessments, on a fast track to take over the entertainment world. He’s 60 now – and still on that same fast track.
What is different is that while he has still not achieved his obvious goal, he’s achieved this other thing, this mythicness, this invincibility, this all-knowingness – and he’s achieved this, his legendariness (which has, not incidentally, allowed him to make billions), precisely because he failed to achieve the other thing.
Barry is one of the luckiest losers in history.
He must be asking himself: Do I really want to succeed now?
It’s an unlikely route to business ascendancy to keep losing your job and to keep blowing the deals you try to make. Interestingly, though, this has made Diller, in an age of excess, seem like the last prudent man – and a not unheroic one.
There was the widely reviled Paramount chairman Martin Davis who, in 1984, ousted Diller as head of Paramount Pictures. Davis then went on to make a run on Time Inc. (as it tried to buy Warner Bros.), compelling both Diller and Sumner Redstone to make a run at Davis’s Paramount. At the eleventh hour, Diller lost his nerve for raising his bid, and lost Paramount to Redstone. But this had the effect of gaining Diller the reputation of being the only media mogul never to overpay for a media company.
Then there was Diller and Murdoch. Diller is one of the few people ever to work for Murdoch – as chairman of Fox – to achieve some kind of parity with the boss. He didn’t submit. Arguably, Murdoch needed Diller more than the other way around. Diller even openly ridiculed Murdoch’s politics. And while he didn’t get Murdoch to make him his partner – and left as a result – he probably was the only person Murdoch ever really considered making his partner.
Then there were CBS and NBC, both of which he tried and failed to buy. There was QVC, which he got control of but then got forced out of. There was AOL, which he considered buying (but then decided was too expensive, looking chumpish when it rose wildly in value – and, of course, looking prescient now). And there was Lycos, which he tried furiously to buy, and if he had (again, he refused when push came to shove to raise his bid), he would have been, today, a goat.
Instead, he waited around and, whether because he was cowardly or because he was smart, did a series of comparatively low-risk deals (the Home Shopping Network, the USA Network cable channel, some UHF television stations, the Sci-Fi Channel, some independent movie companies, Ticketmaster, and CitySearch) until opportunity knocked.
Or, in another metaphor, he was a spider, weaving an intricate web, into which Edgar Bronfman Jr., who had just bought Universal, fell.
Diller, in the time-honored business tradition of parting a fool from his money, bought an interest in Bronfman’s television properties for far less than it was worth. In part because of this bad deal, and the great ridicule it exposed him to, Bronfman, in order to salvage some portion of his family’s fortune, was forced to sell Universal to Messier’s Vivendi. Then Messier, displaying all the traits of the way-out-of-control mogul that Diller himself has resisted displaying, bought back from Diller, for far more than they were worth, those same television properties.
This made Diller billions and put him in the catbird seat at Vivendi Universal Entertainment – which is where he sits now.
The point is, he did the thing really smart businesspeople are supposed to do – that is, bide their time and wait for it to come to them – as opposed to what media moguls invariably do, which is, at vast cost and assuming great risk, go out and get what they want when they want it.
Then there is the toughness thing, which in terms of the Diller legend should not be underestimated – Barry, evidently lacking the need to be liked, is a very scary guy. It is surely this very lack of sentiment that makes a good deal-maker. (Warren Buffett, while not as surly as Diller, also has a marked lack of sentiment – cutting his children out of his will and the like.) You just have to be cold enough, or disconnected enough, to walk away from any deal (no matter how much glowing publicity you’d get for doing it) except a sure deal – which almost no other media person has been able to do.
But here Barry is again, looking the deal of a lifetime in the eye.
It’s his not to do.
There’s a desperate seller. And in this season of media discontent, there probably aren’t other eager buyers. What’s more, Diller runs the company already (in fact, he knows more about the company than the seller knows).
So just say yes, Barry, and you’ll have for yourself a major studio that happens to be performing pretty well, some of the best cable properties in the business, and the biggest music company in the world (the music company is not part of Vivendi Universal Entertainment – but the French would love to fold it into the deal and be done with America in one fell swoop). Then you buy NBC and you become, finally, who you are supposed to be – a top-of-the-heap mogulissimo.
On the other hand, you weren’t born yesterday.
Even with the prospect of DVDs offering a few good years, the movies are a going-nowhere business; it just costs too much to make feature films and prime-time television. Also, the people are unpleasant (true, Diller has in some sense invented this model of unpleasantness). As for cable, even good cable, it’s advertising-driven – and nobody is betting on the advertising business. And music – forget about that.
But for the right price, how do you not do it? How do you resist? For the right price, isn’t everything worth it?
Well, let’s try to look at this through the eyes of Barry Buffett – a man who is no longer just a mogul wannabe but (just assuming) the smartest, canniest, most astute business guy there ever was (by that measure, of course, even Warren Buffett is not Warren Buffett – but play the game). Let’s cast as cold an eye as has ever been cast on a deal.
What you know, if you’ve breathed the Sun Valley air of other media moguls, is that no matter how good the deal is, no matter how great the opportunity might have seemed to be, if you take control, if you get what you want, you get stuck. The bigger the media company, the more public the failure (and all big media companies, partly because they are so public and partly because they are so big, fail).
It’s a tar-baby enterprise.
In the Buffett model, however, you create a remove between yourself and the businesses you own – let somebody else get stuck. You want to buy at a price that is low enough so that you can’t lose, and you want to be distant enough so that you are never in danger of losing your cool (you never, ever make the mistake of thinking any one business is all that much fun, or any imputed glamour all that real). You don’t ever want to risk damaging your legendariness – which is your added value.
There is, too, the John Malone model (which Diller would know very well – Malone has been his partner on various deals). It’s similar to the Buffett model and just as unsentimental, but it has a slightly different spin. You don’t try to take over – you insert yourself opportunistically and annoyingly (your annoyingness is, in a sense, your added value). TCI, Malone’s cable business, was in the middle of everything (it was a crummy system, too – which AT&T would painfully come to discover); you always had to deal with him. He was like the party boss or ward heeler – but he carefully avoided any pretense or delusion of wanting to be the elected official. His power was in the back room. In this, there may be similarities between Diller’s USA Interactive (his system of online shopping networks) and Malone’s TCI. Malone saw cable as the key infrastructure and transforming agent of eighties and nineties media, and it’s possible that Diller sees his transaction model – the ability to sell everything from mood rings to airline tickets to downloadable movies – as the next.
Anyway, what you want is lots of leverage to help you do what you want to do; what you don’t want is to be left holding the bag.
Diller, for instance, clearly left Messier holding the bag (there was that remarkable news conference when they announced their deal, with Diller waving the gathering to a close as Messier was happily answering questions). Diller cozily fit himself into the Vivendi mess, gaining all of its benefits and suffering none of its consequences. Messier was just a passing dupe.
Which is, of course, where young Edgar Bronfman Jr., possibly the stupidest person in the media business, might come back in.
It seems entirely reasonable to imagine a scenario in which a deal is done with what remains of the Bronfman fortune, for which, as partial recompense, young Bronfman again gets to become an official mogul, and Barry steps aside but, for his counsel and stature, receives certain entitlements, which, of course, will rise in value as the media business itself continues its rapid decline. Barry, in other words, plays it sharp.
Unless you never get over dreaming about being a mogul. There actually would be some comfort here in finding out that Barry is really, in the end, a sentimental fool.