Barry Diller is waiting for the right time to say, "I told you so."
news.com
June 3, 1999, Barry Diller
Spinning Web tales
By Jim Hu
Staff Writer, CNET NEWS.COM
Barry Diller is waiting for the right time to say, "I told you so."
This consummate "old-media" deal maker has maintained a firm--if not stubborn--belief that the Internet economy is founded largely on smoke and mirrors that have wowed investors into propelling Internet stocks to illogical heights. And Diller is more than happy to point out the emperor's new clothes.
But it was this stubbornness that led to a showdown during his ultimately unsuccessful bid to acquire Web portal Lycos. Diller convinced Lycos that it needed a long-term strategy that would drive traffic from its television properties such as USA Networks, the Sci-Fi Channel, and the Home Shopping Network, into Lycos. From Lycos, users would be able to easily purchase goods and services from USA's other Web properties, such as Ticketmaster-CitySearch.
While the deal sounded good on paper, Net investors thought otherwise. Moments after Diller's USA Networks announced its bid for Lycos, the portal's stock plummeted. Riding off the company's 52-week high, investors could not warm up to what they saw as Lycos sacrificing its independence for a complex deal with USA. Despite all the enthusiasm executives from both sides tried to pump into investors, the companies faced the inalienable truth that the Web was not ready for this deal. Instead of sweetening his offer, as many urged him to do, Diller scrapped it.
Those familiar with Diller say the structure of the Lycos deal underscored a common theme in his approach to business: be opportunistic, find ways to build alliances between businesses, and focus on the long term. Those close to him remark at his talent in combining weaker standalone businesses to create stronger ones. This was evidenced when Diller married Ticketmaster Online to CitySearch, or back when he combined his cable properties with the Home Shopping Network.
Diller's business acumen was sharpened by his self-made rise in the entertainment industry. From his days working in the William Morris Agency's mail room to his tenure at ABC where he invented the miniseries, to heading Paramount, and then serving as Rupert Murdoch's right-hand man in running Fox, and beyond, Diller had trampled a 30-year path by unconventional means.
As an individual, the word "complexity" pops up frequently. William Shawcross, author of a Rupert Murdoch biography titled Murdoch, described Diller as a complexity fueled by passion. According to Shawcross, Diller is a "special kind of Hollywood creature. Aggressive and touchy, he could be both charming and psychologically overbearing. Powerful motorcycles, heavy skiing, and Democratic Party politics were his style."
It is passion that he demands, and it is his own passion that many who work for him respect and fear. "Killer Diller" is notorious for taking employees to task if they do not perform up to his standards or match his level of intensity. For example, Steven Chao, currently head of programming for USA Networks and the Sci-Fi channel, recounted for Fortune an incident in which Diller narrowly missed Chao after he threw a videotape at him during one of his tirades.
Many who deal with him also find him uncompromising, and unwilling to take "no" for an answer. Some have said nothing angers him more than employees who shower him with flattery or pad their shortcomings with excuses.
Despite his failed efforts with Lycos, Diller remains enamored with the Internet and its potential. In fact, he admits that he loses sleep thinking about it. But whether the Net accepts his courtship, his way of thinking, or his hard-nosed approach to inking deals that rest on long-term growth instead of short-term premiums are issues Diller hopes will be resolved when the Web bubble bursts.
CNET News.com caught up with Diller in his Ticketmaster office in West Hollywood, California, last week on a day after the Internet sector took a hit.
CNET News.com: After scrapping your merger with Lycos because of tepid investor response, are you jaded by the Internet and what it has become?
Diller: My enthusiasm for this revolution, which is what I think it is, is intact. I still believe, though, that you have to do the things that create actual, real businesses. They may not be here today, but the same rules apply, which is you have to impose your will to develop a business over a period of time that is in fact a business. My observation of, certainly not all of it, but a good deal of what's called "business" on the Internet isn't, and never will be.
Any examples of that?
No! I don't want to hurt people.
But you know, they're going to get hurt enough, I think, over time anyway. The thing that amazes me is that people in these businesses--particularly
the ones that are public--these people spend 50-plus percent of their time in public relations and in conferences and things having nothing to do with going from A to B to C to D, the kind of terrible, hard work that is engaged in actually developing a business.
So my only issue is that what's perverted this is all of this paper wealth that has been created. A lot of people have cashed it in different ways over the last period, trading in and out of things, etc. I think that's inherently unhealthy on many, many levels in terms of the development of a business. It's unhealthy for the people in the business because they get paid before they've developed the business, which makes their long-term zealotry for the activity dim. The ability to keep people engaged in an Internet enterprise is almost impossible because the moment you've taken something public and people are vested, they say, "Thank you very much. We're gone now."
What did you learn from your Lycos experience?
What I learned out of Lycos was obviously that the situation was unlike most situations that I've had any experience in. Often times when you've announced something or tell somebody that you're doing something, they're skeptical, they reserve judgment. Mostly their skepticism says, "It can't work, it won't work. It's terrible." But then they listen or they wait for developments and you have the ability to explain it to them. And if they hear something that convinces them, then they react positively.
In this transaction, nothing we said made any difference whatsoever. There was no space between the ears. What went in one ear was "no premium"; what came out the other ear was, "You don't get it, we're day traders. We're not interested in your arguments for the development of the business…so the hell with you!" Literally the only other thing that was said was that the opposing major shareholder, CMGI, went from cheerleading the deal to then trashing the deal in 48 hours. Once that happened, the drama was enjoined, there was nothing else to do. |
