Barry? The Guy Is Golden

A golden image is precious in an era when executives may live and die by the colorings of the media. Image can evaporate with a single stock trade: Witness the woes of Martha Stewart, when the government questioned her sale of shares in a friend’s biotech firm.

Others might take a drubbing for even relatively slight miscues. Thus a firestorm greeted retired General Electric Co. Chairman Jack Welch last year when his corporate perks were disclosed in a bitter divorce battle.

And then there’s Barry, the mogul who’s so well known that he’s on a first-name basis with Wall Street and Hollywood. During a career that has spanned two decades, Barry Diller has been at the center of some of the entertainment industry’s most sensational and brutal deals, reputation beautifully intact. And never has the spotlight shone hotter on Diller than now, as he jockeys to sit atop Vivendi Universal’s U.S. entertainment empire, which may be spun off into a separate company.

Diller is seen by many in the financial community as the only man who can rescue the star-crossed merger of Paris-based Vivendi, formerly a water utility, with some of the richest assets in show business -- Universal Studios.

That Diller, who only a few years ago was cobbling together his home-shopping business, is playing a leading role in the future of a global corporation 10 times the size of his own USA Interactive is surely a tribute to his business acumen. But there’s more at work here.

Among his peers, Diller has been arguably the best at capitalizing on a reputation for deft brilliance, even while stumbling into his share of trouble. Indeed, Diller and his corporation have seen their sizable investment in Vivendi’s U.S. entertainment group jeopardized by the French company’s turmoil. One problem is the firm’s massive debt, worsened when Diller sold Vivendi the same TV assets he bought from the company only a few years before for less than half the price. Universal employees are chafing under Diller-mandated cost cuts necessitated by that debt.

Vivendi shares have dropped nearly 70% during Diller’s involvement to about $18 a share. Shares in USA Interactive, Diller’s company, also are down more than 30% from their peak of last spring because of investor unease about some of USA Interactive’s online operations and concern about Diller juggling jobs as head of USA Interactive and co-chief of the Universal entertainment group.

Still, he remains golden with many of those who control the flow of investment funds.

“He’s considered a winner and a moneymaker for investors,” said Dennis Leibowitz, a money manager with New York’s Act II Partners, an investor in USA Interactive. “People don’t know how much is luck and how much is brilliance.”

Diller has weathered repeated career bumps and strategic reversals through skilled management of the media and, still more, by projecting a sense of destiny that seems to override questions about performance.

“I’ve made gargantuan mistakes,” Diller said. “For me, luckily, none were a killer.” One of those involved his words this month about business rival Marvin Davis, who is bidding for Vivendi’s U.S. entertainment operation. At an investor conference, Diller called Davis a “fat man” who had as much chance as a luncheon waiter of succeeding in his bid. Diller later apologized for the remarks.

On more than one occasion, such withering barbs have been described as Socratic rather than abusive.

Diller-mania has become a volume business of late. A survey of the Nexis database, which compiles print and electronic sources, indicates that Diller was mentioned 2,139 times last year. That’s more than triple what he logged in 1996, when the executive was struggling to combine his relatively modest broadcast and home-shopping operations into what was then known as HSN Inc.

Few would dispute that Diller has scored some stunning successes in a business career that began in the William Morris Agency’s Beverly Hills mailroom in 1961.

A UCLA dropout, Diller worked his way through executive jobs at the ABC network, where he was credited with pioneering the movie of the week. Later, as chairman of Paramount Pictures, he rescued the studio with a string of hits including “Raiders of the Lost Ark” and “48 Hrs.” He followed that by becoming the founder of the Fox network under Rupert Murdoch.

After leaving Fox in 1992, Diller became involved with the QVC home-shopping network, controlled by cable mogul John Malone. Again changing course, however, he soon assembled an e-commerce and media empire of his own around the rival Home Shopping Network and other properties. The resulting firm, USA Interactive, now has a stock value of $10.3 billion, and its revenue of $5.3 billion placed it at 329 on Fortune’s 2002 list of the top 500 U.S. corporations.

“He understands better than anybody what might be the big idea for the decade -- the transaction potential of the Internet,” Boston money manager Larry Haverty said.

Diller traces his lofty status in the corporate culture to a single story -- a profile of him, Michael Eisner, Jeffrey Katzenberg and other Paramount executives that ran in New York magazine July 30, 1984.

Written by former New York Times correspondent Tony Schwartz, the article was titled “Hollywood’s Hottest Stars.” The story opened the door to a new kind of coverage, one that elevated the personalities and machinations of industry power brokers to near-mythic proportions.

Diller seemed “the logical guy who bridged those worlds of celebrity and business and commerce,” said Schwartz, co-author of the upcoming management book “The Power of Full Engagement.”

For Diller, the story was particularly important because it seemed to validate his extravagance and aggressiveness as the kind of behavior expected of a Hollywood titan.

“Do we have fights? Yes,” he was quoted as saying in the article. “But I don’t think that makes us arrogant. I think it’s our right, our obligation. It is our money.”

Shortly after the story ran, Diller left Paramount to run 20th Century Fox -- mocking the article’s central point that the studio prospered on complete trust among its top executives.

To some extent, he is cut some slack by otherwise tough-minded journalists because he is so readily available to them. Diller is known for returning his media calls, and he has never entrusted his image to the highly paid handlers who sometimes promote his peers. “No. No. Not ever,” he said recently, when asked whether he had ever used a public relations consultant.

Once on the phone, he is apt to cut careful bargains to help protect a reputation for eloquence. (The only way he’d agree to be interviewed for this story was if he had the right to correct his grammar, though not retract his quotes.)

Here’s how an unvarnished Diller can sound: CNBC’s Maria Bartiromo asked him to explain his emerging role at Vivendi last year: “I’m -- I don’t think I’m, frankly, anybody’s wild card. I mean, I know that I -- I guess I stir up a little speculation here and there in different quarters for different things, but it -- but -- but -- that’s somewhat historical.”

Diller’s skill in handling reporters owes much to his many ventures, successful and otherwise, in the news business.

The mogul (who sits on the Washington Post Co. board) was an investor, for instance, in Brill’s Content, a media watchdog magazine that folded two years ago.

“I used to run stuff by him. I’d e-mail him covers and designs when we were launching, and he was really helpful with all of it,” said Steven Brill, the magazine’s founder.

Brill said he met Diller in the 1980s, when the executive, still at Paramount, was eager to buy U.S. News & World Report.

“He was fascinated by the magazine and what he thought we could do with it,” said Brill, who declined an offer to run the magazine.

One of Diller’s proudest achievements in that era was to push Paramount into the news business with “Entertainment Tonight,” a syndicated TV program that he saw as Hollywood’s “on-air paper of record.”

Later at Fox, Diller, by his own account, devoted an unusual amount of time to the minutiae of news management at the company’s TV stations.

“I became editorially involved in all of them,” he said. Fox owner “Rupert Murdoch used to kid me all the time, because I spent so much time trying to learn how to do hard TV news.”

By the mid-1990s, Diller owned a small string of TV stations, which had come with his Home Shopping Network acquisition. According to one former company executive, the mogul poured $60 million into a misguided attempt to create 18 hours daily of news-dominated local programming for the group.

Although the news enterprise failed, Diller sold the stations at a handsome profit, preserving his reputation as a visionary with impeccable instincts.

Indeed, the sense that Diller sees something just over the horizon has become key to his sheen, his mistakes and directional shifts notwithstanding. “With Barry, it’s always, ‘One year, something big is coming.’ People get hooked on this sense that Barry’s got a plan,” one former associate said.

Writer Ken Auletta experienced the power of Diller future-think in 1993, when he wrote in the New Yorker that the executive had left Fox to range across the business landscape in search of the next great media bet. Diller fixed his sights on interactive television in the form of the QVC shopping network, which, according to one associate, Diller believed would soon be as big as Wal-Mart.

“I’ve never gotten a bigger response to a story,” Auletta said. “The response was essentially, ‘We’ve got to read this because we’re going to learn about the future, and Barry Diller’s our vehicle for doing that.’ ”

But while focusing on interactive TV, Diller missed the first great wave of Internet commerce, which built such giants as Amazon.com and EBay. And his dismissive remarks about the possibility of owning a television network -- “Even as I say it, I bore myself,” he said -- were soon made to look foolish by his own failed bid for CBS.

Diller dismisses any notion that his shortcomings have been underexposed. “I’m trying to think of anything that I’ve done that I’ve gotten away with. I don’t get the benefit of the doubt,” he said.

Diller’s fans appear bent on seeing even the tangle at Vivendi as a plus for their favorite mogul. And that includes the former chief executive of Vivendi Universal, who was fired as his vision drowned in the debt of merger.

“He has a vision. He’s straightforward, and when he wants something he gets it done,” Jean-Marie Messier said of Diller. “He’s a convincing man.”

Diller, for his part, is realistic enough to know that even the brightest aura can be fleeting.

“There is a natural, or an unnatural, rhythm to things,” he said, in a slightly polished quote. “Many people have said, ‘I’m not as good as you make me out to be, but I’m not as bad either.’ ”

*

(BEGIN TEXT OF INFOBOX)

Rough spots

The stocks of several companies with Barry Diller ties have been hurt by operating uncertainties and a soft market. Here is a look at Vivendi Universal and USA Interactive, where Diller has his biggest handprint:

Diller was born in February 1942 in San Francisco but was raised in Beverly Hills. He dropped out of UCLA after a few weeks and got a mailroom job at William Morris Agency.

1964: Promoted to full talent agent at William Morris.

1966: Joins ABC programming staff.

1969: Introduces ABC “Movie of the Week.”

1973: Made vice president for prime-time programming.

1974: Becomes chairman and CEO of Paramount Pictures.

1983: Named president of Paramount’s Entertainment & Communications Group.

1984: Becomes chairman of Fox.

1986: Fox network is launched.

1992: Leaves Fox and later becomes chairman and CEO of QVC network.

1994: Loses takeover bid for Paramount.

1995: Takes control of TV station group Silver King Communications.

1996: Merges Home Shopping Network, Savoy Pictures and Silver King into HSN.

1997: Acquires control of Ticketmaster.

1998: HSN forms USA Networks Inc. after acquiring Universal Television, USA Network and the Sci Fi Channel.

2001: USA acquires controlling interest in Expedia.

May 2002: USA Networks sells its television and film assets to Vivendi Universal. Diller becomes head of the U.S. entertainment division at Vivendi. The remaining divisions are reorganized as USA Interactive.

July Vivendi Universal Chairman Jean-Marie Messier is ousted. Speculation swirls around Diller taking control of the U.S. entertainment assets.

November: Diller is given a broader role in Vivendi Universal, becoming co-chief of a reorganized U.S. entertainment group. Longtime Diller rival Marvin Davis makes a failed bid for control of those assets.

December: New chairman of Vivendi, Jean-Rene Fourtou, says he will follow Diller’s strategy for the company’s entertainment assets.

January: Davis renews his bid for Vivendi Universal Entertainment. Diller reportedly loses control of Universal’s music division. Diller is expected to continue talks with top Vivendi executives over the company reorganization.

Los Angeles Times

*

Researched by JOHN JACKSON / Los Angeles Times

*

Sources: Bloomberg News, company reports