The Future is Online
Barry Diller, the billionaire media mogul who chairs the IAC/InterActive Corp. (IAC) web conglomerate, has had a pretty good decade. For the 10 years ending in 2010, his compensation was approximately $1.14 billion from IAC and Expedia.com, making him the second-highest-paid public company executive in the world. He has only Larry Ellison of Oracle to envy, but even ocean racer Ellison doesn’t have the keys to the world’s largest private sailing ship. Diller not only owns the $100 million 305-foot Eos, he pays $2,000 a day to dock the three-masted craft at Chelsea Piers in Manhattan.
Diller is now 69, and even if he docks 10 yachts in Manhattan, he isn’t going to run through a fortune estimated by Forbes at $1.6 billion. But Diller (who declines to confirm that Forbes is right) has been making deals for almost a half century, and he has no plans to give that up in favor of a richly upholstered armchair. “Retirement? No,” he tells SUCCESS. “I would only retire if I no longer felt engaged. It’s about still being curious, and that hasn’t stopped for me. I hope it won’t.”
Diller’s career reveals a certain restlessness, which compelled him to seek new challenges after reaching pinnacles in the television and film businesses. He wasn’t the earliest Internet player or an innovator in the space like Mark Zuckerberg. But he jumped in decisively and today IAC owns some solid performers in the space, including Match.com, Ask.com and Citysearch.com. For media sizzle, if not short-term profits, he has both Newsweek and The Daily Beast.
The move to the Internet makes total sense for a programmer like Diller if you agree with his contention that the ultimate destination of family viewing is online. “We’re really at the beginning,” he tells us. “The Internet consumers use may seem fairly developed, but it’s only about 15 years old, and it’s just now getting the bandwidth that allows for the transfer of large files of rich data and video. It’s infusing every area of our lives, and commerce on the Internet is quickly becoming the natural order. But, in terms of its technological development, it’s still in its infancy. People subscribed to cable to get 100 channels or whatever it was, but the Internet is infinite.”
In Diller’s vision, Americans surfing cable today will trade their remote for a mouse, and troll through huge troves of Internet-based high-def content. “Large-format screens won’t be Internet-connected for three or four years,” he says, “but eventually they will be, and that means much more viewing by appointment, much more a la carte television. Modern tools will allow you to search for what you want and have it brought to you instantly. On cable, that means a lot of ‘creative destruction’ as television becomes increasingly delivered over the Internet rather than over coaxial cable.”
Diller’s view that traditional TV is an increasingly spent force—a conclusion he reached before most other people—helps explain his early move to the Internet. Time may validate that view but, at least so far, making money from online service businesses (which fill the IAC portfolio) is easier than monetizing Internet-based entertainment.
Despite the maxim that information wants to be free, Barry Diller’s Internet won’t be. He thinks we’re moving—and soon (by mid-decade)—to an online universe where most quality content is behind some kind of pay wall, that no-cost content is “an accident of historical moment,” and that big sites will follow The New York Times in demanding a subscription price for their intellectual property.
Diller is on the board of the Washington Post Company, but he says that the newspaper’s future would be “dim” if paper were its only medium. “The future is much brighter if you define the Post as an organization of great expertise and talent in national and international news,” he says. “It’s the newspaper of record, and its information can be delivered in a number of ways. With the wide availability of online information it no longer has a monopoly, but that doesn’t mean it can’t compete.”
A Restless Climb
Diller’s career arc is well known, but here are the bare bones. Eager to get to work, he quit UCLA after one semester (a route shared by fellow impatient executives Steve Jobs, Bill Gates and many others). He famously started out in the same William Morris Agency mailroom as his great friend and sometime rival David Geffen, then hopped to ABC. He was negotiating broadcast rights for features at the age others were graduating from college, and gets credit for launching the ABC Movie of the Week. It was a meteoric trajectory, but Diller’s career was just beginning.
Back in the mailroom, Diller may not have seen how far he’d go, but he says that then and now he relies on the same inner compass. “The only thing anyone should pay attention to, entrepreneur or not, is what intrigues them, what they’re passionate about,” he says today. “That will lead to something interesting, at least to yourself, maybe not to anyone else. But that’s the first stage of any kind of value-added development.”
“Follow your heart” may not work as career advice if your abiding interest is in collecting old subway tokens, but Diller was always fascinated by movies and television. “When I was starting out in the 1960s it was a different time in the extreme,” he says. “The thing I was interested in and curious about was the world of entertainment—they didn’t call it media then. I was lucky enough to start out on a broad path, and I found my future. The world was less complex, but I don’t think it was harder or easier—it just was what it was. What I had then was the same fluency that a 4-year-old now has in walking up to a TV, putting his hand on the screen and swiping it—because that’s how he thinks it works.”
Diller was chairman and CEO of an on-a-roll Paramount Pictures from the mid ’70s to the mid ’80s, at a time the entertainment divisions turned out everything from Cheers to Raiders of the Lost Ark. But in 1984, after wanderlust called again, he jumped to take the reins at Fox and helped shape The Simpsons.
There was also a stint at MCA Universal, when that company was briefly controlled by Seagram’s heir Edgar Bronfman Jr., now an IAC board member. In a complex series of transactions, Bronfman—apparently convinced that only Diller could steer the entertainment giant to success—offered his new hire a rich package of incentives. With Bronfman’s help, Diller was able to acquire the No. 1 primetime cable channel, USA Network, for himself in 1997. He eventually sold it back to MCA Universal, then under the brief control of a French company, Vivendi, for more than $10 billion.
But USA turned into a cash cow worth twice what Vivendi paid, and Diller’s deal—seen as a windfall then—no longer looks quite as savvy. He’s the first one to admit it. “USA Network is making such a huge amount of money on its dual revenue stream [from cable operators and advertisers],” he lamented last Sept. 16 during the Paley Center’s International Conference. “We undersold it by $5 billion!” In hindsight, Diller might have become even richer than he is, but he became a billionaire anyway.
Diller has made missteps, but he doesn’t look back in anger. He tells SUCCESS, “I have endless regrets—those happen every hour—but they’re little blips that are not of much concern. You might realize you missed something, but in the end you go where you go. I don’t care about what I didn’t do; only what I did.”
Diller is nothing if not outspoken, and that’s one source of regret. He sharply criticized AOL for its handling of conflict-of-interest charges involving TechCrunch founder Michael Arrington, but now says, “I wish I’d been more politic about that.” And with Ask.com, he has Google in his sights. Diller tells us, “Given its sway over everything related to search, it’s inevitable that Google would abuse—well, maybe that’s not the word I’d apply. But Google absolutely needs to have its business monitored so it does not in fact become a dictatorial monopoly. That regulatory oversight is beginning now, and it’s good.”
What’s clear is that Diller is a flamethrower and a risk-taker, but he doesn’t—and can’t—anticipate every trend. “We all make mistakes, even the best of us, and Diller is one of the best of us,” notes Scott Kurnit, another entertainment executive who’s succeeded in the online world. Kurnit sold About.com to Primedia for $690 million, after a career at Viacom and Warner, and an early foray into online at Prodigy. (Primedia, in turn, sold About.com to The New York Times.) Kurnit served with Diller on the board of Brightcove, a pioneering online video hosting company. “He was a fantastic board member,” Kurnit says. “He made the transition from flat media into dimensional media.”
The Move Online
Through the 1980s, Diller had followed a path worn smooth by generations of studio executives. But in 1992, Diller took a step few would have anticipated—buying a $25 million stake in the QVC teleshopping channel.
QVC may be a bottom feeder and its fare is nobody’s idea of award-winning programming. But it’s clear that Diller liked its consistent, high-growth revenue model because after leaving QVC in 1995 he bought the Home Shopping Network and invested in the industry-controlling Ticketmaster Group. These acquisitions are echoed in Diller’s current Internet holdings—although the portfolio includes Newsweek and The Daily Beast, its base consists of unglamorous but profitable businesses that provide consumer services. For the shareholders, it works.
Former Adweek editor Michael Wolff, author of The Man Who Owns the News , a critical biography of mogul Rupert Murdoch, nonetheless has nice things to say about Barry Diller. “Over the years I’ve gotten to know Barry very well. Of the media CEOs I’ve encountered, he’s by far the smartest and most interesting. That is, he’s innately curious and continually searching. He is about what interests him. So no doubt he’s missed opportunities—who among us hasn’t? But I don’t know anybody who understands the business as well as Barry, or who seems to have had as much fun in it.”
Diller likes to say his IAC businesses are throwing off 20 percent growth, and what more could the Street ask for? Diller does get credit for watching the bottom line. Goldman Sachs analyst Ingrid Chung follows IAC and recently upgraded the stock, partly because she sees up to 50 percent of the company’s revenue as recurring. And she notes that IAC has bought back more than 30 percent of its share base in the last two years—“and still has more than $600 million in net cash on hand.” That huge bank balance will help IAC weather downturns. Chung also sees a “significant opportunity” for the company in turning around its recent acquisition, Meetic, Europe’s largest online dating service.
Colin Gillis, who follows IAC for BGC Partners, a diversified financial services company, agrees that Diller is a good money manager. “He’s done an excellent job in maintaining cash flow,” he says. Gillis adds, “He’s quietly going private and he’s knocked out a third of the shares.” That strategic move has bolstered IAC’s stock price, and with so much cash on hand Diller can definitely afford to do it. Gillis gives Diller’s Internet portfolio a mixed review, pointing out that some IAC holdings are “not top-tier properties on the Internet, except for Match.com. CitySearch, for instance, is not on the cutting edge of local.”
But it’s not just about buzz. PopularScreenSavers.com may not be the stuff from which dreams are made, but it’s far more likely to make money than The Daily Beast (which can only boast of “reduced losses”) in a 2011 IAC results report.
So IAC is well-positioned. But Diller’s career was fired by a love of the entertainment world, and we wondered how closely he still follows it. Asked what film he would have green-lighted if heading a studio today, Diller paused for a long moment before citing the critical and box-office success The Help. Did he like it because it was successful? “The point is that it was successful for me, and my interests are not out of the mainstream,” he says with a laugh. At this point in his career, Diller seems more interested in how movies and TV get delivered to your living room than in producing content again. “The movie business is giantly uninteresting,” he told his audience at the Paley Center.
Diller lives in Manhattan with glamorous fashion-designer wife Diane von Furstenberg, owns a 305-foot yacht and presumably spends more time at the Metropolitan Museum and other art venues he endows than at NASCAR races. But his résumé is studded with TV shows like Laverne & Shirley and movies like Beverly Hills Cop—both huge hits. At USA Network, he wasn’t interested in creating a schedule that would win him backslaps at dinner parties. He hired Steve Chao as his chief programmer, a guy whose irreverence got him fired at Fox, who prided himself on meat-and-potatoes fare like Cops. If Diller wanted highbrow, he wouldn’t have hired Chao. Pragmatism rules—today, Diller’s company owns CollegeHumor.com.
Last year, Diller stepped down as CEO of IAC after buying out the company’s largest shareholder, John Malone’s Liberty Media, in a somewhat acrimonious dispute. Diller remains the company chairman. Although he said at the time that the company “needs a full-time, aggressive and aspirational executive,” that doesn’t mean Diller’s left the building. “My work hasn’t changed,” he tells us. “I still devote much of my time to IAC, working on strategy, acquisitions and areas of investment for the company. But I have varied and multiple interests, and there was much that I thought needed to get done that I couldn’t do as chief executive.”
Among those interests are the Diller-von Furstenberg Family Foundation, which has given an amount “in the millions” to the Central Park Conservancy, Heart of Los Angeles Youth, the Natural Resources Defense Council and other organizations. “There are so many worthwhile things, and a lot of your time is spent deciding what to fund,” Diller says. Asked what recipient most engaged him, Diller singles out The High Line, an elevated park in Manhattan. “I’m personally interested in public spaces and public art.”
Diller is plunging into philanthropy, but isn’t likely to walk away from business as decisively as, say, Bill Gates. He’s not summing up and writing an autobiography just yet, which may be why he paused again when asked about his proudest achievement. “I’ve never given it a thought,” he says. “I’ve been lucky, and there have been a lot of things I’ve been able to do. I’m not proud of everything, but I’m proud of much of it.”