Autumn of the Moguls

by Michael Wolff

  I, on the other hand, would theorize that what has happened at these companies is merely a reverse psychosis—the flip side of the same condition. We have just moved from the manic phase into clinical depression.

  At Vivendi, the company is now run, in effect, by the French government, depressed for half a century.

  At Bertelsmann, the company is now run by the guy who, until just before his surprise elevation, pressed the CDs.

  And at AOL Time Warner, you have in Richard Parsons a canny imitation of the walking dead.

  For argument’s sake, and in the interest of developing a method by which we might accurately predict the coming apocalypse of the media business, let’s assume that these men will not deliberately disassemble what has so irrationally been assembled. Let’s assume, too, that the hubris that created these companies does not naturally convert to reason—rather, it converts from mania to helplessness. In my model, then, these companies are now being run by men much less temperamentally suited to run them than even the overblown figures they’ve replaced. The situation has not gotten better; it has gotten worse (and less fun too). More chaos.

  The worst case, you have to figure, always gets worse.

  And yet, everybody who should have been running screaming into the night or hanging their head in shame would be showing up at Heilemann’s and Batelle’s and Rattner’s conference.

  11

  BARRY

  BUFFETT

  But then there was Diller, who surely would be one of the conference stars, and who seemed to transcend the calamity.

  He was the most unlikely and most respected of American business figures. He’d surpassed mere media and become a nearly deified business phenomenon—like Warren Buffett, the CEO of Berkshire Hathaway, with its forty years of double-digit returns, the oracle of Omaha, the most beloved business figure in America. Diller, too, had an almost avuncular Midas touch. The oracle of Coldwater Canyon. He was, against most sense and reason, beloved too.

  It was a remarkable transformation. 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.

  This was his accomplishment: After forty years spent rising to the penultimate reaches of the American media business—through Leonard Goldenson’s ABC, Charlie Bludhorn’s Paramount, Rupert Murdoch’s Fox, John Malone’s QVC, and now his own independent USA Networks (soon to have its name changed to USA Interactive)—he neither looked like a fool, nor a Queeg, nor as though he were engaged in a vainglorious last hurrah. He looked like a genius.

  He did not seem, unlike so many of his mogul colleagues, ineffectual, pathetic, empty.

  He seemed scary and full of portent.

  He was a threat.

  But not just a threat, not just a bully.

  Really, he had several themes going—it was a wacky, picaresque, modernist novel, worthy of Thomas Pynchon or William Gaddis:

  There was Diller as the preternaturally knowing businessman. Diller as thug and lounge lizard. Diller as the brilliant, creative, finger-on-the-pulse guy. Diller as consummate, gray-suit Wall Street financier. Diller as gay man—as gay icon. Diller as media contrarian and outsider. And Diller as once and future corporate media chieftain.

  It seemed that the people who really appreciated Diller were people who appreciated him as fundamentally… playful.

  Whereas the people who didn’t appreciate him felt he was fundamentally … cruel and deadly.

  It’s an unlikely means of business ascendancy to keep losing your job and 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.), eventually leading 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 in time, 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.

  After a much-publicized period of soul-searching in 1992, he took over the cable shopping channel QVC. The notion of home shopping as a reflection of Diller’s media genius—a spin most of all propounded by Ken Auletta in a New Yorker profile—goes a long way toward obscuring the fact that these were Diller’s wilderness years. Subordinates (not his biggest fan club) paint a comical picture: the ever-pampered Diller in a low-rent motel in West Chester, Pennsylvania, near QVC headquarters, or Diller bawling out the young woman staffer who teases him when he arrives at the new QVC office in Queens (“Welcome to Queens, Barry”), or Diller’s persistent irritation about being called the cubic-zirconium king. And in the end, he was effectively forced out of the company anyway (at great profit, of course).

  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 when it tanked. 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.

  There was surely something startling about seeing Diller in the middle of the Internet business: Could there be anyone less nerd and more showbiz than Diller? The parties; the cars; the planes; the celebrity posse; the power breakfasts, lunches, and dinners? (Diller had cut an uninhibited path for many years.) Could there be anyone with a more old-media-centric point of view? And yet, there was something oddly in character too. After all, almost everyone in the Internet business had “transitioned” out of another business and turned themselves—more or less overnight—into new-media seers. This was true of Barry as much as of anyone: He was a founder and leading light of the I-get-it-you-don’t school of management. And his was one of the great career shifts (a late-in-life one at that): From an exalted programming guy and talent coordinator to a finance, marketing, and technology wizard. He wholly remade himself—from showbiz cat to astute financier.

  I’d certainly love to know how he suddenly came, mid-career, to learn the ins and outs of corporate finance, how he went from partying with Warren Beatty to designing deals so artful and complex that analysts, investors, and principals alike are flummoxed. Lots of people would want to take that course.

  At any rate, instead of buying something for more than it was worth, 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, some independent movie companies, Ticketmaster, and CitySearch), a collection of media properties that either (1) are a hodgepodge that have no relationship to one another save for the fact that he can apparently afford them, or (2) are the basis of the first truly convergent media company, or (3) are just something you do to keep yourself occupied until opportunity knocks.

  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. And then, 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.

  Whereupon Messier, too, immediately fell into Diller’s web.

  Messier, displaying all the way-out-of-control mogul traits that Diller himself has resisted displaying, bought back for Universal from Diller, for far more than they were worth, those same television properties that Diller had bought from Bronfman and Universal before. In addition, Diller, as part of this deal, seemed to be left running Universal.

  And yet, obviously, this wasn’t entirely what Diller had in mind. He might have banked a billion, but he wasn’t ready yet for a retirement sinecure.

  Obviously, he regarded Messier as something just this side of a personal embarrassment; 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. But if you paid any attention to the deal, it was clear that Diller had gotten himself into the catbird seat: Messier’s deal to attract Diller into what was, in effect, part-time employment gave Diller effective control over the fate of the company—which was surely going to be worth something great to Diller.

  Still, it was all in the details. It was an almost old-fashioned, your-father’s-business kind of thing. That is, he did the thing really smart (or really conservative) businesspeople are supposed to do—bide their time and wait for it to come to them; wait for the opportunity to buy low and sell high—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.

  Diller watchers call this his “discipline,” which is related in various ways to his toughness.

  Now toughness is a not untypical mogul attribute. Moguls take a certain sort of enjoyment in not only taking advantage of someone else, but in humiliating them, too.

  But Barry’s toughness is either of a different order, or he is just tougher than even the toughest mogul. It isn’t toughness just for sport or pleasure, but an ideological toughness. I am better than you. At the heart of his toughness is a profound condescension. He doesn’t let one moment of anyone else’s weakness pass.

  “He won’t let you forget it if you drop your napkin on the floor,” Michael Fuchs—who, as head of HBO and of Warner Music, was himself a tough mogul—told me once.

  It’s the way to keep a certain distance. It may be a gay thing—the sneer of the outsider.

  At any rate, Diller sucker-punched Messier every which way but loose—and eventually loose too.

  And suddenly, at the relatively advanced age of 59, Diller seemed finally in position to get what he wanted: control of a media empire.

  This included a major studio, some of the best cable properties in the business, and the biggest music company in the world. There was, too, a desperate seller, and in this season of media discontent, probably not a lot of other eager buyers. And, what’s more, Diller already ran the company—meaning that when it came time to do the deal to buy the company he would know more about the company than the seller knew.

  You do this deal, then you buy NBC, and you become, finally, who you are supposed to be—a top-of-the-heap mogulissimo.

  And yet, you weren’t born yesterday.

  Also, a measure of proportion is that most good things finally come to you just when you don’t necessarily want them so much anymore.

  It’s the existential moment: to be a mogul or not.

  Possibly there is a certain innocence that attends to moguldom—or, anyway, enthusiasm. You have to have an enormous tolerance for a big mess, you have to be able to minimize vast problems, you have to be able to see yourself as greater than you are. To be a mogul is to be a little bit delusional.

  Notably, moguls usually become moguls by taking over businesses they don’t know a hell of a lot about. (What did Murdoch know about a movie studio, or Redstone about cable television, or Eisner about theme parks?) Diller, on the other hand, knew just about everything there was to know about running entertainment companies. He couldn’t have any illusions.

  And yet 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 Diller (nee Buffett)—a man who is no longer just a mogul wannabe but (just assuming) the smartest, canniest, most astute business guy there ever was. 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, 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—instead, you merely 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 after buying it for $55 billion); you always had to deal with him. He was like the party boss or ward heeler—but he carefully avoided any pretense 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, in a post-advertising world, 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. 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.

  I have taken to observing Diller from afar. I have often seen him striding in blue pinstripes between Allen & Company, his investment bankers, and Wachtell, Lipton, his takeover lawyers, a few blocks apart, or setting out in the morning from his New York base at the Carlyle Hotel, jacket over his shoulder, walking alone through Central Park. Once, under the awning of the Carlyle, we might have even stopped to chat, except that I was with my children, who were crying and hitting one another. I wonder if I haven’t seen something kindly come into his face. It could be that he appreciates the arc of the story—how a gay man, reckless in his honesty, without much education, beginning with no capital of his own, becomes one of America’s most successful and admired businessmen. Or it could be that the possible twinkle in his eye comes from an understanding that he has beaten the mogul cycle. Been there, done that, without getting caught.

  On the other hand, maybe you never get over dreaming about being a mogul—and, if given the opportunity, you just have to buy the whole deal. There actually would be some comfort here in finding out that Barry is really, in the end, just a sentimental fool.

  I was looking forward to seeing him at the conference. The walk, the suits, the Mona Lisa smile—he made you feel that something interesting and terrifying was going to happen very soon.

  12


  AND THEN

  THERE WAS

  MURDOCH

  Heilemann called to say I was on for the Murdoch interview—I’d sit with Murdoch on stage and we’d schmooze.

  All right, it’s a tetchy situation that this book is being published—and I’ve been paid a lot of money—by a company controlled by the pivotal figure in the collapse of the media industry: Murdoch.

  The editor of this book at HarperCollins, having read that sentence, has now paused. His stomach and facial expression have tightened. All illusion of professional integrity and independence is now lost.

  Or, on the other hand, the fact that Murdoch’s people are paying me good money to write about the end of Murdoch and his ilk may actually reflect one of my basic points about mogul kingdoms—AOL Time Warner, Vivendi, Viacom, Disney, and News Corp. They’re always being subverted. Any megamedia conglomerate is really, as anyone who has worked in one knows, a confederation of more or less noncooperative parts. It’s quite possible that only in periods of acquisition, sale, or big stock losses (and ensuing fear of job loss) do the people who work for a mogul actually personalize their part in his grand scheme and do their literal follow-the-mogul duty. Otherwise mogul employees are mostly able to passive-aggressively defy, if not ignore, their mogul master.

  And yet, equally, I’ve wondered in my paranoid moments if I might not be a pawn of Murdoch’s, doing what he wants me to do, which is to make the case that he’s a lot less powerful than he obviously is.

  Moguls want power, but they want it with a certain order of ritual deniability.

  Indeed, Murdoch, claiming that his influence is greatly exaggerated (“We’re minnows,” he’s said), is constantly engaged in an effort to get the Feds to waive whatever media ownership rules have not yet been waived.