BUSINESSWEEK ONLINE : JULY 3, 2000 ISSUE
COVER STORY Has Barry Diller Found a Soul Mate? When word first starting leaking out weeks ago that Vivendi (VVDIY) was contemplating a bid for Seagram Co. (VO), Barry Diller was one of the first people Vivendi Chairman Jean-Marie Messier says he called. ''He is a key asset all by himself,'' says Messier of the 58-year-old chairman of USA Networks Inc. (USAI), which is 43% owned by Seagram. And Messier makes no secret that he intends to use that asset. The two men are expected to meet in the next few weeks, say associates of both, with an agenda that will include distributing USA Networks' Home Shopping Network and sci-fi channel to the more than 13 million European subscribers controlled by pay-TV operator Canal+ (CNPLY), now part of Vivendi Universal. But it may not take long for the two dealmaking executives to lock onto Diller's long-held ambition to buy NBC, the General Electric Co.-owned TV network he has coveted for the past three years. ''With Vivendi, that deal can get done,'' says PaineWebber analyst Christopher Dixon. It's the media world's worst-kept secret that Diller came close to buying NBC twice before. GE (GE) has considered a deal for NBC, since it's the only network currently not part of a larger media company that produces programming. NBC needs to secure TV programming in the future, and that means being part of a studio that produces shows just for it. Makes sense. But Edgar Bronfman Jr. vetoed Diller's earlier designs on NBC. Bronfman has the right to kill any deal above 10% of USA's market capitalization. The reason: Bronfman feared seeing his stake diluted in any combination with GE, and ended up wearing thin his relationship with Diller. EUROPEAN EXPANSION? Things will be rosier, at least at the outset, between Diller and Messier, who shares the USA Network chairman's empire-building strategy. As part of his own grander plan to marry the huge TV library of Canal+ with USA's, Messier will likely give Diller the go-ahead to find a way to bring NBC and its cable holdings into the family. ''I'm ready to hear his projects and see how best we can support them,'' Messier told reporters in Paris, acknowledging that relations between Diller and Bronfman ''have been a bit frustrating over the last few years.'' The betting in Hollywood is that Messier would be less worried about the dilutive effect an NBC deal would have on Universal's stake in USA Networks. Any NBC deal still could come untracked by GE, which is in the midst of transitioning from longtime Chairman Jack Welch to an as-yet unnamed successor. But there are no shortages of other deals that could link Diller and Messier. USA Network executives have been aggressively targeting European expansion for both their Home Shopping Network and Ticketmaster Group units, and see the coming rollout of wireless distribution as key to that expansion. That makes Vivendi's Vizzavi Internet portal, which it just launched with wireless giant Vodafone AirTouch PLC (VOD), a natural fit. Diller isn't talking, and even top USA Network executives say they're in the dark about what the future will bring. Still, the buzz is there. ''We're all learning French as quickly as we can around here,'' jokes Home Shopping Network Inc. President Mark Bozek. Even before the Vivendi deal, says Bozek, the company was projecting that sales of HSN merchandise in overseas markets like Germany, Austria, and elsewhere would double to $1 billion next year. USA Networks had 1999 revenues of $3.2 billion, though it lost $28 million because of big expansion costs. Diller's cable holdings, which include two small news and entertainment channels he just purchased, could also get a boost from Messier's plan to fold Vivendi's 24% stake in Rupert Murdoch's British BSkyB satellite service into Murdoch's just-unveiled Sky Global Networks. This new entity will have satellite operations in Europe, Latin America, and Asia. All of this assumes, of course, that Diller and Messier continue to see eye to eye on where to take their respective empires. Early rumblings that Diller would buy back Seagram's stake, likely in concert with USA shareholders Liberty Media Group (LMG.A) and billionaire Paul Allen, seem less likely with a more receptive Messier on the other end of the bargaining table. Diller, who sits on the Seagram board, may well be offered a seat on the Vivendi board. That would likely help the French company traverse the often-tricky Hollywood seas that have made life uncomfortable for foreign owners like Sony Corp. (SNE) and Matsushita Electric Corp. And it would no doubt help keep Barry Diller on the Vivendi team. The Diller name and the Diller touch--those are assets the Frenchman doesn't want to lose. By Ronald Grover in Los Angeles _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Vivendi: Going Hollywood COVER IMAGE: Vivendi: Going Hollywood PHOTO: Vivendi Chairman Jean-Marie Messier TABLE: Messier's Master Plan TABLE: Jean-Marie's Universe TABLE: Messier's Metamorphosis Has Barry Diller Found a Soul Mate? ONLINE ORIGINAL: How Vivendi Could Become USA Networks' Rich Uncle INTERACT E-Mail to Business Week Online

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