Can Barry Diller Make Content Pay?


The onetime ABC programming exec and creator of the Fox Network has subtly shifted his IAC/InterActiveCorp's focus from e-commerce to media

It was a week after the annual Allen & Co. mediafest, and Barry Diller, the fabled former Hollywood mogul and chairman of IAC/InterActiveCorp (IACI), was eager to chat. Just back from his trek to Sun Valley, Idaho, to join Herb Allen's annual convocation of moguls, Diller was talking about content and how, despite all the hoopla over the mass of online video that folks are watching, the whole notion is hopelessly unprofitable unless the media world can figure out a way to get people to ante up for what they now get for free. Why the interest? "We're the biggest content producers on the Web," Diller quickly pointed out.

That's right. While hardly anyone was looking, Barry Diller has begun to reinvent himself again, this time as an Internet media mogul, making online videos, operating online news sites such as the Daily Beast, producing TV shows, and—maybe somewhere down the road—movies, too. Diller, who brought America the ABC Movie of the Week as head of programming at the network in the '60s and then created the Fox Network two decades later, sees money in online video even as others—Hulu, for one—are still trying to figure out how to mint profits in new media.

The most obvious indication that Diller is headed back to his entertainment roots came on July 27, when IAC announced that it is bankrolling former NBC Entertainment Co-Chair Ben Silverman's still-unnamed venture to make content for "the ever-evolving world of multimedia production and distribution."

The Desire to Be Entertained Is Eternal

Even before that deal, Diller has been quietly adding content assets to IAC's roster of 35-odd holdings, while spinning off companies like Ticketmaster (TKTM) and mortgage lender LendingTree (TREE) that never added up to the killer e-commerce empire he was hoping to build. In 2006 he bought a 51% stake in CollegeHumor.com's parent, added other humor sites along the way, and in July launched a spin-off called Notional that intends to turn all that sophomoric humor into TV shows. Already, the CollegeHumor folks have a reality show on MTV. Add to that an online video-game network called InstantAction that has 1.6 million monthly users, and Diller has the building blocks for what could be a good-size push into the media world again.

That's probably one reason Diller has been telling any reporter with a notebook that the day of free online media is over and that there will soon be many ways to pay for content online—ads, subscriptions, even advertisers who underwrite shows. "As long as content is more than 144 characters being Twittered…there's going to be a payment system that will be developed for content that is produced professionally," Diller recently told analysts during an earnings call.

Technologies change, figures Diller, but the desire to be entertained never becomes obsolete. "It's always been that way in the entertainment business," he tells me. "TV shows used to be free before cable TV needed to have them, and would pay for them, too."

Diller took great care to tell analysts that his content strategy is not on the front burner. He's still building out search site Ask.com, the company's largest revenue generator, and growth is still strong at IAC's dating site, Match.com. But neither has made IAC the Wall Street killer that Diller once envisioned.

Turning the Model Inside Out

So where does he plan to make his content mark online? For starters, he has apparently become a big believer in getting advertisers to create branded content (i.e., commercials masquerading as plots within a TV show) or maybe totally sponsored shows. He told analysts: "The next step could be that advertisers will pay for the programs," a model that would effectively turn inside out the traditional one in which TV networks paid fees to studios to create the programming. That would seem to be the basis of the new joint venture IAC intends to create with Silverman, who had been nuzzling up to advertisers as NBC's top programmer in search of just such joint production efforts.

If successful, Diller told analysts, media companies in the content business will have three revenue sources: selling shows to TV networks; collecting subscription revenue from cable or satellite operators; or partnering with advertisers, who would pay the freight for creating the ads and then likely share ad revenues with the content creator.

For Barry Diller, this has to be déjà vu all over again, to borrow from Yogi Berra. When he launched the Fox Network, few folks were thinking there was room for anything beyond the Big Three. So maybe there is life after free video on the Web. At 67, Diller still seems to relish the thrill of forging new paths, even if he has to go back to some familiar ground to do it.

Grover is Los Angeles bureau chief for BusinessWeek.

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