Barry Diller Talks Murdoch Succession, Pegs Aereo Supreme Court Odds at '50-50' (Q&A)

 Matt Furman

This story first appeared in the May 2 issue of The Hollywood Reporter magazine.

When Barry Diller left Fox in 1992, he had launched a TV network and been chairman of Paramount Pictures -- a run that would have been enviable on its own. But he was just getting started: The combative, curious executive began a journey that would include running the home-shopping channel QVC, attempts to buy Paramount and CBS, the purchase and sale of USA Networks and a brief partnership with Vivendi when it owned Universal. Ultimately, Diller transformed his digital commerce and media holdings into IAC/InterActiveCorp: With revenue of $3 billion in 2013, an 8 percent increase from 2012 (Forbes estimates his net worth at $2.4 billion), his empire includes the production company Electus, search engines like About.com, the fast-rising VOD company Vimeo, the dating app Tinder and The Daily Beast.

Through it all, the outspoken and mercurial Diller, who married designer Diane von Furstenberg, his close friend, in 2001 -- his stepson, Alexander von Furstenberg, 44, is on IAC's board of directors -- never has lost his appetite for disrupting the status quo. On April 22, the Supreme Court is expected to take up American Broadcasting Companies v. Aereo, a case that could alter the television landscape profoundly. Aereo, a startup in which IAC led a $20.5 million investment in 2012, captures broadcast TV transmissions via tiny antennas then relays the programming to subscribers' digital devices. Broadcasters say Aereo merely is a technologically sophisticated way to violate copyright laws. They also see it as a significant threat to an increasingly important revenue stream: the billions in retransmission fees they receive from cable and satellite providers to carry their content.

Diller, 72, met with THR in late March in his suite of executive offices on the sixth floor of IAC's gleaming, Frank Gehry-designed headquarters in New York's Chelsea. Its undulating form resembles a giant sailing vessel -- appropriate given he owns the Eos, a three-masted Bermuda-rigged schooner that reportedly is the world's largest private yacht. Diller revealed whether he thinks Aereo will survive ("50-50") and who in Hollywood really understands the Internet (hint: practically no one).

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In a 1993 profile in The New Yorker, you were prescient in imagining the profound disruption of media and entertainment. How?

I was very lucky because I got to QVC at the very beginning of a convergence of television screens, computers and phones. The only spark I had was that I had seen, for the first time, screens used for something other than telling stories -- and that fascinated me. It was that crystal of an idea: "Oh, interactive -- that's interesting." I had no idea that there was going to be this Internet three years later.

Still, QVC was an unusual choice, given your background.

When I bought into QVC, there was not a person in the previous community I inhabited that did not think I had lost my mind.

Did that sting -- that they thought you had lost your mind?

No, the opposite. Well, what did I think then, rather than what do I think now about then? (Long pause.) I thought maybe they were right. I mean, everybody said to me: "You can't do that. You can't go to Philadelphia!"

Have you had the last laugh?

Yeah, well, I'm not so sure about the laugh. (Laughs.) I'm completely glad that I got that opportunity. The movie and television businesses are quite simple, not complex. Have been [the same] for 70 years -- mostly technophobic. Contrast that with the world I've been participating in primarily for the last 20 years. It's a world where you never figure anything out; you are constantly on the edge of innovation of some kind, either yours or from somebody that's going to destroy you.

Which leads me to Aereo. Will you be there when the Supreme Court takes up the case?

Oh yes, absolutely! I've never been involved in anything which turned sharply black-and-white as to whether or not you survived or died -- and the answer is definitive. Now, of course, where I think the merits are is clear: If Aereo survives, it's incomprehensible that it will have any particular effect on the economics of broadcasting.

Really?

I really don't think so. Will this produce other add-on effects, as any new technology does that are unknown as to what their consequences are? Yes. Do I understand why broadcasters would oppose it? Of course I do, and I did when we decided to invest in it. But my motivation for doing this has nothing to do with hurting broadcasters or anyone else's economic model -- period. I have one interest, which is to have Internet protocol distribution progress and be part of the ecosystem of distribution. I think, honestly, at best -- at best -- we have a 50-50 chance [of prevailing], certainly not on what I think supposedly settled law is but because it has become so controversial. It's going to be a tough, tough, battle.

Were you surprised the Obama administration sided with the broadcasters in its brief to the court?

I was not surprised -- I was shocked. I was shocked because the Obama administration has been so out front about innovation, about supporting not only technology but also consumers' rights, that if I had not been cynical before, it would make me utterly and completely cynical. I believe the only reason -- the only reason -- they have supported this is because of the broadcasting lobby.

Have you spoken with your friend Leslie Moonves, the head of CBS, or other broadcasters about their concerns?

Yes, I've talked informally to lots of broadcasters, none of whom share my enthusiasm for Aereo.

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If Aereo loses, is that the end of Aereo?

Yes. Look, to say it's a pimple on the hide of an elephant would be metrically true -- it's of no material consequence to the IAC company -- but I think it would be unfortunate. With the Betamax case [a landmark 1984 Supreme Court decision that personal recordings of TV programming do not constitute copyright infringement], with hindsight we know how consequential that was. Think of this: If the DVR had been prevented, which is what Betamax was, there would be no such thing as time-shifting. There would be no such thing as all this innovation. It would be awful to shut off what is clearly, without I think argument, technology that might benefit a consumer. But it more than may happen.

What would you do if you were in the broadcasters' shoes?

If you aren't willing to cannibalize, if you aren't willing to force yourself into the mindset of, "You have nothing to lose," then it's very, very hard to be alive today. Up until a very short while ago, all these systems were closed -- there was no possibility of opening them or breaking them, etc., starting with radio, to television, to certainly movies. It's endemic to the demands of incumbency. It's not a negative comment on the people [working in broadcast TV]. It's very hard to be able to live, so to speak, in an environment where you cannibalize the very thing that's feeding you. Most people would say, "No, that's crazy; I can't do that," when, full stop, that's about the only way to stay relevant.

When you look at Hollywood today, do you think any of the type of legacy businesses you're talking about are doing it right?

Unless you get doused in the Internet, unless you are swimming underwater in the Internet -- which is such an iterative process -- it's really unlikely that you'll ever understand it in a way to make use of it. So, to your question, there are some good signs … [but] I would say these worlds are so insulated. By the way, the converse is true: I've not seen one [technology-based] entity make that bridge to "programming entertainment." The only example that's close, but not the cigar, is Netflix -- and I think Reed Hastings wisely found someone in Ted Sarandos, who had the right mix of history and contemporary life that he could see that essentially a technological platform could bridge the divide.

Isn't that the plan for Vimeo?

Absolutely. Go on Vimeo today, and you will see video-on-demand, which is just beginning for Vimeo. But of course that's what Vimeo has the potential to become. It does and it is, and we're going to invest heavily in it.

Do you see Vimeo making its own movies and TV or just acquiring?

Well, what is Netflix? Would you call Netflix an acquirer? What would you call Amazon, which is now actually forming themselves as a full-boat studio in the sense that they've got every one of these disciplines that would be out-of-house or outsourced in-house. Whether that will work or not I don't know, but for Vimeo, we will acquire -- we will finance content of all kinds and stripes. We were talking the other day: Would we be up for House of Cards? And we wouldn't today because we've got to make more progress on the content side to get to the point where such an investment would be sane -- but we're not that far away from it.

Why did you think Newsweek, where I once worked, was fixable when you bought it in 2010?

The Newsweek mistake was mine, solely. By that I mean that the concept that was presented at the time was superficially lovely but did not have a single brain in its head beyond the superficiality. I didn't scratch it enough, and the truth is that a village idiot, if they had scratched the surface of it, would have said, "This is very unlikely to happen," because the original projections were that we would break even in the first year.

You were on the board of The Washington Post. Did you want the Graham family to sell it?

No. [But] Jeff Bezos will be at the very least as good a steward as you could ever invent for the Post.

The Daily Beast -- will it have a future past this year?

I hope so. Without question they're making progress.

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Will it be profitable?

Reality is reality. It will have to carry its weight -- meaning, it will have to be deficit-neutral at the least for it to continue. There is no exact point in time [to reach that], other than there's no possibility that the timeline for determining that would be 10 years. But it's not 10 months or 10 minutes.

Do you regret going into business with former Daily Beast editor Tina Brown, for whom I also worked?

No. The Beast has never been a problem. Newsweek -- look, we lost $60 million on Newsweek.

At Electus, why are Chris Grant and Drew Buckley taking over day-to-day control, with Ben Silverman moving to the chairman role?

I think it was evolutionary. I think it was as much in Ben's interest as it was the entity's interest. Electus has grown so fast -- I mean, it has an awful lot of individual units in production and series. It's grown so fast that just to keep up with it organizationally has been a challenge for everybody involved, but it's definitely making progress.

Let's talk about the biggest category within IAC's portfolio, the search-and-apps business, which is under some stress. That group's revenue was down 8 percent year-over-year for the fourth quarter of 2013.

Our search-and-apps business grew for five years at some astronomical compound rate. But search-and-apps has in the last year confronted more changes from Google policies than it ever had, and that reduced revenue. However, search-and-apps will grow this year, year-on-year -- not necessarily short-term, but if you take the full year, I'm very confident it will have growth. And I think it has positive characteristics for the long term. The reality is, Google is such a powerful force that you are not entirely in control of your destiny. That's the issue.

How soon after you saw the tweet from Justine Sacco, who was then your PR chief, joking about not getting AIDS in Africa because she's white did you conclude she would have to leave the company? 

Once we discovered, very shortly after the tweet, that there were multiple questionable ones preceding, we felt we had no choice. I like Justine Sacco a lot and don’t think she has poor character.

You know Rupert Murdoch well. What did you make of him returning Lachlan to News Corp and 21st Century Fox in a top executive role?

I would never comment on the family; I would only say about Rupert that he's the greatest large risk-taker I've ever known. Among everyone in the last certainly 20 years, he's the only world industrialist in media.

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What becomes of his companies when, inevitably, he no longer is there?

I don't believe much in succession for large, diversified companies that have been put together by a singular vision. There are exceptions, of course, but generally I believe shareholders are better served by taking the constituent parts and making them independent businesses.

Does the same go for IAC?

We're long on the way to doing that: We've spun off seven separate public companies over the years, and I would expect that to continue after I am no longer involved. My family, which will control 40 percent of IAC's votes, has been clear that they have no desire to manage the businesses.

Did you think you wanted kids before you became a stepfather?

No, I didn't.

But you enjoy being a stepfather to Alexander and Tatiana?

Oh yes. These are my children, for sure. They've been my children since they were 5 and 6 years old; they're now 43 and 44.

How do you spend your day? How do you focus?

My day is not focused by definition, thank God, because I don't any longer have ground-line responsibilities for managing individual businesses. But between IAC and Expedia [and his positions on the Coca-Cola and Graham Holdings boards], luckily I can spend some time -- probably only enough time to be irritating, or only enough time to be incompetent -- in many different areas. Because of the enormous benefits of technology, you can be anywhere 24 hours a day, all over the world and in any time zone.

Even on the yacht?

More so. Absolutely.

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