Diller: Big media is late to Internet chat
EmptyFormer entertainment mogul Barry Diller said Wednesday that when it comes to the disruptive power of the Internet, incumbent media companies still "don't get it," with the possible exception of News Corp.
All the media companies have done a few interesting things online, but only News Corp., now the world's most valuable media conglomerate, has delved deep, by way of its $650 million MySpace purchase and other digital initiatives.
Diller, CEO of IAC/InterActiveCorp, made his remarks at a Forbes conference in Beverly Hills.
His advice to media executives is to build new things online from scratch, and he praised Time Warner for doing just that in the form of TMZ.com.
Technology companies, Diller said, understand the value of research and development, whereas Hollywood does not.
He said many executives don't invest in their companies as they should because they are overly mindful of how Wall Street might punish their stocks for overspending. Such fearful companies should learn from Amazon's example and ignore the naysayers who might have preferred the company take a more frugal approach to technology expenditures.
Diller warned of the breaking down of all "distribution chokepoints" and called the network TV business "temporarily prehistoric." He said he hasn't been interested in purchasing such a company for about a decade.
Later at the conference, Yucaipa Cos. founder Ron Burkle surveyed the private-equity landscape.
Noting the lack of respect Wall Street has for newspaper companies, he contrasted the New York Times with one of his investments, Current TV, which he said is worth up to $2 billion after just a few years in existence.
"It's hard to believe the New York Times isn't worth 10 times that and not only twice as much," he said.
He said former Vice President Al Gore, a Current TV co-founder, "made a ton of money off it because he has half the upside. He cut a phenomenal deal for himself."
Burkle said Sam Zell's Tribune purchase, which some on Wall Street predict won't close, will happen. "Sam keeps his word almost better than anyone on Wall Street," he said.
He also said that newspapers ceded big digital opportunities by not moving their classified ad, auto advertising, real estate and help-wanted businesses to the Web, allowing for upstarts to dominate.
He offered several pieces of advice to the Los Angeles Times regarding its online efforts, including: "Maybe they should focus on being one of the premium and primary entertainment sites. Maybe they should focus on trying to compete with Daily Variety and The Hollywood Reporter rather than the kinds of things they were facing. But they didn't have the resources to do that and they didn't have the commitment from the parent."
Burkle said he and his partners had been interested in buying the L.A. Times as "a pure philanthropic play" because "we wanted to have a newspaper in L.A. that actually liked L.A."
He said that small private-equity deals are still getting done in the midst of the credit crunch, though big ones are not. He added, though, that nobody wants "to be the guy who sold MySpace too early."
Asked by Forbes associate editor Matthew Miller about what company might make for a logical acquisition, he named Playboy.
"You could probably sell the mansion and have enough equity to pay for the whole company," he said, but he added that his group "didn't do it because we didn't want to read in the news the next day that we bought Playboy."
During the same presentation, Digital Coast Ventures CEO and Montgomery Co. CEO James Montgomery predicted that Comcast and Disney would make content acquisitions next year.
Last year during this conference, Montgomery predicted that Dow Jones would be purchased, and he bought 2% of the company in anticipation. About six months after that prediction, News Corp. made its $60-a-share offer for Dow Jones, roughly a 60% premium to where the stock was trading.