By KRIS HUNDLEY, Times Staff Writer
ST. PETERSBURG -- Barry Diller, the powerhouse behind the company that controls Home Shopping Network, has jetted into town for his monthly visit. He's here, in his words, to "detonate" management at this Florida outpost of his far-flung empire.
HSN's elegantly appointed executive suites are on high alert. Secretaries sit at attention. There's no tolerance for errors; Diller is known to shred employees if his tea isn't properly brewed or red poinsettias show up at Christmas time.
Diller's polished desk holds a single sheet of yellow legal paper and a container full of black pencils, sharpened to identical lengths. To his right, a wall of silent TV monitors are tuned to HSN, arch-rival QVC and CNBC. A fourth screen gives a real-time reading of HSN's sales and dollar volume.
During a rare interview on this summer morning, Diller's attire is casual -- oxford shirt, no tie -- but his medium build is coiled tight as a spring. Behind gold-rimmed glasses, his eyes dart to the TV monitors. His fingers scroll through e-mails. He left New York City at 7 a.m. It is nearly 11 a.m. and nothing is moving as fast as Diller wants at his mundane but reliable cash cow in St. Petersburg.
"It's difficult because of the incestuous behavior that takes place in a campuslike setting and that is very hard to detonate into any meaningful action because it's very, very insider," Diller, 60, said of his efforts to motivate HSN employees. "If you're in the walls, it's one thing. If you're outside of them, you're a foreigner."
Ironic words coming from a man who has been the ultimate insider during a 30-year career in Hollywood. He introduced the miniseries and Movie of the Week at ABC. He developed blockbusters such as Saturday Night Fever and Grease at Paramount Pictures. And he proved all the naysayers wrong when he created a fourth broadcast network called Fox.
But since Diller quit the top job at Fox in 1992 with $140-million severance and hopped into his Gulfstream II, he has become the ultimate dealmaker. Along the way, Diller has made millions for investors. He is nearly a billionaire, ranked 256th on Forbes magazine's list of the 400 richest Americans.
The key to Diller's success: vision, viciousness and other people's money. His pitch alternates, from new media to old media and back again, but his blistering management style remains. Diller has a hair-trigger temper that alternates between fire and ice. He once threw a video at an underling with such force it put a hole in the wall. A secretary who neglected to note a returned phone call received a 20-minute tirade from Diller that drove her to tears.
Critics -- such as the analyst who recently accused Diller's company of overstating its returns -- are hammered with self-righteous indignation and legal threats.
No wonder criticism of Diller -- from ex-employees or outsiders -- is rare. "There's almost a visceral fear of what Barry might do to them," said George Mair, author of 11 celebrity bios including The Barry Diller Story: The Life and Times of America's Greatest Entertainment Mogul (John Wiley & Sons; 1997). "He's vicious as hell to anyone who crosses him. And he uses his power for personal vendettas. If he sees you in his gunsights, he'll pull the trigger."
Today Diller's influence, which waned when he left Fox, has risen to an all-time high. And he may well be on the verge of amassing more.
He is chairman and chief executive of Vivendi Universal Entertainment, formed from the spinoff of Diller's entertainment assets 10 months ago. With Vivendi's French corporate parent in financial disarray, there is much speculation about who will end up running the entertainment business, which includes Universal Pictures and Universal's theme parks. No one doubts Diller will play a key role in deciding.
In what he calls his day job, Diller drives the continued evolution of HSN's parent company, USA Interactive. "HSN was the original clay of building USAI," said Diller, who usually makes day trips to the area. "HSN has driven the wheel since the beginning."
USA Interactive is now an $8-billion company that sells everything from cruises to concert tickets to cookware via phone, TV or Internet. Using the company's shares as currency -- and occasionally dipping into cash -- USA Interactive under Diller has bought controlling ownership in Expedia, Ticketmaster and Hotels.com. One recent purchase: a vacation time share business he plans to incorporate into a new travel network being developed at HSN.
Diller is vague when asked to describe the new network. Though it has been in the talking stage for more than a year, the project at this point is pure Diller: sparse on details, long on enthusiasm.
"We want to build a vibrant travel, discovery and shopping business," he said before grabbing a phone call. "Our ambition is large."
* * *
From age 19, Diller's ambitions have been huge. Raised in upper-class comfort in Beverly Hills, Calif., he dropped out of UCLA after four months and wrangled a job in the mail room at the William Morris talent agency through good friend Marlo Thomas' dad, Danny.
There he learned the entertainment business by reading every document in sight. It reportedly took him a week and a half to get through Elvis Presley's 6-foot file. Within two years he was an agent who knew secrets about everybody in town.
In 1966, Diller got into a heated argument at a party with ABC's vice president of programming. Far from being offended, the executive hired the brash 23-year-old as his assistant. Within three years, Diller rose to vice president of feature films for the network.
With the help of a newly hired underling, Michael Eisner, Diller tapped young producers to make 90-minute movies for half the price ABC had been paying major studios. In 1972, he adapted the BBC's concept of the miniseries to ABC, buying rights to Leon Uris' novel QB VII and Alex Haley's Roots.
Not all of Diller's moves were winners. ABC's primetime lineup for the 1974-75 season included bombs such as The Sonny Comedy Revue. But Diller's growing reputation for rapid-fire decisionmaking and sharp eye on the bottom line was enough to attract the attention of Gulf & Western chairman Charles Bluhdorn. His Paramount Pictures subsidiary was bleeding money. In 1974 he hired Diller as Paramount's chairman and chief executive. At 32, Diller became the youngest studio chief ever and the first to come from the TV business.
"I was treated as less than scum," Diller said of his early days at Paramount during a 1989 Playboy interview. "I remember being hurt a lot."
Success was Diller's revenge. With Eisner, who became Paramount's president, the two green-lighted movies that made money. The key: keep a tight rein on the budget and market like crazy.
Though Diller complained about the $17.5-million spent on Raiders of the Lost Ark, the movie netted Paramount $115-million. When Diller's friend Warren Beatty went over budget with Reds, the budding mogul had an escape hatch: He shifted much of the risk and cost to a British bank. Four years after Diller took over, Paramount was No. 1 in market share and revenues.
While Diller honed his moneymaking skills at Paramount, he also developed a managerial style much like the company's tyrannical owner. Diller once characterized his relationship with Bluhdorn as "noisy."
"That's one of the places I learned you'd better be up for the fight," he said.
It was there that Diller perfected what late Paramount producer Dawn Steel called the "aggressive advocacy and yelling system," which became his trademark.
The intercom became an instrument of terror for employees who would be paralyzed with fear when Diller's name appeared on its digital readout. In meetings, his bullet-bald head would flush red with anger, his piercing blue stare would go icy and curses would fly. At wild parties and in the workplace, Diller cultivated spies who would keep him up on the latest gossip and be protected in return.
Mair, the biographer, interviewed a secretary of Diller's at Paramount, who said her boss would go into an uncontrollable rage if the papers on his desk weren't precisely arranged, his tea perfectly brewed and the cups of cigarettes around the office not adequately replenished.
"She was bitter about her treatment," Mair said. "And she was disgusted with herself for needing the money and putting up with it."
The survivors of Diller's temper tantrums yelled back. The others left, in a revolving door of aspiring executives who couldn't deal with trying to second-guess what would make Diller go ballistic. Ex-employees said Diller's mean-spirited combativeness and explosive outbursts made their jobs unbearable.
He obsessed over every detail, from the spelling in a press release to the color of the poinsettias in the reception area. Pity the underling who didn't know he detested red flowers.
"Not good enough" was his constant refrain. What he seemed to like one day he might loathe the next. And just when it seemed like he couldn't turn the heat up any further, he would demand more.
Ex-employees said Diller could be charming and funny, but he never showed a human side. They refused to talk about their experience on the record, however, for fear it would hurt future job prospects.
Even today, Diller doesn't apologize for being abusive.
"What I do is to rub the idea as toughly as one can, to have as much conflict as I can," he said. "I like to have passionate opinion in every matter until the issue is resolved. It improves the end decision."
Those who withstood Diller's blistering attacks say they benefited from the experience and even considered it a badge of honor. If Diller took the time to berate you, he must like you, the thinking went. Brad Turell was senior vice president of publicity at Fox Broadcasting Network, where Diller headed in 1984 after leaving Paramount.
"Barry was a magnet for seeking out extraordinary young executives with potential, putting them in high-pressure situations and seeing what rises to the top," said Turell, now an executive vice president at Turner Broadcasting. "He developed the next generation of movie and TV moguls."
Among graduates of the brutal Diller boot camp: Jeffrey Katzenberg, co-founder of movie studio Dreamworks SKG; Jamie Kellner, chairman and chief executive of Turner Broadcasting Inc.; Scott Sassa, an executive at NBC; and Peter Chernin, president and chief operating officer at News Corp. Most recently, former USA Interactive executive Jon Miller was named chairman and chief executive at AOL Inc.
"He taught me to be passionate about my argument and be right or keep my mouth shut," Turell said of Diller's tutelage. "Those who just aimlessly talked about something he didn't find accurate -- that was death."
Drawing on the deep pockets of Rupert Murdoch, who bought Twentieth Century Fox the year after Diller arrived, Fox network lost $94-million in 1987, its first full year. By 1991, the network that attracted audiences with shock and schlock made more money than either NBC or CBS.
Diller was willing to gamble big. In 1990, he stunned even his staff by pitting The Simpsons against long-running hit The Cosby Show. "Jim Brooks (Simpsons' creator) pleaded with him not to do it, but Barry stuck to his guns," Turell said. "It turned out The Simpsons won all under 50s (age groups) and Cosby was gone by the end of the year. It was a gutsy move."
Two years later, Diller would be gone as well. After failing to carve out an ownership position for himself in Murdoch's News Corp., Diller resigned in February 1992 at age 50.
"I'm both young enough and old enough to want to own my own store," he said at the time.
For 10 months, media and entertainment mavens buzzed about Diller. The smart money was betting that he'd go for a big prize -- a major network -- and nothing less. At Fox, he had been the only executive with control over both a movie studio and TV network.
After three decades in the entertainment business, Diller was firmly ensconced in the Los Angeles firmament. He played poker with Steve Martin and Johnny Carson, biked through the Malibu hills with Eisner.
* * *
While his friendships have always been high-profile, Diller's personal life remains a puzzle. Spy magazine referred to Diller and close friend David Geffen as part of "Hollywood's powerful gay tong," or secret society.
When then-superagent Michael Ovitz claimed he was being harassed by Geffen, Ovitz turned to Diller for advice. Diller's response, which he recently admitted was "pure high school": Beat Geffen up if he won't leave you alone.
The fight never took place, but the battle continues to rage. In an August Vanity Fair interview, Ovitz blamed his financial ruin on Hollywood's "Gay Mafia."
Diller was floored by the charge. "A statement like that is . . . beyond unfortunate," he said. "It's fairly rotten."
Though Diller has steadfastly refused to answer questions about his personal life over the years, he has not hesitated to put his considerable wealth to work for gay causes. In 1991, he provided seed money to create Hollywood Supports, a group dedicated to fighting AIDS-phobia and homophobia in the entertainment industry. In 1994, his foundation sponsored the Gay and Lesbian Alliance Against Discrimination media awards. And the Diller Foundation is currently a member of the President's Council of the Human Rights Campaign, a Washington, D.C., group that works for gay, lesbian, bisexual and transgender rights. That designation indicates the donor has given more than $100,000 and less than $250,000 for the year.
Biographer Mair, who had only sporadic cooperation from Diller during his research, said his subject simply ignored questions about his sexual orientation.
"He doesn't know if he wants to admit his sexual preference or not," Mair said. "Everybody's clear he's not clear (about his sexual orientation)."
In his book, Mair referred to Diller and Geffen as the nucleus of a powerful "Velvet Mafia."
"That's how they refer to themselves," Mair said. "It's hard to say if all of them are gay."
After years of speculation about his sexual orientation, Diller created a minor stir when he married fashion designer and longtime friend Diane von Furstenberg on his 59th birthday in February 2001. Reporting on the wedding, which it called a "merger," the New York Times said the two had "a relationship widely assumed to be platonic."
In a Vanity Fair interview several months after the wedding, von Furstenberg, 55, said she finds people's curiosity about their relationship strange. The two have homes in Manhattan and Connecticut, while Diller retains his L.A. residence. Von Furstenberg sits on USAI's board and her fashion company's Web site, www.dvf.com, is hosted by Styleclick.com, a division of USAI. The site includes "DVF's diaries" with breathless prose about her travels to Turkey and Russia with Diller and good friends Mike Nichols, Diane Sawyer, Warren Beatty and Annette Bening.
"Everything has always been normal," von Furstenberg told Vanity Fair. "We share the same bed. We go on vacation together. . . . It's so weird that people can even ask."
* * *
After exiting Fox in 1992, Diller took a hiatus from Hollywood. He visited Bill Gates in Seattle, Warren Buffett in Omaha, Neb., and future President Bill Clinton in Little Rock, Ark. But the sidetrip that stopped him in his tracks was with von Furstenberg to TV retailer QVC Inc. in West Chester, Pa.
Watching her sell silk wrap dresses live, on the air, Diller was mesmerized by the colored bar on a computer screen that kept rising as calls flooded in. In less than two hours, more than $1.2-million worth of clothes had been sold. "It was the closest link I've ever seen between action and reaction," he later said.
By December, Diller was chairman and chief executive of QVC, which was majority owned by Comcast Corp. and John Malone's Tele-Communications Inc. Typically, Diller's ambitions were large.
In 1993 -- well before the Internet became popular -- he told an interviewer, "Three years from now, you'll say, "I want shoes.' You'll press a button and see yourself in various shoes on the screen." From their homes, consumers could roam the aisles of Bloomingdale's, Diller predicted. They'd be able to find a hotel in the Caribbean, inspect its rooms on the TV screen, then press a button to make a reservation. All through QVC.
But Diller got derailed in his dreams. Instead of sticking to his much vaunted vision of interactivity, he used QVC to make a failed run at buying Paramount. Then he took aim at CBS, only to be opposed by the Roberts family at Comcast, who owned a bigger stake of QVC. With his power base pulled out from under him, Diller cashed in, turning a $25-million investment into $130-million in less than two years.
But Diller wasn't out of work for long. By August 1995, TCI's Malone arranged a consolation prize. Like Paramount's Bluhdorn, Malone wanted Diller to work some magic on ailing Home Shopping Network, where he controlled 80 percent of the stock.
Malone put Diller on HSN's board and gave him a $5-million interest-free loan (due in 2007) to buy shares in TCI's Silver King Communications, a former HSN subsidiary with 12 TV stations. Sweetening the deal was a $2.5-million bonus for Diller, plus $1-million to pay capital gains tax on the Silver King shares. Diller's total out-of-pocket cash for his new company: $2,210.
Within three months, Diller was chairman of HSN's board and replacing the network's management. Within a year, Silver King had acquired control of HSN in a $1.27-billion stock swap. The company was renamed HSN Inc. and Diller controlled 80 percent of the voting stock.
HSN was a mess, losing $62-million in 1995. Diller hired merchandising experts such as James G. Held, a former QVC and Bloomingdales' executive, who became HSN's president in late 1995. Under Diller's alternately obsessive and oppressive direction, HSN upgraded its inventory mix, cleaned up its finances, improved its delivery systems. By the time Held resigned in March 1999, the company had record profits and a growing customer base.
Though Diller spent about a week a month directing rebuilding efforts at HSN, his grand plan went far beyond peddling polyester pants to couch potatoes. He seized on the idea of developing local programming for the company's television stations.
He started with WAMI-Ch. 69 in Miami, where a staff of 35 created offbeat shows such as Strip Poker and a closeup of female lips reading the evening news. The experiment lasted six months, then disappeared.
"He poured $30-million into that rathole," former Miami Herald TV critic Terry Jackson said of Diller's shortlived infatuation with local programming. "For this to have worked, it needed a long-range commitment of $200- to $300-million. And his commitment was never that deep."
* * *
But Diller and his company's shareholders profited even when he failed. Broadcast stations worth about $200-million when Diller took control of HSN in 1996 skyrocketed in value after a 1999 court decision easing restrictions on station ownership. At the end of 2000, HSN sold the stations to Univision for $1.1-billion.
Even as local programming lost its luster, Diller was engaged in nonstop acquisitions on two distinct tracks: interactive retailing and entertainment. He reconciled the schizoid strategy with one word that calmed analysts but often confused investors: convergence.
Convergence, he predicted, would mean shoppers would not only order products by simply clicking on their TV screen, but the goods would be specially tailored to their interests.
"The context of the message is not only directed to you because of your interests," Diller told an interviewer in late 2000. "But (it) is integrated into the space of the programs as well."
Amassing more avenues to the consumer, HSN bought majority interest in Ticketmaster, acquired CitySearch online guides and merged the two operations. Next came controlling ownership of Hotels.com, Styleclick.com, Match.com, Evite.com and the Miami customer service company, Precision Response Corp. This year, travel site Expedia was added to the mix.
But Diller made it clear he hadn't abandoned his showbiz aspirations. In late 1997, HSN bought USA Network, Sci-Fi Network and the Universal TV production operation from Seagram Co.'s Universal subsidiary for $1.2-billion in cash and a 45 percent stake in the growing conglomerate, which was renamed USA Networks.
A couple of attempted acquisitions flopped. In 1998, HSN made a bold move to buy NBC, but it was blocked by Seagram's Edgar Bronfman, who retained the right to veto major transactions. And in mid 1999 when the company tried to buy Lycos, the Internet search engine's biggest shareholder rejected the $18-billion bid as too low.
Constantly reorganizing USA's patchwork of properties into some semblance of synergy, Diller kept pitching the bigger picture.
"Nothing is going to take away from the convergency of direct selling, information and entertainment," Diller told a group of analysts in early December. "We're sure on this one."
* * *
Two weeks later, Diller was just as sure of something else: that USA Networks was best served by selling its entertainment assets to Vivendi Universal of Paris.
Under terms of the $11-billion deal, USA's three networks as well as its TV and movie studios were combined with Universal Studios and its theme parks in a joint venture called Vivendi Universal Entertainment. Vivendi owns 93 percent of the joint venture, USA owns 5.4 percent. Diller -- who assumed the unpaid position of chairman and chief executive of VUE -- received 1.5 percent interest with a minimum value of $275-million.
With the entertainment assets pared off, USA Networks was once again renamed, this time as USA Interactive with Diller firmly at the helm. Though the dream had once again been rejiggered, the man behind it was as enthusiastic as ever.
In an e-mail to USAI's executives on Jan. 2, Diller admitted he had struggled with the idea of splitting the company in half for nearly a year.
"At first, it was heretical, separating the two worlds of interactivity and entertainment that for 5 years I had been arguing were symbiotic," he wrote.
But with the deal came new flexibility to become a major player in interactive commerce, which Diller described as "the cornerstone industrial development of this century."
"High flown words, yes," he wrote. "But I deeply and completely believe them."
* * *
Months later, the high-flown words are gone. The nagging details remain.
USAI's efforts to buy the rest of Ticketmaster, Expedia and Hotels.com have been bogged down by speculative traders and recalcitrant boards. HSN's Spanish-language programming and its operations in much of Europe have been unplugged. Jean-Marie Messier, chief executive of Vivendi and Diller's ally in formation of Vivendi Universal Entertainment, has been booted from the company.
Diller has said his first allegiance is to USA Interactive. But the contract signed when VUE was created puts him in the driver's seat when it comes to deciding the unit's future. Vivendi's board meets this week in Paris to discuss its options.
As Diller bolted between meetings at HSN's headquarters on one typically hectic Friday, he said execution is always the biggest obstacle.
"It's not the opportunities," he said. "There are plenty of them. It's getting it right. Mastering all the many little details."
Thanks to Diller's attention to details, as well as the company's penchant for buying and selling assets, its complex corporate structure and partial ownership of several subsidiaries, USAI's financial reports are ponderous. That doesn't stop analysts and institutional investors, smitten with USAI's growth rates, from being bullish about the company.
"Barry quickly understood that the Internet was good at delivering bits rather than stuff," said Larry Haverty, managing director of State Street Research, who dismisses USA's merchandise-based businesses such as HSN as a sideshow. "The businesses that deliver bits -- Expedia, Hotels.com, Ticketmaster -- are anything but a sideshow. The beauty of these businesses is they get paid before the service is delivered. And the faster they grow, the more cash they generate."
When criticism of USA Interactive appears, the reaction is nothing less than nuclear. In May, Howard Schilit, a forensic accountant who runs the Center for Financial Research and Analysis Inc. in Rockville, Md., sent a skeptical review of USAI's first quarter results to clients, suggesting the company had weaker than reported revenue and negative operating cash flow.
Though Schilit refused to release his report, which was based on the filing and did not include discussions with the company, some of its issues were outlined in a strongly worded rebuttal from USAI.
"The shocking fact that CFRA would issue a negative report without making sure to speak with someone at our company demonstrates CFRA's recklessness, gross negligence and utter disregard for the facts," the May 29 letter from USAI said, adding that the company demanded both a correction and apology. "If you fail to do so, we will have no choice but to seek full redress for your reckless conduct."
Asked about the letter, Diller strained across his immaculate desk at HSN, red rising in his face.
"If we had not acted with outrage at this, I would question the core of what we believe and that's complete disclosure," he said.
Schilit said in an e-mail that CFRA had incorporated "some of the companies (sic) commentary in our report." Several analysts and investors, meanwhile, said they shrugged off CFRA's criticisms.
"That report was irrelevant," said Haverty of State Street Research, whose mutual funds own over 10-million shares of USAI. "They (CFRA) analyze historic data and USAI was selling major assets. That report needed to go in the wastebasket quickly."
To a large extent, history is a poor measure of what Diller will do in the future. Right now, his bet is that being an intermediary on the Internet -- selling plane reservations, theater tickets, hotel rooms and dating connections -- will throw off ever-increasing amounts of cash for ever more acquisitions. Tomorrow, the plan could be different.
To analysts such as Peter Mirsky of SG Cowen, who rates USAI a strong buy, it almost doesn't matter.
"It's absolutely a bet on Barry," he said.
-- Times staffers Barbara Oliver and Mark Albright contributed to this report.
Date of birth: Feb. 2, 1942, San Francisco, son of Reva and Michael Diller, real estate developer
Education: dropped out of UCLA after four months
First job: 1961, mailroom at William Morris talent agency, Los Angeles
Big break: 1966, hired as assistant to vice president of programming at ABC television
First turnaround: 1974 as chairman and chief executive of Paramount Pictures Corp.
The fourth network: Launched Fox Network in October 1986
Career change: chief executive of home-shopping network, QVC Inc.
Switching horses: Acquired Silver King Communications in St. Petersburg in 1995, and it acquired control of Home Shopping Network within a year
Married: Feb. 2, 2001, to long-time friend and fashion designer Diane von Furstenberg
Residences: Los Angeles, New York, Connecticut
Diller's contributions to popular culture
-- at ABC: Roots miniseries, Movie of the Week concept
-- at Paramount Pictures: Saturday Night Fever, Raiders of the Lost Ark, Grease, Reds, Bad News Bears, Terms of Endearment
-- at Fox TV: The Simpsons, Married... with Children, Cops, In Living Color
-- at USA Interactive, his empire includes: Home Shopping Network, Ticketmaster, Expedia, Hotels.com, Match.com
-- as unpaid chairman of Vivendi Universal Entertainment (the spinoff whose future is in question): Universal Pictures (Blue Crush, A Beautiful Mind, Scorpion King), USA Network (Monk, Nash Bridges), Studios USA (Law & Order), Sci- Fi Channel, Universal Studios theme parks
Diller's 'day job':
Headquarters: New York City
Chairman/chief executive: Barry Diller
What it does: interactive commerce and services
Businesses: Home Shopping Network, Ticketmaster (which operates Match.com and Citysearch), Expedia Inc., Hotels.com, TV Travel Group, Precision Response Corp., Electronic Commerce Solutions and Styleclick
2001 revenues: $3.5-billion
2001 net income: $383.6-million
Diller's 'night job':
Vivendi Universal Entertainment
Headquarters: Los Angeles and Paris
Ownership: 93.06 percent, Vivendi Universal; 5.44 percent, USAI; 1.5 percent (with minimum value of $275-million), Barry DillerChairman/chief executive (unpaid): Barry Diller
What it does: Film, television and recreation
Businesses: Universal Pictures, Universal Studios theme parks, USA Network, Sci-Fi Channel and Studios USA
Started: May 7, 2002
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