Down And Out In Beverly Hills? Get Real

If Barry Diller is moping over his loss of Paramount Communications Inc. to Viacom Inc., he's not about to show it. "One of the things I learned long ago about auctions was that it's not about ego or talent," Diller said after his defeat. "It's simply about raising your hand for the next bid."

That next bid is a matter of fervid speculation from Wall Street to Wilshire Boulevard. Diller won't discuss specifics, but he makes it clear that he plans to play on a larger field than his $1 billion-a-year home-shopping service. "We went for five months tilting at this windmill," Diller says. "There will be others."

BIG STAKE. What media property could he target? Take your pick: NBC, which he once considered buying from General Electric; or MCA, whose Japanese owner, Matsushita, has discussed selling an equity stake with other media companies; or maybe even Time Warner, in which his friend, Seagram President Edgar Bronfman Jr., has amassed a big stake. "You have to be opportunistic about these things," says one top Diller adviser. That means Diller could make his move with scant warning or change strategy as assets become available.

In the short term, however, Diller needs to get his own house in order. While he has been waging his campaign for Paramount, others, including Time Warner Inc., have announced a raft of home-shopping rivals. QVC Network Inc. itself will soon launch a new upscale shopping channel, Q2, and also is selling its tchotchkes in Europe. To bolster his position in this crowded market, Diller will probably revive his efforts to merge with archrival Home Shopping Network Inc.

Before he even takes that step, Diller must settle the shifting list of players who are supporting QVC. Cable titan John C. Malone had agreed to sell his stake in QVC after his involvement raised antitrust concerns during the takeover. Since that's no longer an issue, the president of Tele-Communications Inc. will retain his 19% stake in QVC and resume his role as one of the company's three controlling shareholders, along with Diller and cable operator Comcast Corp.

But some of Diller's other backers may not welcome Malone's return. BellSouth Corp., which played a crucial role in financing Diller's bid, still retains an option to buy $500 million worth of QVC stock. TCI, meanwhile, is close to merging with Bell Atlantic Corp. BellSouth may not want to share its investment in QVC with a rival Baby Bell. What's more, Malone remains a lightning rod for federal regulators.

With annual cash flow of nearly $100 million and with funds available from backers such as Comcast and the Newhouse family, Diller has plenty of money to go shopping without BellSouth. Nor has he lost much of his luster in the takeover battle. Matsushita, which has discussed selling a minority stake in MCA to Malone, may see Diller as just the man to propel its film and record companies into the multimedia age.

The creator of the Fox network has also contemplated starting another TV network. Buying NBC Inc. would give Diller a strong foundation. But Richard J. MacDonald, a media banker at CS First Boston, warns that Diller might have to compete for the networks with such power players as Turner Broadcasting and Walt Disney.

Diller is a methodical man who weighs his objectives carefully. This time, though, media experts say he can't afford to tarry, since other potential buyers are already circling the few remaining software players. "It isn't as if there's another Paramount," notes Viacom Chairman Sumner M. Redstone. "We got the last Paramount." Sure enough. But in Barry Diller's world, this auction has only just begun.

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