White Knight or Thorn in Barry's Side?

It didn't take long for Vivendi Chairman Jean-Marie Messier and Barry Diller to get chummy. Within three weeks of Vivendi (V ) announcing last June that it was buying Seagram Co. for $34 billion, Messier jetted off for an introductory sit-down with Diller at Los Angeles' Four Seasons Hotel. Vivendi would be taking over Seagram's 43% stake of Diller's USA Networks Inc., and the intriguing subplot was that Diller's white knight had finally arrived. Under Messier, Paris-based Vivendi would help Diller realize his long-held goal to buy TV network NBC or some other large media property. "We're all learning French as quickly as we can," joked Mark Bozek, CEO of USA's Home Shopping Network, at the time.

A year later, it seems Messier needs Diller at least as much as Diller needs the 44-year-old former investment banker. Already, they talk at least weekly. And Messier is moving to New York, where Diller spends half his time. That raises the question of how cozy might be too cozy for Diller, who has fallen out with nearly every media exec he has worked with--from Rupert Murdoch to Paramount Communications Inc.'s Martin S. Davis. "At this point in his life, Barry doesn't want to work for somebody else," says SG Cowen Securities Co. analyst Ed Hatch.

LEG UP. Messier's challenge is to ratchet up the newly named Vivendi Universal to offer a wide array of e-commerce and interactive entertainment over Canal+, its European pay-TV network, and Vizzavi Ltd., its European wireless Net portal. Suddenly, USA Networks' shopping, ticket, and travel businesses look like a leg up--especially for Vizzavi, which faces tough rivals. What's more, USA Networks (USAI ) has a proven track record in e-commerce; Vivendi does not. And Diller might just help Vivendi get a foothold in the U.S. cable or satellite markets. "Having USA in the family makes it that much easier for them," says Merrill Lynch & Co. analyst Neil Blackley.

As for Messier, he believes he can help Diller speed USA's global growth by offering him rich new outlets for those businesses. About 10% of USA's estimated revenues of $5.5 billion this year is expected to come from overseas. Messier says one way to boost the numbers might be Canal+, whose 15.3 million subscribers make it Europe's No. 1 pay-TV operator and a possible new outlet for USA's Home Shopping Network.

Beyond those plans, just how far will the synergy stretch? Canal+ still doesn't have the upgraded set-top boxes to provide the range of interactive services Messier envisions. Vizzavi, a joint venture between Vivendi and cell-phone operator Vodafone Group PLC (VOD ), has repeatedly delayed its rollout in Europe because Web-enabled, next-generation cellular handsets aren't yet widely available. Even when it's up and running, Vizzavi will face stiff competition from portals such as Yahoo! Inc. (YHOO ) and European Net giants such as Deutsche Telekom's T-Online International.

Stateside, of course, Messier is well aware of Diller's importance, particularly as Vivendi's eyes and ears for deals to strengthen its U.S. distribution. That might be why he is looking to hug USA Networks even tighter. He is in talks with dealmaker John Malone about a stock swap that would boost Vivendi's ownership of USA from 43% to 63%. Messier says taking a greater stake in USA is a good investment and not meant to breathe down Diller's neck. "He's the guy who makes the decisions," he adds. But to Barry, he could seem like just another meddlesome boss.

By Tom Lowry in New York, with Carol Matlack in Paris and Ronald Grover in Los Angeles

— With assistance by Carol Matlack, and Ronald Grover

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