The Miserable Lives of Media Moguls
By Ronald Grover
Last year was tough for media moguls, and 2003 isn't starting out any better. AOL Time Warner Chairman (AOL ) Steve Case quit under pressure. So did Sony Music head Tommy Mottola and Jay Boberg, president of Vivendi Universal's MCA Records unit. Case fell victim to an overhyped merger whose benefits never materialized, while Mottola and Boberg had to answer for falling sales at the divisions they ran.
Indeed, it looks like every A-list media mogul is under attack. Barry Diller is getting whipsawed by Vivendi (V ), the French company from which he hopes to buy the Universal film studio. Viacom President Mel Karmazin is getting sliced and diced by Sumner Redstone, the Viacom chairman who only a few months back was making kissy-face with the guy running his company. Michael Eisner has been under attack for, among other things, having on Disney's (DIS ) board his architect and others too close to him. Rupert Murdoch can't get the buy of his lifetime made. And John Malone is drawing snickers for being the dealmaker who can't seem to strike a deal.
IN THE DOG HOUSE.
The problem with being a mogul is that knives are always at the ready, and jealousy simmers just beneath the surface. But heavy debt, stock-market doldrums, and music piracy on the Internet have damaged that patina of politesse. As one of the tribe told me not so long ago: "Everyone hates everyone else. We only make nice to one another at social events, where it would be uncivilized to do anything else." He summed it up this way: "We're all hoping the next guy fails."
Diller looks like the most vulnerable. The USA Interactive (USAI ) chairman seems -- uncharacteristically -- to have messed up what looked like a sure thing. Diller has run Vivendi's Universal Entertainment unit since his company sold its TV properties to Vivendi in 2000, and the French had been counting on him to guide them in the wake of dealmaker Jean Marie Messier's forced departure in the summer of 2002. But Diller picked a major fight with Vivendi, saying his company was owed $620 million in taxes as part of the 2000 deal.
That put Diller in the dog house with Vivendi's new Chairman Jean-Rene Fourtou when the two met in New York on Jan. 21. In the next two weeks, both sides are likely to announce a deal to untangle their fates. As of now, Diller holds a 5.4% stake in Universal Entertainment and can block any large Vivendi transaction. Vivendi wants to spin off at least a piece of the U.S. studio unit and may cut Diller out of the deal, say sources close to the talks.
Diller and Fourtou issued a statement on Jan. 23 saying: "We have previously said we are each desirous of renegotiating various aspects of the VUE joint venture. These discussions, cordial and collegial, continue."
Diller's problems may complicate life for Malone, who wanted to help Diller finance the Vivendi transaction. Malone wants to merge some of his Liberty Media (L ) assets, including the Starz Encore pay-TV channel, with Vivendi's studio and its cable channels. The deal would be a welcome one for Malone, who has spent most of the last two years kicking around Europe, trying -- unsuccessfully -- to buy cable properties in Germany, Britain, and the Netherlands. A Liberty spokesman was prepared only to reiterate that the company, which owns a large USAI stake, backs Diller.
While Malone cools his heels, fellow mogul Murdoch is still trying to get General Motors (GM ) to the table to negotiate the sale of GM's 30% stake in DirecTV. Murdoch wants it for his worldwide armada of satellites delivering the TV shows and movies produced by his News Corp. (NWS ). The GM board is expected to meet in early February to decide whether to move forward with talks, allow management to try to buy DirecTV's parent company, Hughes Electronics (GMH ), or maybe float a public offering of the satellite assets.
Over at Viacom (VIA ), Karmazin and Redstone, who owns 68% of Viacom, have been feuding for months. Redstone gave Karmazin the power to run his company as part of the 2000 CBS-Viacom merger, and he can't fire Karmazin without the support of 14 of Viacom's 18 board members. Redstone has chaffed as Karmazin has made decisions without checking with him. Now, despite assertions that he wants Karmazin to stay when his contract expires in December, Redstone has told The Los Angeles Times that he "made a sacrifice to get CBS" and "gave up a lot of power, and I didn't like it."
Doesn't sound like Karmazin is going to have an easy time of it. Karmazin, say those with knowledge of the talks, has told Redstone he might leave to join another media company (both Disney and AOL Time Warner have been rumored to be in the running) if he doesn't get his deal. Viacom says Karmazin won't comment. Still, I figure that Karmazin, who has a big chunk of his personal wealth tied up in Viacom stock, won't quit while all media outfits are in the dumper. That probably means he'll swallow his pride and hang in there -- despite a boss who seems to be getting territorial.
Another with much on his mind is Disney Chairman Eisner, who has been under attack for several years over Disney's poor performance -- and also for a board that seems to have been handpicked to be as friendly as possible. He has been forced to take measures to ensure greater board independence. Former Senate Majority Leader George Mitchell was recently elected as a presiding director, and on Jan. 27, the board is expected to reduce its size, with some members most closely aligned with Eisner likely to leave, including his architect.
Before you start getting all weepy for these beleaguered big shots, put things in some perspective. The recently resigned Case, Mottola, and Boberg each has a healthy pile of dough to console him. Odds are that Eisner, barring some calamity at ABC, will manage to stick it out at Disney. As for Diller, Vivendi has to pay him off to go away. And Malone and Murdoch will most likely find deals to call their own. The only real damage may be to their egos. For media moguls, though, the ego can be everything.
Grover is Los Angeles bureau chief for BusinessWeek. Follow his weekly Power Lunch column, only on BusinessWeek Online
Edited by Patricia O'Connell