IAC/InterActiveCorp Chairman Barry Diller's Media Industry Outlook for 2014
What will we be talking about this time next year?
In the short sweep of time—say, three to five years—this digital revolution we’ve been undergoing for 18 years is becoming the way of our lives. We now have Internet fluency among more people, and you have the kind of innovation that is the mandate of digital life. So the result is an ever-increasing velocity.
Music, having gone through its creative destruction, is now finding new legs. It’s completely transformed. Print, which is still in the middle of a long-term decline except for, I believe, magazines of a certain kind … is not yet at the point where it’s seeing any green shoots, and it will be a few years before it does. Will it? Of course it will, particularly tactile and visual delights—luxury magazines.
With video, we’re at the beginning of a transformation from closed systems—wired or satellite-driven—to open Internet systems. It’s only a question of the transition time. In the main media areas—music, print, video—this revolution will be radical for at least another 5 years, maybe 10. Out of that destruction will come new services and new ways of doing things.
Can anyone resist these long-term trends?
These things metastasize. For instance, cable companies found out relatively late that the CoAx wires could be used, without much additional cost, to create broadband data. Most cable operators wildly prefer their broadband service, which is 90 percent-plus margins, to the pain of negotiating with CBS over retransmission. The current business of cable-programming distribution is in a long period of distress and difficulty: rising program costs, inability to pass these costs to subscribers, decreased margins. You have to do something. Cable is lucky. It has broadband. How long does it have broadband, this closed-loop system? I don’t know.
New companies have an enormous advantage against those who have something to lose. Incumbents don’t win.
What innovations are transformative right now?
I think the broadest is touchscreen in smartphones and tablets. Because it’s what allowed most people who were not fluent to get fluency very quickly. It’s intuitive. People who are BlackBerry-savvy may complain, but no one else does. Voice-activated technologies, which is how normal people do things—that’s powerful. These are the leaps, and they’re only a few years old.
What are the investment opportunities?
Well, we want to invest alongside our biggest businesses, one of which is Match.com, our personals business; the other is search and applications. We definitely want to invest in this creative destruction in video, whether it’s through Vimeo or Aereo or our digital production operations.
Is the current environment conducive to the innovation we need?
It’s very conducive as long as we preserve Net neutrality. The most dangerous canard is that Net neutrality inhibits investment and innovation. It does the opposite, because there’s no highwayman on the broadband path who can stop you and say “pay my toll.” You can press a button and publish. Big, vested communications interests want to throw that out. They want to charge tolls because that’s how they built these big closed systems. We lucked into Net neutrality. Everybody must shout and fight to preserve it.
What businesses do you think are on the descent?
There’s a lot of money chasing bad ideas. There are so many internal valuations that only make sense if miracles happen. The valuations, the money, are making companies believe they have something to protect when they don’t. That incredible stir that comes when you have nothing to protect is an incredible building block for these companies.
Are there areas that you wish you knew more about?
By the third hour of your morning, you have some kind of a headache. The reason is you can never master the swiftness of change, innovation, knowledge, etc. It’s very daunting, in particular if you came from print or retail. You really didn’t need to know very much if you were really good, if you had better instincts. We’re in a world now where it’s not enough to be smart. You have to be curious.
Curiosity is rare. That level of intelligence is rare. Probably the further up in a business you are, the less intelligent you need to be. At the entry stage, the sieve grows ever tighter and education can only do so much. The truth is we don’t manufacture that many really smart people.
If we look back over the past 12 months, whether it’s J.C. Penney or BlackBerry, we’ve seen winners become losers in such a short time.
I think that’s going to increase. Music is less affected because it was so severely damaged and reorganized in plenty of time. The Internet speeds things up. My companies, IAC and Expedia, are in that space. We operate at that speed. At Expedia, we’ve been a disrupter in travel.
Does Airbnb disrupt Expedia?
Airbnb is primarily additive. I don’t think it’s stealing much share from urban hotels. I think it’s serving people who didn’t travel because they were scared, or couldn’t afford it, or use it because it’s an antidote to loneliness. A room in someone’s house is not as valuable as a room at the Helmsley. Expedia’s been a disrupter in travel. When travel is down, hotels love us. When demand goes up, they don’t. Nothing’s going to replace a hotel. We’ll have different versions—we have hotels in igloos now. It was thought for a time that business travel would be disrupted by videoconferencing. It’s not a large market and probably won’t be.
What should we be focused on?
We should all be much more engaged in the political process, because we have seen the damage from that. If we don’t recognize the long-term damage of such a dysfunctional process, we have bigger problems. If year after year we say, “Washington is broken,” and not find the will to fix it, everyone will suffer.
Edited and compressed for space.