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The Honolulu Advertiser
Posted on: Monday, March 24, 2003

E-commerce ventures pay off for 'old media dog'

By Gary Gentile
Associated Press

LOS ANGELES — Barry Diller has been saying for years that his passions have shifted from the entertainment industry to the fledgling world of electronic commerce.

The problem is, few were listening.

While Diller was making bets on such untested ventures as online personal ads, online travel booking and online ticketing, the media, investors and the growing group of professional Diller-watchers kept wondering when he would make his next bid for a movie studio or broadcast network.

It's a battle Diller is tired of fighting.

"There's no point in struggling too hard, because no matter how you struggle, the media is going to write to the drama, notwithstanding, often, what the facts are," Diller said in a recent interview.

What some find hard to believe is that Diller, 61, who helped launch the Fox Television network, served as chairman of Paramount and tried to buy both Paramount and CBS, is content running USA Interactive, a company that operates the Home Shopping Network, Ticketmaster (which last week bought Honolulu-based Ticket Plus), Expedia, Citysearch, Match.com and other electronic commerce services.

It's not that Diller has lost his passion for the entertainment industry.

"I love the entertainment business. I'm drawn to it. It will always pull me," Diller said. "I have had the ability to process all the stuff down to something that's quite clear, which is I'm not ambitious in this area, in the area of entertainment and I'm very ambitious about USA."

Diller made his ambitions clearer last week when he resigned as interim chief executive officer of Vivendi Universal Entertainment. He said his dual role was confusing and inappropriate while VUE's parent, Vivendi Universal, is trying to sell its U.S.-based entertainment assets, including Universal Pictures, theme parks and television production company.

As recently as Wednesday, however, the shrewd dealmaker stopped short of ruling out a bid on one of VUE's assets.

Diller took on the dual role in December 2001 when Paris-based Vivendi Universal bought Diller's USA Network, Sci-Fi Channel and a television production company and installed him as CEO of Vivendi Universal Entertainment, a joint venture between the two companies. Diller's role changed in mid-2002 when Jean-Rene Fourtou became Vivendi Universal chief executive in a management shake-up and Vivendi decided to sell its U.S.-based entertainment assets, including Universal Studios.

At that time, Diller agreed to run the company on an interim basis and share the title with Fourtou.

Diller, whose worth is estimated at about $1 billion, built USA Interactive into a powerful portfolio of companies, including the top travel, ticketing and online personals sites. The company had $4.6 billion in revenue in 2002, with profits coming mainly from transactions over its sites, and expects revenue to increase 24 percent to $6 billion in 2003.

"They are well positioned to take advantage of consumers' migration online," said Peter Mirsky, an analyst at Fahnestock & Co.

USA Interactive is expanding internationally and is considering launching a cable television travel channel in the United States. It is aggressively marketing Match.com and recently targeted the growing U.S. Hispanic market by becoming the exclusive provider of personal ads on Univision Communication's Web site.

USA Interactive is also considering getting into the online classified advertising market this year and has said it is also looking at acquisitions in the financial services and real estate areas.

"Something in the personal finance area makes a lot of sense," Mirsky said. "Auto loans, home equity loans, definitely something where they are not using their balance sheet, but where they would be an intermediary between supply and demand, just taking a transaction fee."

USA Interactive is well positioned to expand, with nearly $4 billion in cash and almost no debt. The company will also reap a huge profit if it converts its interest in Vivendi Universal Entertainment into cash this year. USA Interactive owns 5.4 percent of VUE's stock and has a preferred interest as well. Diller personally owns 1.5 percent of VUE.

Diller said it is unlikely USA will negotiate a deal this year that will transform the company, such as a merger with a much larger company like Yahoo.

"The only thing I'm really wary about is the big mistake," Diller said. "I can handle every other mistake. And transforming transactions can be that."

Diller's professed love for the interactive business won't likely stop speculators from wondering if the "old media dog," as Diller describes himself, is just waiting to make another bid for a broadcast network or a film studio.

"While I do want the record to be clear, I've kind of decided not to struggle too much with all of this," Diller said. "There's nothing I can really do about it. Events will prove things through."