(3 of 4)
So how would Dillervision work? One scenario posits that Vivendi's American entertainment assets are spun off into a new publicly traded company, with Diller at the helm. That would eliminate the Franco-American culture clash. And investors would probably react favorably to having a proven hand such as Diller's steer the company. Diller clearly relishes the limelight that comes with being a Hollywood chieftain, but it would mean he would have to work once more with the Bronfman family-- an unlikely development. "I doubt Barry would work for Edgar Jr. again," says a Hollywood insider. "Barry has always been a hands-on manager, and it's always bothered him how CEOs at some point lose control making movies." Diller wouldn't comment.
Diller has his own company to run-- USA Interactive (USAI), one of the few dotcoms to emerge intact from the crash. Says analyst Peter Mirsky: "They say some people find God. It seems Diller has found Warren Buffett. In the past few months he has been talking about cash returns, clean balance sheets and going back to the basics." Diller sold USA's cable and TV assets to Vivendi precisely to get out of the entertainment business. He has said he intends to spend $9 billion bolstering USA's e-commerce sector. He is planning to buy out minority shareholders of Ticketmaster and websites Expedia.com and Hotels.com For Diller to merge Vivendi's assets with USAI's would mean a sharp strategy reversal. Nor would USAI's investors want Diller to become CEO of two large companies. "Diller is sitting on a powerhouse of assets [at USAI], and his impetus should be there," says Larry Haverty, a money manager with State Street Research, a Boston money-management firm that holds several million dollars' worth of shares in USAI.
The dismaying fact for Vivendi stockholders is that several of the firm's businesses are doing just fine. Cegetel's wireless subsidiary, SFR, is growing rapidly and last year earned about $1.8 billion before taxes and other charges. Universal Music Group, run by chairman Doug Morris, has managed to gain market share amid an industry downturn. The theme parks, with new expansions in Japan and Spain, are recovering from the post-Sept. 11 travel slowdown. And Universal's movie studio is in much better shape than when Vivendi bought it. After a stellar 2001, Universal has had a mediocre record this year. But that's the nature of the business, says Jeffrey Katzenberg, a co-founder of DreamWorks, which has a distribution deal with Universal. "Nobody is ever able to sustain record-setting paces year in and year out," he says. "Without question, [Universal] is one of the best-run studios in town."
Messier's defenders say he is a victim of bad timing more than bad strategy. Signs of Vivendi's synergies are just now emerging, they say, and a few years from now companies that control both media content and the digital means to deliver it will be making fat profits. That would help Messier, who was trying to persuade Vivendi's board to pay off $25 million in loans he had taken out to buy Vivendi shares, now worth a fraction of what they cost him. He also asked the board for at least two years' salary in severance, worth more than $14 million. In his autobiography, j6m.com Messier criticized other CEOs for taking golden parachutes. Clearly, he never anticipated being thrown off his own plane.