Diller and Redstone are the guys who discovered that “crude” pays, and they’re determined to get more properties with which to play and profit. Diller, as the creator of Fox Television, brought us “The Simpsons,” and Redstone, through MTV and Nickelodeon, is the purveyor of Beavis, Stimpy, Rocko et al. Last week the three-week-old battle for Paramount escalated as the antagonists brought in reinforcements: Diller rounded up financial credibility from Chemical Bank, and Redstone got a $600 million injection from Wayne Huizenga, the head of Blockbuster Entertainment, the country’s biggest video-store chain. This week Redstone may announce another two investors - and a bigger bid.
The big-money maneuvers aren’t only the best takeover tale of the 1990s thus far, they are the latest skirmish in the wider media wars. This is the scramble for dominance in the new communications future, when we will all travel along the information superhighway - and pay a lot of toll fees to the shrewdest gatekeepers. It resembles the historic contests to drill oil or build railways, and if even the experts don’t know what the future looks like, they are nevertheless in a mad dash to buy land rights and lay track.
That makes Paramount a hot property. Early last week the excitement focused on Redstone and his friend Huizenga, who had been talking for months about possible ventures. When QVC came in to challenge Viacom’s bid for Paramount, Huizenga got on the phone. Wednesday morning, after days of round-the-clock negotiations, exhausted lawyers brought documents to the two magnates in New York’s Carlyle Hotel, where they had drummed their fingers through two hours of coffee and croissants. They had a deal.
By Friday the loquacious Redstone was mute, while sources suggested that he was in talks with Cox Enterprises, a newspaper publisher and the nation’s sixth largest cable operator, and with telephone companies, including Southwestern Bell. The hope: more cash investments to help him boost his bid.
In the QVC camp, Diller announced only Chemical’s role, quieting critics who had questioned his financing. But if Viacom moves again, Diller is unlikely to sit still. One possibility, says Guy Wyser-Pratte, a Wall Street trader, is that Diller will launch a hostile tender offer, appealing directly to Paramount shareholders.
Whatever the strategy, both Diller and Redstone seem determined to keep dueling for this prize. Paramount comes equipped with big film and TV hits like “The Firm” and “Cheers,” a huge library of other valuable titles and a grab bag of properties such as Simon & Schuster and the New York Knicks that could also be grist for the media mill. It’s a delicious meal for Viacom, QVC and the Other contenders hungry for “content.”
Content is part of the tripod of the communications future - along with networks to transmit all that content and the technology, like sophisticated remote controls, to help the consumer select, manipulate and interact with it. And the hot idea now is vertical integration: having two or three parts of that tripod in your own empire. The prescient John Malone, for example, is head of TeleCommunications, Inc., the Denver-based cable giant that serves a whopping fifth of the nation’s 60 million cable subscribers. But a TCI spinoff called Liberty Media also has stakes in a long list of cable channels, from The Family Channel to Diller’s QVC. Malone is one of those bankrolling Diller’s bid. If they win, that will give Malone control over a huge supply of programming for his own channels and network. It will also mean he can control who gets access to the material, and to his network.
It’s this kind of empire building that scares some watchdogs of the dawning media age. No doubt, Sumner Redstone has visions of the same type of empire; that’s why he wants a linkup with cable and telephone companies. But Redstone’s first move against Diller and QVC, made two weeks ago, was to sue Malone for antitrust violations, evoking the specter of Malone as a late-20th-century robber baron who will use his power to block access and raise prices. Malone dismisses such notions. But he prompted new fears last week, by signing a deal to buy Disney movies for the next decade to be broadcast on Encore, his competitor to Home Box Office and Viacom’s much smaller Showtime.
The growing power of executives like Malone and companies such as Time Warner worries people besides Redstone. The Federal Communications Commission has just issued new rules setting limits on cable ownership-although a federal court has said such limits are unconstitutional. Ohio Democrat Howard Metzenbaum, who heads the Senate antitrust subcommittee, is “very concerned,” says an aide, about mergers such as AT&T’s with cellular-phone king McCaw, and about some Malone ventures. The new antitrust chief in the Justice Department, Anne Bingaman, has gone on record as an “unabashed and enthusiastic” trustbuster.
Industry insiders, too, trip the alarm. Mitch Kapor of Lotus Development Corp. points to the people building the information highways. They want “to further their interests, not necessarily ours.” What happens to free speech, he asks, “if ’they’ will let you on only if you pay their tariff, or only if they like [your] message?”
Some fears may be overblown. There was buffing and puffing when Diller’s QVC proposed buying Home Shopping Network, its main rival. Then last week Time Warner and Spiegel announced the creation of a brand-new retail channel. Even the power of a cable operator such as TCI may fade as the telephone and wireless companies get into the act; they may end up as the primary carriers of voice, video and data.
The balancing act for the government may be in allowing the industry to blossom while protecting consumers and competitors in the short run. “Technology is changing so fast that these problems may vanish,” says Irwin Stelzer of the American Enterprise Institute. “But right now it can be a problem.”
The same could go for the invasion of privacy. The smart PC-cum-TV of the future will help us do so many things-pay bills, watch movies, program the home alarm system, talk to friends and relatives-that it will be a conduit for the most intimate details of life. Consultant Don Peppers expects a flood of legislation designed to protect consumers. But ultimately he sees the development of a sort of video valet service that buffers consumers from the market, helping them sift and control what comes in and out.
Though barely imaginable now new companies and services such as the video valet will soon populate the landscape. Futurist Paul Saffo says that battles like the one for Paramount are “the dying gasp of the old TV order, not the birth of a new one.”
Still, it’s the best show in town right now. The next weeks should bring higher bids, emergency board meetings and, inevitably, some surprises. Barry Diller and Sumner Redstone may not be your first choice for cultural captains, but at the moment, they rank as moguls most likely to succeed. Watch out, dude.
Hollywood’s famed ex-movie mogul turned home-shopping magnate Barry Diller leads the bidding for Paramount. His $9.7 billion offer is backed by John Malone, head of mighty Tele-Communications, Inc./Liberty Media, and Comcast’s Brian Roberts.
Said chairman Sumner Redstone to Blockbuster chief Wayne Huizenga: “We’re gonna win!” Replied Wayne to Sumner: “I wouldn’t be here otherwise.” With that, the pair joined forces to vie for Paramount - and create a global entertainment “colossus” built on the likes of Nickelodeon and MTV.
Martin Davis is the sought-after man in the middle. His not-so-secret game? To wring as much cash as he can from Sumner, then marry Paramount to Viacom. But what if his archfoe Diller wins? Davis most likely would be out - road kill on the Information Highway.
Everyone wants in on a deal so hot it looks like the ’80s all over again. Ted Turner could yet team up with Diller & Co. Cox Enterprises and Southwestern Bell are talking with Viacom. This is the fast lane to the Digital Age.
