I f the enemy of my enemy is my friend, as the old chestnut says, then it makes perfect sense that Barry Diller would host a swanky soiree last summer for his former boss Rupert Murdoch. They once had been on the outs: after building the Fox television network for Murdoch in the 1980s, Diller stormed off when Murdoch refused to make him a partner in his News Corp. media empire. But 15 years later, here was Diller—now a full-fledged mogul in his own right after building up the Internet company IAC/InterActive—hosting the crème of Manhattan aboard his yacht to celebrate Murdoch's successful bid for Dow Jones and its iconic Wall Street Journal. When Diller and his wife, fashion designer Diane von Furstenberg, welcomed Murdoch and his wife, Wendi, aboard their yacht, moored on the Hudson near Diller's new Frank Gehry–designed headquarters, the two moguls found themselves in the same boat in more ways than one. They now had a common nemesis: cable titan John Malone, who'd eased his way into each of their companies with big, friendly investments.
The cost of appeasing John Malone—the man Al Gore once called Darth Vader because of his stranglehold on the cable industry—can be steep. Fourteen months ago Murdoch agreed to give Malone control of DirecTV to make peace, a transaction valued at $11 billion. Diller's fee may be even stiffer personally: it may cost him his job as CEO of IAC/InterActive, which owns Match.com, Ticketmaster and Home Shopping Network. Malone, who actually controls IAC, is seeking to oust Diller, accusing him in a lawsuit of maneuvering to dilute Malone's ownership. This follows Diller's own suit to affirm what he says is his right to break up IAC and rid himself of more than a decade of Malone's commanding influence. Diller has called Malone and his fellow executives at Liberty Media "insane." Reached late Friday, a Liberty spokesman declined to comment, saying the company "will leave the colorful language to Barry."
Whatever the outcome—and it's as apt to be a negotiated settlement as anything else—the showdown marks a noteworthy passage in the annals of the media industry. With Diller, Malone is seeking to tame the man considered to be the last great media titan of his era. Over several decades, the reclusive Malone had made himself into a kind of mogul's mogul, investing in the ventures of businessmen like Diller, Murdoch and Ted Turner. Today the mogul mind-set appears to be a casualty of an atomized media culture. Entrepreneurs now seem perfectly content to survive just long enough for the IPO—or for Murdoch to buy them.
Diller and his peers are large-living, sharp-elbowed workaholics who were all born in the early years of television and set out to fundamentally revamp their industry. With an unusual similarity of vision, each embraced bigness and self-sufficiency as the path to success. Hitting their strides from the mid-1980s to the '90s, they transformed their companies into vertically integrated media conglomerates through a series of front-page megadeals. The likes of News Corp., Sumner Redstone's Viacom and Time Warner (owner of the Turner-created CNN) grew to own almost every form of media and distribution—from magazines and books, to cable systems, TV networks and movie studios.
These men became one and the same with their companies, so that News Corp. is Murdoch and Viacom is Redstone (by comparison, the new group of chieftains—men like Jeff Bewkes of Time Warner and Robert Iger of Disney— represent a return of a professional management class to the corner office). Their bigger-than-life personalities made the entertainment industry more entertaining: thrice-married Murdoch, 76, met at least two of his wives at the office, including his current spouse, Wendi, who is almost 40 years his junior and bore him two children who are roughly the age of his grandkids. Not to be outdone, the 84-year-old Redstone, who seems to be in perpetual nuclear war with his children, married a 40-year-old schoolteacher in 2003.
Malone helped most of these moguls along the road to success. But the one who giveth can take away, and he has since clashed with all of them—revealing their vulnerabilities and diminishing their stature while spotlighting his own sway over men widely regarded as some of the most influential in the global economy.
For a long stretch from the 1970s to the 1990s, "you had four or five personalities in a full-size way in the entertainment and media business," Diller said in a brief interview with NEWSWEEK (he is a director of The Washington Post Company, which owns NEWSWEEK). "One by one," they've crossed Malone, Diller notes, agreeing that his own row may be seen as the end of an era of outsize media moguls. "I think that's accurate," he says. Diller would not comment on his specific dispute with Liberty Media.
Malone, who rarely ventures beyond Liberty's headquarters in a Denver suburb, got his start in the 1960s as a cable-equipment executive. In the years that followed, the Connecticut native became one of corporate America's most powerful, if controversial, industrialists, emerging in the 1970s as the boss of Tele-Communications Inc., once the nation's biggest and most aggressive cable operators and Liberty Media's progenitor. Armed with a fearsome intellect for financial wizardry and business strategy, Malone was arguably the most important force behind the rise of cable television, supplanting the traditional supremacy of CBS, NBC and ABC.
TCI was flirting with bankruptcy in 1973 when it wooed Malone. After holding lenders at bay and refinancing the loans, the Yale-educated financial whiz began a new debt-fueled frenzy of deals that expanded TCI into one of every five homes over the next two decades. By then, Malone and TCI's founder, the late Bob Magness, had gained tight control over the industry's most powerful company, which also held stakes in the Discovery Channel, Black Entertainment Television and other top-10 cable networks. When Malone structured a cable bailout of Ted Turner's debt-laden company, TCI ended up with a 25 percent stake. Similarly, he gained a stake in News Corp. when Murdoch ran into financial trouble in the early 1990s.
In 1992, Malone hired Diller when he left Murdoch's employ. Diller—who had worked his way up from the mailroom of the William Morris Agency to head Paramount Pictures and then Fox—joined QVC, the home-shopping network then jointly controlled by Malone and the Roberts family of Comcast. From that perch, Diller—with the backing of Malone and Roberts—launched a takeover battle for the Paramount studio. It pit the Diller-Malone team against Redstone, who was also bidding for Paramount. In the end, Redstone was victorious—one of the few times Malone was defeated.
Apparently with Malone's continuing support, an unbowed Diller arranged a CBS takeover in 1994. But it fizzled after the Roberts family—which was clearly against the deal—moved to take full control of QVC and fired Diller. But Diller's godfather Malone was steadfast: he handed Diller new assets, including Home Shopping Network and a group of local television stations, to make a fresh start. It was the beginning of IAC/InterActive—and the beginning of the end of a relationship that now, 18 years later, is crumbling in a courtroom showdown over who controls whom. Too bad it won't be televised.