One on One: Masters of his domain

Jun 11, 2001  •  Post A Comment

Sit around with a bunch of cable TV veterans and ask them to tell stories about the wild times and crazy guys who pioneered the cable programming business, and Lee Masters’ name will invariably come up.
Gerry Laybourne, for one, loves to tell the story about Lee’s lighting up a party one time. Literally. It happened in the spring of 1986, soon after Mr. Masters joined MTV Networks as general manager of VH1.
Here’s the story from Mr. Masters himself:
“I went to a sales meeting in Boca Raton [Fla.], where after dinner I watched the camaraderie of the team as everyone got drunker and drunker. I watched as they did flaming shooters of tequila only to blow out the flames before imbibing. As a newcomer, not knowing many of these people well, I restrained myself and kept quiet.
“Finally, unable to contain myself, I blurted out, `Let me show you how we did flaming shooters in El Paso!’ They brought me one. The group gathered around me, and I tossed it back, alcohol aflame. All I could remember was the look of utter shock and horror on everyone’s face. They were mesmerized. Within seconds I realized that the reason they were agape was that some of the tequila missed my mouth and the beard I had then was on fire!
“I thought, `Well, I can freak out or be cool. This is MTV after all.’ I reached up, and with my hands smothered the flames on my face to a round of rousing applause.
“The next morning I called Bob Pittman to apologize for embarrassing myself and him–since he had hired me. As I started to tell him what happened he said that he had already gotten three calls on my stunt. I apologized profusely. Bob said, `Are you kidding? You are now a god to these people.’ I knew I had found a home. Human sacrifice always works.”
Mr. Masters is somewhat more corporate these days, but he remains a fascinatingly complex character, one part colorful drive-time DJ and one part clear-headed business professional. So far in his varied career, Mr. Masters has helped MTV and VH1 get established in the ratings book, and he has reinvented E! Entertainment Television with a vision that worked better than anyone could have imagined. His current task: Steer John Malone’s Liberty Digital through the shark-infested waters of the technology world, away from its Internet portfolio and into the perhaps safer haven of interactive television.
While there’s no question that Liberty Digital has suffered greatly during the current downturn, its stock plunging from a high of more than $75 to its current single-digit status, Mr. Masters, the company’s president and CEO, has completely changed its original focus from an investment portfolio of Internet and interactive TV companies to a new emphasis on building interactive channels. Mr. Masters raised a lot of eyebrows in February when he paid $275 million for 50 percent equity in The Game Show Network, a more conventional business than those in which Liberty Digital had been investing. So there’s still an element of the risk taker about the man.
“I like Lee a lot. He’s a great CEO,” observed Spencer Wong, who covers Liberty Digital (NASDAQ: LDIG) at ING Barings, which maintains a strong “Buy” recommendation for the stock.
“He’s been the right guy at the right time,” HBO CEO Jeff Bewkes says of Mr. Masters today. But at their initial meeting in early 1990, Mr. Bewkes was anything but sure about Mr. Masters.
It was shortly after Mr. Masters was hired at E!, which was managed by HBO at the time. He was having dinner at Mr. Bewkes’ Manhattan apartment. All Mr. Bewkes really knew about Mr. Masters was that he had been in radio and had just left MTV after doing some good work there. As Mr. Bewkes recalls, after dinner the two men fell into light conversation. Mr. Bewkes probed a bit. “What’s your background, Lee? Is Masters a British name?” There was an awkward pause.
“Actually, It’s Norwegian,” Mr. Masters responded.
“`Masters’ doesn’t sound Norwegian to me,” a puzzled Mr. Bewkes responded. Another awkward silence.
“Well, truthfully, Masters isn’t my real name,” Lee managed.
Now Mr. Bewkes was really confused. Who was this guy? HBO had just signed a lengthy contract with Lee Masters, and now he was saying he wasn’t Lee Masters? “My real name is Jarl Mohn,” Mr. Masters continued.
“But we just hired `Lee Masters,”’ Mr. Bewkes blurted out. “If your contract doesn’t say `Jarl Mohn,’ it isn’t binding.”
HBO’s Seth Abraham would later joke that the network was worried it had signed a contract with an “illegal Norwegian alien.”
Mr. Masters had been through this before. He had actually been turned away from many public events when asked to produce ID for a `Lee Masters.’ All his personal identification, including his driver’s license, is in the name of Jarl Mohn, and he has just lived with the discrepancy. Somehow, they sorted it all out, and E! had a new CEO, no matter what his real name was.
No one who knew a young man growing up in rural Point Pleasant, Pa., in the 1950s could have imagined he would emerge as Lee Masters, a carefully tailored CEO guiding digital investments for a major company and living in a mansion in Brentwood, Calif.
Lee’s father, Earl Mohn, was a writer and a professor of English literature at various colleges, including the University of Pennsylvania. Earl Mohn was a heavy drinker, and he worked a succession of jobs, including a brief fling with Hollywood. The family says he ghost-wrote a screenplay for the 1958 Nicholas Ray film “Wind Across the Everglades,” which starred Burl Ives and Gypsy Rose Lee and introduced a young man named Peter Falk. Budd Schulberg, whom Earl knew, is in the film’s credits as the writer of record.
The Mohns never had much money. Lee’s mother, Suzanne, wanted to name her son after his father, but she never liked the name Earl much. Investigating, she found that the earliest form of Earl was the Norwegian name Jarl, which is what she named her son, though the family is not Norwegian.
One day in the ’50s, Mr. Schulberg, the author of the classic Hollywood novel “What Makes Sammy Run?” was visiting the Mohns when young Jarl, not yet 3 and wearing rubber pants, trotted up to the big Magnavox hi-fi, which hadn’t worked in some time. “Jarl fixed the record player; I don’t know how. And he started playing a Wagner record, over and over again,” Suzanne remembers. “Budd laughed and said, `He just might be the greatest disc jockey this country ever had.”’
Lee’s sister, Tanya Mohn, 15 months younger than her brother, recalls that he began his public performance career not too long afterward. “When we lived in Point Pleasant, Jarl would get up in front of the bus and tell jokes the whole way in. He would never even sit down. I would cringe in the back of the bus,” she says, laughing. “And then later, in high school, he would get on the school’s public address system and read the announcements. I’d cringe again.”
“I knew when I was 13 that I wanted to be a disc jockey,” Mr. Masters remembers. “I saved up my money, working two jobs, and I went to engineering school to get my FCC First Class license. I believe I was the youngest person ever to get a First Class license–at 15.” The 49-year-old Mr. Masters is sitting in his plush office off Wilshire Boulevard in Westwood, Calif., when he says this, a setting long removed from those days. A photo of Mr. Masters at the mike in the early days reveals a long-haired, bearded guy sporting wire-frame glasses, a cross between the campus radical and a hip “mathlete.”
AM radio was still playing music in the 1960s. The TV industry was not on the radar screen because Earl Mohn had banned TVs from the house until Lee was in the fourth grade. Instead, reading was stressed. Mr. Masters is still an avid reader. He’s a member of a reading club, and he’s on the board of NewStar Media, which produces audio books, printed books and TV movies. Unlike TV, radio wasn’t verboten in the Mohn household, and by the time Jarl was a teen-ager his fascination with radio had hardened into a career path.
The station manager at WBUX-AM in Doylestown, Pa.,
let Jarl do some shifts, mostly running tapes in their required time slots. Lee remembers the big thrill the first time his voice went out over the air. “WBUX, Doylestown,” he trilled, marking his debut in the media business. And he also remembers what the station manager told him after hearing that quavering voice give the ID: “Kid, you’ll never make it in radio. Go home.”
But the kid persisted. A few years later, he met someone who would have a profound influence on his life: Bob Pittman. “We’ve known each other since we were teen-agers, when I was 18 and he was 17,” Mr. Masters says. “We were both disc jockeys.”
As Mr. Pittman remembers it, “Lee and I met because there was some crazy guy in radio who used to set up a conference call among the Young Turks in radio. FM was beginning to emerge. People on the call were talking about the new way of programming, using research instead of going with the `golden gut,’ looking at programming as a business. Lee was in Louisville, Ky., and I was in Detroit.” Mr. Pittman felt that Mr. Masters was a “kindred spirit,” so on his next drive home to Mississippi, he stopped in Louisville.
Listening to the audience
“We were both teen-agers, young and ambitious, wildly optimistic, wanting to set the world on fire,” Mr. Pittman says. Pressed, he admits that his ambitions at that point might have stretched to “making it to a daytime shift.” But what the two learned then was pivotal to their later careers. “Radio is a great training ground,” Mr. Pittman says. It taught the two men to program for consumers, not to consumers. What began during those radio conference calls in the early ’70s was the idea that heavy audience research could win ratings books.
“The time we were in radio, there [were] a bunch of us beginning to listen to consumers and trying to do what they wanted,” Mr. Pittman recalls, noting that he and Mr. Masters were “controlling program directors. We told DJs what to play and when, to do news 20 minutes after the hour, when to do the weather.” This was antithetical to the ideas of the counterculture ’60s, when a freewheeling DJ had been celebrated by Joni Mitchell as a “holy man on the FM radio.” But it worked, and it kept on working. In speeches by Mr. Pittman or Mr. Masters today, that key element is always present: Listen to consumers, program for what they want.
When Pittman landed at WNBC-AM, New York, in the late ’70s, he brought in Mr. Masters, who was put on mornings in 1977 and landed in the drive-time slot in 1978, occupying the same microphone as today’s legends Don Imus and Howard Stern. Former radio colleague Dick Ferguson recalls Lee doing a “no-hype, low-key” kind of show on WNBC, more FM than AM, though Mr. Masters had been a Top 40 screamer as well. Mr. Pittman recalls that the station was “in the doldrums” when they got there and had made it to a No. 2 ranking by the time they left.
Mr. Pittman and Mr. Masters made their first forays into TV during this period as co-hosts of a show for NBC stations called “Album Tracks.” They both still sported the big hair of the 1970s. Mr. Pittman recalls the singular moment: “Lee and I had this funny relationship. First, I dragged him to New York City. And then we did this TV show in 1978, `Album Tracks,’ which ran after `Saturday Night Live’ on the NBC O&Os [owned-and-operated stations], where we started to play these things called video clips. Lee had an afro that was 10 feet wide. I was about 2 feet wide, 40 pounds lighter than I am today, with a big moustache, hair that was quite long.”
In the early ’80s, Mr. Pittman went on to fame and fortune and MTV; Mr. Masters went into radio management, and owned and ran a series of stations in Louisville and Texas. It was in Louisville in 1980 that Mr. Masters met his wife Pamela, a child psychiatrist. They have two daughters.
Working in radio is a highly unstable life, no matter how successful you appear to be. So in March 1986, when Mr. Pittman called, offering Mr. Masters a job as general manager of VH1, the new channel run by MTV Networks, Mr. Masters was receptive. As Mr. Pittman recalls it, Mr. Masters was reluctant to take the job at first, saying he’d just been offered a big job as head of a major radio station group. “Do me a favor. I will be in Dallas tomorrow. Don’t do anything until I get there,” Mr. Pittman told Lee. “I dragged him into the cable business.”
Mr. Masters ended up reporting to Tom Freston, now chairman of MTV Networks. Hiring people from radio was common in the early days. “Radio was the dominant company culture at that time,” Mr. Freston says. But what really impressed Mr. Freston was how much money Lee had made not only in the radio business but in real estate: “Lee had amassed a fortune in the radio business, in 10 or 15 jobs, always moving and selling his house and making money. I was impressed with that, that he had taken advantage of the inflationary market at the time.” Mr. Freston says Lee had “great instincts” and “great discipline.”
In the early days, VH1 was having its problems. Its stars were a pack of VJs drawn from Top 40 radio, including Scott Shannon, Frankie Crocker and Don Imus, who would make fun of the Julio Iglesias and Lionel Richie videos then being programmed. It was probably the only cable channel regularly engaged in the disparagement of its own programming. Under Mr. Masters, the sarcastic VJs were jettisoned and the channel began to air real programs that could be measured by Nielsen.
Six months into his stint, however, Mr. Masters got the word that Mr. Pittman was leaving MTV Networks to start a company called Quantum Media with the help of Irving Azoff of MCA.
“Bob’s leaving, and everyone’s calling me and asking, `Are you safe?”’ Mr. Masters recalls. “I thought, `Jesus, do people think I’m that incompetent?’ As it turned out, not only did I stay, but I got this huge promotion because Tom Freston moved up into Bob’s CEO job and I was promoted to Tom’s position, vice president and general manager of MTV and VH1.”
Mr. Masters began a series of program innovations that changed what MTV was all about. Everything at the network in those days was part of a collaborative process, and whenever you give one person credit for doing something back then, today three others claim to have actually done it. But Mr. Freston says Mr. Masters was a major force in moving MTV away from videos–“10 little programs an hour,” he says–into coherent TV shows.
Mr. Masters remembers the young Ted Demme (director of “Blow”) pitching him on a show to be called “Yo, MTV Raps” at a time when MTV was getting huge flack for not putting music by African Americans on the air. Mr. Masters also championed the idea of MTV starting a game show–which became “Remote Control,” developed by Joe Davola and Doug Herzog. And he was also present at the creation of “Club MTV.”
Until this point, Mr. Masters’ career trajectory had been steadily upward, but now came one of those bumps in the road without which VH1’s “Behind the Music” and E! Entertainment Television’s “True Hollywood Story” would not exist.
In August 1989, Tom Freston faced a decision. He had two ambitious guys working for him–Mr. Masters and advertising executive John Reardon–and he had to promote one of them, which would alienate the other. Mr. Freston chose Mr. Reardon.
“I picked Reardon because I felt more comfortable with John at the top–it was a misjudgment,” Mr. Freston says, with regret still evident in his voice. “We really needed to make some money and get going, and we were overloaded with traditional creative people and short on business people.”
Mr. Masters was shocked. Soon after Mr. Reardon consolidated his new position as president, he fired Mr. Masters, something that Mr. Freston says he didn’t anticipate. Lee saw this as a rank betrayal on Mr. Reardon’s part: They had been friends and at one point actually shared a house in Westport, Conn. Mr. Freston said he soon regretted his decision, since he quickly clashed with Mr. Reardon and ended up moving him out of
the president’s office.
“Tom likes to forget what really happened,” jokes Mr. Masters. “Every time he sees me, he says something like, `When you left MTV …”
Exquisite timing
Mr. Freston says the whole matter pained him: “And it turned out to be a boon for Lee. He went on to make a fortune. He might still be at MTV. He ought to give me a cut of his earnings,” he jokes. “His timing has been exquisite.”
Just like when that station manager told him he would never make it in radio, Mr. Masters used Mr. Freston’s then-opinion of him as expendable as a motivating factor in his tremendous push to succeed in television.
Mr. Master’s firing from MTV made the front pages of the daily Hollywood trades. Fran Shea, then vice president of promotions at HBO, read the Hollywood Reporter’s story. The pay channel was the managing partner of a consortium of cable operators and programmers that had bought a controlling stake in Movietime, a failing cable channel that devoted most of its time to playing movie trailers. Ms. Shea was involved with an effort by top HBO management, led by Mr. Abraham and Mr. Bewkes, to find a new CEO to turn Movietime around. Ms. Shea recalls, “I went running into Seth’s office waving the Hollywood Reporter, and I said, `Here’s a guy.’ Seth said, `I’ve already made the call.”’
Movietime was a mess when Mr. Masters arrived. The channel was in very few homes, and very few celebrities deigned to appear on it. One of Masters’ first acts, after changing the name to E! Entertainment Television–on the recommendation of a consulting firm–was to pull strings with cable operators to get the channel carried in Los Angeles. Once the talent began to see the channel, it started to make tiny waves. A break came when Kevin Costner directed his first movie, “Dances With Wolves.” E! stroked Mr. Costner’s directorial ego by filming on the set, and Mr. Costner gave E! an exclusive interview. Sylvester Stallone saw the interview, which aired often, and jumped on the phone. “What is this? The Kevin Costner channel?” Mr. Stallone thundered. Soon Mr. Stallone offered E! carte blanche access.
Mr. Masters also reached back to his WNBC days when he persuaded Howard Stern to join E! in 1993. The move caused huge consternation among cable operators, who knew how raunchy the shock jock could be. And E! took chances by beginning its “True Hollywood Story” documentary series, which depicted stars with all their vices and virtues. “We had to convince the business that we could cover Kelsey Grammer on `Frasier’ and at the courthouse,” Ms. Shea remembers.
Mr. Masters himself came up with the idea of E!’s “Talk Soup,” a program that aired clips of wild moments from daytime talk shows. Host Greg Kinnear had been fired when Movietime’s hosts were axed, but Mr. Masters brought him back. It is highly unusual for a cable network CEO to create programming, but Mr. Masters came from radio, where you also produce. So dedicated was he to making E! a success, the channel’s first trade ads featured Mr. Masters with a shaved head with only a tuft of hair remaining that spelled “E!” Most people thought he had really shaved his head, but it was actually the result of a five-hour makeup job.
The right fit
Dale Hopkins, E!’s head of marketing, brought in by Mr. Masters in January 1991, recalls Mr. Masters’ unique way of doing things. During her initial interview, he asked her two curious questions: “Who was your best boss and why? And who was your worst boss and why?” The question floored Ms. Hopkins, who wasn’t used to bad-mouthing former employers.
Mr. Masters is a serious student of management technique, Ms. Hopkins says, even taking a group of E! executives to a seminar run by management guru Warren Bennis. He personally interviewed all new hires, from director up, and was involved in the daily minutiae. “He didn’t have it easy. He’s been on the receiving end, so he’s very cautious about doing things fairly. He’s all about performing and contributing, and if you don’t you’re not part of the team,” Ms. Hopkins observes.
At the end of 1998, Mr. Masters started casting around for something else. “There were a couple of factors,” he says. “I’d been at E! for 9 years. Traditionally, my average tenure in jobs is about four years. I like changing what I’m doing, new challenges.”
In 1996, two years before he left E!, Mr. Masters had been approached by Liberty Media executive Robert “Dob” Bennett with a variety of opportunities. Mr. Masters’ reputation as a guy who knows how to turn around failing properties had preceded him. “It just didn’t seem like the right fit for me, and at the same time headhunters were calling about various dot-com opportunities that, financially, would have been pretty amazing,” Mr. Masters recalls. Among the opportunities offered was the CEO spot at Santa Monica, Calif.–based GeoCities, which was eventually sold to Yahoo! for more than $1 billion. GeoCities CEO Tom Evans made tens of millions of dollars from the transaction after only 15 months with the company.
In 1996, becoming an investment/finance executive might not have been as attractive as running E!, but by 1998 things had changed. Although he had amassed an equity position worth about $20 million at E!, by 1998 executives at Internet companies, like Amazon.com’s Jeff Bezos, were becoming paper billionaires, and Mr. Masters saw what GeoCities had done for Mr. Evans’ portfolio.
In the second round of discussions about joining Liberty, the company’s John Malone and Mr. Bennett asked Mr. Masters to monetize a public spinoff unit called TCI Music–which consisted of three main elements: The Box cable channel, DMX Music and SonicNet, a pioneering music Web site–and create a digital-industry investment company that would take advantage of the wild new valuations.
Mr. Pittman urged Mr. Masters to take the job: “I convinced him to go for it. Why did he just want to renew his contract? I told him he was a spectacular manager and that he ought to participate in the equity wherever he went. It’s the name of the game.”
West Coast muscle
It also could be Mr. Masters’ competitive nature that made him take on the challenge. Since moving to L.A., Mr. Masters has become a fitness enthusiast and is seriously into bodybuilding. He lifts weights with a personal trainer at Gold’s Gym in Venice, Calif., and hikes a lot and runs at the beach in Santa Monica.
And then there was the Reardon factor. After getting the boot at MTV, John Reardon had served as CEO of TCI Music, one of three management teams that had a shot at turning the flailing company around. Mr. Reardon had also championed an interactive TV technology called Zing! at TCI in the early’90s. Finishing a job Mr. Reardon hadn’t really succeeded at had to be there somewhere in the equation.
The actual creation of Liberty Digital, so named in 1999, is complex, typical of the businesses associated with Mr. Malone. Essentially, in July 1999, Liberty Media’s stakes in The Box and the SonicNet Web operations were swapped for a 10 percent stake in MTV’s Web/digital operation, which was then slated for an IPO. DMX Music, the cable music company being merged with AEI Network today, was retained. Liberty had already made a series of investments in various dot-com businesses, including iVillage, Priceline, iBeam and CBS SportsLine.
In September 1999, Liberty Media contributed the group of interactive media investments to Liberty Digital in exchange for $150 million in cash and notes. And Liberty Digital gave Liberty Media 109 million shares of its Series B common stock and 150,000 shares of its Series B convertible preferred stock. Liberty Media also ceded to Liberty Digital its access agreement with AT&T, which “establishes a framework” allowing Masters & Co. to gain access for its interactive TV channels to AT&T Broadband systems.
Mr. Masters admits to having a little trepidation at jumping into Liberty. John Malone’s companies are characterized by complex financial maneuvering. “Very few financial analysts can even follow some of the moves,” Mr. Masters say
s. “Anyone indicating that they aren’t intimidated by that is lying to you. And it’s not just John. Dob Bennett is a brilliant financial guy. This wasn’t my background. I came up through the programming side of the business. It was very intimidating from that standpoint.”
Some thought he was nuts to leave a safe position at E! At his send-off, which E! videotaped, Howard Stern proclaimed that “Liberty Media sounds like a ridiculous company. You’re going to buy equity positions in Internet companies? That sounds safe and secure. Today, Liberty Media; tomorrow, The Food Network.”
Though the stock is struggling, Liberty has been good for Mr. Masters. He has a stock option rights deal that could make him a billionaire if the market fully recovers. In a little-noticed move this February, Liberty entered into an “amended and restated deferred compensation and stock appreciation rights agreement” with Mr. Masters. This was necessary because as of January 2000, marking his first year at Liberty, Mr. Masters had vested stock options worth $133.7 million on paper, reflecting a stock price that was then in the $70 to $79 range. He could have cashed out these vested options for a huge payout, but to do so would have created all kinds of problems involving unwanted publicity and concern for the health of Liberty Digital.
So under the amended agreement, Liberty paid Mr. Masters $50 million in cash (which helped him take care of his tax liability) and awarded him 5,779,982 shares of AT&T’s Liberty Media Group common stock. At approximate current valuations, the Liberty Media common stock is worth more than $80 million. And the vesting period on the 12 million shares of Liberty Digital stock Mr. Masters owns was shortened to four years from five; he’ll be fully vested on those in 21/2 years. Should he get Liberty Digital back up in the $70 to $80 range from the $5 or $6 it has been selling at lately–and that’s a big if–Mr. Masters could become a certified member of the Billionaire Boys Club. Next to all this, his salary of $634,615 seems almost incidental. “It seems aggressive,” one analyst comments. Mr. Masters himself had no comment on his compensation.
Liberty Digital now is all about interactive TV, grouped around two main investments: DMX Music (56 percent retained after its merger) and the Game Show Network, now in 33 million homes. There is a plan to develop a travel commerce channel with Discovery and to develop interactive channels in games, Gen X/Y, automotive, home and financial services.
Mr. Masters gets good marks from a number of financial analysts for having monetized some of the most egregious of Liberty Digital’s dot-com investments before the bottom fell out. Because Liberty negotiated a “collar” in its investment in Priceline, the company was able to cash out $125 million on an investment of $10 million, notes ING Barings’ Mr. Wong. The investment in iBeam, similarly structured, eventually netted Liberty Digital $65 million on an investment of only $3.5 million. The 10 percent of MTVi that Liberty Digital got out of the TCI Music deal could wind up being valuable. “MTVi is still part of the No. 1 player,” says Liberty Digital Chief Financial Officer Mark Rozells. Some current investments, such as TiVo, are thought of as strategic; many are not, and Liberty will divest some of these, particularly the Internet companies.
Dot-com missteps
Some of the company’s most memorable Internet flops include investments in Kozmo, Webvan and Quokka Sports. Kozmo recently folded, a total loss, but Mr. Masters says Liberty kept its investment small. “It wasn’t a big loss, about $5 million,” he says. Liberty Digital also lost about $10 million between Webvan and Quokka Sports. And iVillage, an investment made before Mr. Masters arrived, is facing delisting.
Mr. Masters and Mr. Rozells have been tirelessly making the rounds of analyst presentations, trying to restore some of the more than 90 percent of the lost shareholder value by telling the “new” Liberty Digital story. Internet incubator companies like CMGI are saying similar things, but most don’t have an alternative that would separate them from the Internet businesses they have amassed. Profitability has suddenly become important in public companies again, and Liberty Digital is moving in the right direction. For the fourth quarter ended Dec. 31, Liberty Digital reported a loss from its operations of $31.3 million, compared with a loss of $321.7 million for the same period the previous year.
While Liberty Digital was downgraded by Deutsche Bank Alex Brown in February, the firm rates the stock as Market Perform. Most analysts who follow the company list it as either Strong Buy, Buy, Market Outperform or Market Perform.
`Real companies … real earnings’
Mr. Masters argues intensely about Liberty Digital’s future: “We say, `We have real companies with real earnings. We have two really solid businesses.’ I don’t think the market has recognized it today, and we have to get the word out. We’re thought of as a purely interactive TV business. Let’s build real assets, using the technology we have today, using 800 numbers, Web TV, using Ultimate TV, using AOL TV, Hyper-TV. As new technology comes along, we will add to what we have, so when the advanced set-top box gets here, we will adjust really nicely to this new world, and we will have a base from which to operate.”
Mr. Pittman, now AOL Time Warner’s co-chief operating officer, says Liberty Digital’s focus on interactive TV makes sense because the business is in an “early stage of development, not at that stage where all the holes have been filled up. I think there’s a position there. Lee has picked an area of specialization, and that helps whatever you go into.”
One analyst, however, says the channel strategy has been too slow to develop. The agreement with Discovery to develop an interactive travel channel has not fully emerged, and the other channels are just concepts at this point, he notes. “It’s been slower than anticipated,” says this analyst, who asked not to be named.
Mr. Masters acknowledges the slow pace, partly attributable to the sometimes glacial movement of cable operators’ rollout of high-end boxes. “Cable operators have to make capital calls. They ask, `Am I going to make enough money from [advanced boxes] to justify the cost?’ They’re still working on that.” But today’s $350 box is a completely different equation than the $10,000 Silicon Graphics–enabled workhorse that Time Warner’s Full Service Network bet on almost 10 years ago. “There’s a big difference between $350 and 10 grand,” Mr. Masters stresses.
To believe in Liberty Digital, you have to believe in Mr. Masters himself, that he’s the turnaround guy par excellence in a particularly shark-infested field that many, particularly Time Warner, have lost a bundle on. “In the nine businesses that I’ve run, they were each worth considerably more the day I left than when I got there,” Mr. Masters says, confident that he can and will turn the company around.
If things get really bad, would Mr. Masters shave his head for real this time, leaving only a tuft of hair resembling Mr. Malone?

Jarl Mohn, the one-time world famous Tequila flame shooter, only smiles.