TV IN TRANSITION: Diller could foil Messier

Nov 5, 2001  •  Post A Comment

Barry Diller owns it. Vivendi Universal Chairman Jean-Marie Messier wants it: USA Networks’ domestic television production and distribution platform, off of which Vivendi Universal could leverage its film, music and other properties.
However, Mr. Diller has no intention of selling or sharing control of his valuable televisionrelated assets.
“He [Messier] can say what he wants. We own it, all talk aside,” Mr. Diller told Electronic Media last week. “If there were anything to talk about, we’d talk about it. Otherwise, it’s just noise.”
Neither media mogul will comment on his specific discussions concerning Mr. Messier’s desire for a role in USA Networks’ television business, which Universal, under Mr. Messier’s predecessor, Edgar Bronfman Jr., sold to Mr. Diller in 1997 for $1.2 billion and 45 percent of USA Networks. By some accounts, Mr. Messier, who is also said to be in co-production talks with NBC, wants to actually reclaim the domestic TV distribution of Universal films and the entire TV production and distribution business. Canal Plus, the leading European pay-TV operator, is the only distribution platform Vivendi owns.
Last week, during a conference call about his company’s third-quarter results, Mr. Messier told reporters and analysts, “Our relationship with USA Networks will move in the coming months.”
He added, “I want to make sure that we don’t leave money on the table by leveraging Universal’s success on the movie side for TV production and distribution.”
At a luncheon with reporters in New York following the conference call, Mr. Messier was quoted as saying Universal’s TV production initiatives are essentially thwarted by the current relationship with USA, which separates production from distribution, and that he expects to make changes with regard to the studio’s TV operations before the end of the year.
Diller keeps control
Would Mr. Diller consider swapping or selling back USA Networks’ TV production and distribution operations?
“Clearly not,” Mr. Diller said.
In fact, despite its 45 percent stake in USA Networks, Vivendi Universal can’t do much to grow its stake or do anything to move on any of its assets without Mr. Diller’s consent. The USA Networks partnership pact with Vivendi gives Mr. Diller right of first refusal and voting control over any such transaction.
Mr. Diller said there are no clauses or conditions in the current pacts between the two companies-“Zero, nothing”-that would force him to forfeit control or financial interest, or to share any of his company’s holdings. Mr. Messier is seeking to restructure the pact between the companies, but sources close to Mr. Diller say he would require access to some of Vivendi’s assets in return.
“We’re very happy to accommodate, to the degree we can, any of the desires Vivendi Universal has. The issue of whether we can or not is, of course, in the details,” Mr. Diller said.
Although Mr. Diller declined to comment on possibilities, some analysts who follow the company say USA Networks, which has slipped from first place in the cable ratings, could benefit from an infusion of movies and other Universal programming. The companies have long talked about partnering in a new branded cable network that would draw on Universal’s film library.
“We have continuing discussions with them which relate to our working together with them and working in joint ventures and working along cooperative lines-none of them involving the exchange of shares or interests or assets,” Mr. Diller said.
Vivendi’s wish list
For his part, Mr. Messier has been throwing his deals wish list on the table everywhere he goes, calling on the likes of Mr. Diller, NBC Chairman Bob Wright, Sony Corp. of America Chairman Howard Stringer and others about strategic alliances that would give Universal a domestic springboard to a burgeoning digital television market.
NBC declined comment on discussions with Vivendi Universal. However, sources close to the company say there are a number of options, including reciprocal agreements for NBC to air Universal films and product on its broadcast network or to help Vivendi Universal launch a branded cable channel in the United States.
The two companies could co-produce and finance new television product, and Vivendi Universal could agree to distribute NBC-owned and -produced programming on Canal Plus, its dominant pay cable operator in Europe. Mr. Wright is seeking to extend NBC’s reach without making costly acquisitions and also is conducting such discussions with other media and entertainment concerns, sources said.
Sources say Mr. Messier also made overtures last week to others, including satellite merger partners EchoStar and Hughes Electronics’ DirecTV, about aligning to provide Universal’s branded product to subscribers.
“Messier does shoot from the hip. That’s part of his charm,” said one high-level media executive. “He talks to everybody all the time, and he’s always looking for deals.”
Chao out of the picture
Last week, USA Networks announced a closer integration of its film and television production units under Michael Jackson, the new president and CEO of USA Entertainment, and the resignation of USA Cable President Stephen Chao the day after Mr. Messier’s comments about wanting to reclaim some of USA Networks’ television operations. The timing was coincidental.
“Do you think we organized our entertainment units in response to some statements [Mr. Messier] made?” Mr. Diller said, adding that Mr. Chao’s departure has been planned for some time
“Yes, absolutely, because we are consolidating our entertainment operations under Mr. Jackson,” he said. Mr. Jackson is expected to find ways to bolster USA Networks’ television operations that could involve shared production and distribution arrangements with Universal, both in the United States and abroad.