Barry Diller - Building An Entertainment Empire - [Invest Like the Best, EP.441]

26:24He said, do it. I said, well, we have to buy these stations. It'll cost a billion, one 50. and then it'll cost, I don't know,$150,$200. And he said, do it. What could be better? There was a moment when the Simpsons and Home Alone together effectively saved his bacon. That's true. What was going on then? Why was there so much risk? Why did those things need to happen? Well, what happened is a gambler, industrial gambler, and someone who keeps trying to change things, Murdoch had overextended himself because he had taken on a huge amount of debt to start satellite broadcasting in the UK. He'd taken on debt to buy TV Guide, which at the time was like America's Bible.

27:10Now, of course, kind of irrelevant. And he paid$3 billion for it, which ended up some years later to be relatively worthless. So he had overextended himself, and the banks didn't want to renew. It literally was the renewal of his entire loan package. And there were 50 banks, I think, that were involved all over the world. And some of them had very little exposure. Big bank, big exposure, all said yes. But the smaller ones said, no, you're too much of a gambler. It's too dodgy. And we're not going to renew. And it literally, for about a year, it teetered on whether or not they'd renew these loans.

27:54and since there was not more credit and because of the debt repayments and all, cash became extremely important, literally, to keep the lights on. Home Alone, which was this giant hit at the time, and poured cash into the company. At that time, we were very cash positive, Fox. It wasn't Simpsons yet. Simpsons later delivered huge returns. But it was the cash basically from Home Alone that kept the company from going dark before he could refinance his loan package, which took place about a year later. What was he like in that period? I have so much admiration for Rupert. I have some issues that are not admirable about his conservatism.

28:44But during that period, he never complained. He suffered enormously, but his character was that he would not show it and he wouldn't complain and he wouldn't blame others, took full responsibility for it. Yes, no favors. Yes, no whatever. And that's a great demonstration of character. How much did he care about money as like a motivator? He adds better than I do. For me, part of the fun of being in the movie business is I love process. Another difference between us is he doesn't like process. He wants, basically, he has an idea. He wants to get to the conclusion of the idea so he can move on to the next idea.

29:24I love process. So you make a movie. It's not an easy thing to go through. And usually when it's more difficult, the movies come out better. A happy set is a boring set. When you make a movie in olden times before streaming, you open it on a Friday night. And by Saturday, Sunday, this is, again, before a lot of predictive stuff comes along that can tell you what the engross is going to be. You literally understand every theater in the U.S. and you get one by one the results from these theaters as to how it's doing on its first showing, its second showing, its third showing. that process which either you're building yourself into a success into a hit movie because people are going to see it or not that's a iterative processy thing i love that the rhythm of it was worth the candle of making the film i can't remember one of the early days of fox with rupert i think we were talking on a sunday of some movie that was diehard and i'm getting these hourly figures whatever and And I think, how's it doing?

30:34And I said, it's doing really well. He said, all right, well, so if it's doing this, how much will it make? I said, what do you mean how much will it make? He said, well, no, no, no. Let's take the data of this and the data of that and multiply it by whatever. And what will be the final amount that it'll make? And it was like, fuck if I know. I don't want to know right now. I want to enjoy the process of learning about it as actual human people are coursing through and sitting in those seats. All he wanted to know, give me the final amount so I can take that amount and invest it somewhere else.

31:11Did you ever care about money? Was it ever a motivator? Never, ever, ever. I mean, I'm an odd character, obviously, because there are definitely some of us. Although, weirdly, people who have grown up with wealth, they seem to be very concentrated on wealth. and money means a lot to them, even if they've got it. In my case, because it was never an issue to me, I never cared about it. I had no practical necessity. Since it's never mattered to me. Now, do I like it? Yeah, sure. But I don't know, nominal interest in it. It's never been a marker for me. At the end of your executive run in entertainment, you're 50-ish or so in the early 1990s.

31:57And there's this amazing line in the book that said, you're thinking about wanting to own and control the next thing, to be independent. And there's a line, either I am or I'm not. Just incredibly simple. What was that leap like? Maybe more interesting is that I was very successful. Had been very successful in multiple iterations of it, but I'd always worked for companies. I was a corporatist. I worked for the mother church in a way. And when you do that, I think if you're a good employee, you think it's yours. You do have an illusion that, oh, it's mine. It is an illusion. It is not clearly yours.

32:36That illusion can be alive forever and who cares? It's nice. Nothing bad about it in any way. For me, when I realized that it wasn't mine, but I acted like it was mine, I thought, well, am I capable of actually having something that really is mine, that is independent of the mother church of the corporation? over a period of time. I didn't want to leave Fox. I was doing very well. I was very happy. I was challenged. I was still doing interesting stuff. But I thought I'm either capable of being independent or I'm not. I got this thing in my head of this binary. You either are or you're not. And I couldn't turn away from it.

33:25As much as I tried, I don't know how much I really tried, But as much as ideas or convictions do dissipate, the you are or you're not, I could not accept that I wasn't. I didn't want to go. But once I realized this binary you are or you're not, it forced me into action I did not want to take. And then everyone hated QVC, right? Oh, yes. But then, of course, I did leave and I left by design with a blank piece of paper because I didn't want to repeat myself. And then I did go to QVC, which everyone thought I was insane. This next chapter you described as being an internet opportunist, not visionary.

34:07You did something like 150 deals investments coming out of QVC. I want to hear about like how the hell you managed to do all those deals. But starting with QVC, what was so hard about it and the Home Shopping Network, which followed soon thereafter? What was the getting the flywheel going? It wasn't hard, oddly. We created this business model. nothing with me is ever full-blown at the first hour of the first day. But we created this conglomerate that was an anti-conglomerate because we've spun off 11 public companies over the last, I don't know, 15 or so years. It was very iterative. Again, lucky in that I had this primitive understanding of convergence and the coming of the internet.

34:50And the internet came in 95. There were so many possibilities. so many ideas, the good from the bad. And we picked more good than bad. And they just came one after the other. The ground was just so fertile. That was the second revolution. And now we're embarking on the third revolution. If you want to be an AI opportunist, is the lesson from that chapter that you should do a lot of things? You should just be a bias to action and to say yes rather than be nitpicky about it, about what you do? So I think we were very picky because unlike most people at the time who just thought getting attention, meaning almost everyone, wanted to go after volume.

35:35Eyeballs. Exactly. More eyeballs you could aggregate at a diseconomic cost often. We thought, no, we treat revenue, importantly, as against expenses. And so we didn't do those web-van-y things that were good, but very much before their times and not simply aggregation of eyeballs. I would approach this next super period in the same way, which would make me very wary of what now seems to be the cat's meow, which is huge expenditures in areas in which there is no known revenue or no big revenue to relate to hundreds of billions of dollars of investment. Tell me how that actually is going to return.

36:23Now, of course, some of it will, but I would be dodgy about that. In this chapter in the 90s, a whole new cast of characters enters the scene. There was this amazing Larry Ellison interview on Charlie Rose where he quotes you talking about Bill Gates, which I found from like way, way back when. It was around the whole Ticketmaster thing, which relates certainly to the AI copyright stuff today, kind of a similar episode, history repeating. And you said something very funny, which was, he's young, he's mean, and he's not tired. All of those things definitely were true. Actually, that's not fair to Bill, who I like very much, and I respect a great deal.

37:03Usually, I think people do not grow. Gates has grown enormously in so many areas. Empathy, but he was mean and relentless. But he is no longer that. He's a solid citizen of today and tomorrow. Did you ever see anyone more competitive and aggressive than him in his heyday? Unlikely. At that time, he was truly ferocious. And he understood leverage. Anybody who's in any world of commanding, revolutionizing a world, which Gates certainly did, has got that quality. Many people would love to be the person that you were in the internet era for this AI era. You did these 150 deals. What was that process?

37:48What was the team like that found them? How much of it did you just do yourself? We never had a lot of people, but we had a lot of stimulants. And anybody who had an idea was a good idea. You can't do good ideas until you ratchet through a lot of rotten ideas. And I've always thought you got to tolerate stupidity because in any kind of argument about what to do, what not to do, future whatever, you got to be stupid before you're smart. You got to go through that process of allowing dumb stuff to come out because in the dumb stuff alongside of it is some little smart thing. And if you can tease that one out and act on it, you got a shot.

38:30Was there a defining early transaction other than QVC and HSN in those days that you think back on? There are the early obvious ones now, Match.com, Personals, which was something at that time that was so early stage and so primitive. Again, just a good idea. And there were players around it who we had kind of rejected, but then we came on this tiny little company, Texas called Match.com, and we bought it, and then it just spawned everything. If you start in a good arena, one thing spawns the next thing. And out of Match came all sorts of different personals, brands, and then it got to a large category.

39:13And then along came Tinder, this definition of an idea that with no investment, I don't know, I think the investment in Tinder was nickels, but absolutely virally just shot to the skies. You've got this interesting setup with IAC now. you've spun out all these businesses. You've been this amazing capital allocator. One thing that's so remarkable is Buffett's observed this lots of times. Usually amazing executives get to the promised land, which is tons of free cash flow they can do something with. And now they have to be an allocator and they stink at it. And you had the opposite experience, arguably a better allocator even than executive.

39:47You're an allocator. Again, it's amazing that you're still doing this through IAC. How do you think about that job in this world? I think I'm no longer qualified for I think I'm irrelevant to it. Why? Because I don't want to do it anymore. I have this whole thing about dodging every aspect of age and thinking about it and conceptualizing, which I think is a horrible thing to do. So I stay way away from it. But the one thing I am aware of for me is that this next period, I still have a lot of curiosity, but this world we're entering is too much for my curiosity load to relate to. I don't think I've ever conceptualized that.

40:31By the way, this is why one of the things that interested me, we bought 24 % of MGM. And why does that appeal to me? Because you can't disintermediate it. Because you give me any AI equation, and I will tell you, irrelevant to this. No one's going to get between going to an MGM resort, particularly Las Vegas, in which we have a huge share of Las Vegas. We have 11 properties in Las Vegas. No tech is getting between that and a human. It's like the Flintstones. I'm going back to the dark ages. But that to me, because everything else in the world that I see is able to be disintermediated by this, that, and the other thing.

41:14That isn't. And so it fascinates me. Certainly I understand how a visit to a place, a concert, something live and in person. What about betting though? Polymarket and Kalshi and these markets, people are glued to their phones,$10 million valuation today or yesterday. Do you think that's a major threat to MGM? No. No, no, no. Because people want to go. People want to go. Gambling part of it, it's certainly an important part of the revenue, but it's not the most important part. The thing is, we have these resorts that, if you just look at the depth and breadth, in Las Vegas, we have 490 restaurants.

41:50We have 125 performance venues from 25 ,000 seats down to a few thousand seats. We have so many ideas of things and places to do and to go and to be and to enjoy and to entertain. All of those things. Yeah, gaming's over here, but that's the plotting and pleasure of it. The other person that I would argue built the modern media world with you is John Malone, who just came out with a book as well. What was it like being around him? I talk to John frequently. He's still the smartest one in the room. There's just no question. John's an engineer by training, but he has such pure ability to analyze almost any situation because he brings this engineer's frame with an absolute frowned understanding of every technological possibility that could possibly happen.

42:46And he can mix all that, both horizontally and vertically. When you're talking to him, it's really you're talking to a master craftsman. What did Lou Wasserman teach you about negotiation? Lou Wasserman was the legendary chairman of MCA, which started as a talent agency and became Universal Studios and other kinds of things. I grew up with his daughter as my friend, and so I knew him when I was very young. But then when I was in my 20s and negotiating movies, I went to his office to close one deal. And I said to him, of the 60-some-odd units we were buying, because we were paying a big price. I said, can you just give us one less?

43:27And he just looked at me and said, no. And I said, what do you mean no? And he said, no. He kind of said, that's it. And we got up and walked to the door. And he said to me, so let me tell you something. He said, when you're in a negotiation, you better be prepared, if I say no, to blow the deal. Or you're never going to get what you want. And it was the greatest lesson in leverage and in organizing in your brain how far you're prepared to go. then you must figure that out up front. You draw a line and you must demonstrate beyond that line you will never go. That's how I learned to negotiate. How did you produce so many people that have gone on to great things?

44:07Eisner, Dara, Dillard's Killers. I don't know if I didn't produce them. They grow up in your environment. I like environments where in all those cases, just like me, I was totally unprepared and I had no reason for anyone to give me any responsibilities. I had no experience about anything. But I got dropped in the deep end of the water and I figured out how to swim. I like people coming into any orbit of mine without any experience particularly, without any necessarily expertise, without having been quote made. And then you give people more responsibility than they qualify for. Because in that forge, you find out who swims and who doesn't.

44:52And if you have that kind of environment, out of it's going to come pretty good people. What made Eisner so explosive? Michael is this big, gooky, gawky guy. His brain is so creative and his mind is so fertile that just outspins stuff faster than his mouth can do it. Stuff comes out, that's goofy. But the next thing is absolutely brilliant. It's actual original thought, and he is capable of that. I lost track of The Simpsons before, which I think is the most profitable show maybe ever in history. Longest running. Well, it's that, but it's also probably the single most profitable entertainment product ever invented.

45:35What was it like at its origin? Well, its origin, everybody thought it was stupid. Yeah, yeah, yeah. And they thought it was stupid because it was a cartoon? Well, because, yes, the last cartoon, the Flintstones before, was like, I don't know, 20, 30 years before we put The Simpsons on. So we just thought, are you crazy? You're going to do a half hour? cartoon about these characters, The Simpsons. The first screening we had was with a bunch of suits, executives from Fox, and they said, well, you can't put this thing on the air. I mean, you must be nuts. And you just liked it. Well, Jim Brooks, who was the creative force of this, along with Matt Groening, and I were in this screening.

46:10When you're making things, and particularly comedies, and you're in a room with other people, and you're involved in the making of the thing, you laugh harder at things you wanting to create laughter so that other people will laugh so you're over engaged jim and i are laughing we by the way had long stopped laughing at this stuff because we'd seen it a hundred times and we're laughing to create with these 12 suits some laughter in the room and they're just stolid hunks not even moving it was so sad and afterwards they said we're not successful enough to just write this off i don't know what you're going to do with this, but certainly I put it on the air.

46:49And of course, like many things from the first hour of the first day that went on the air, it was a smash. It's been running ever since and most profitable thing ever. Through the lens of the Simpsons, how do you think about the world of entertainment today? It just seems like nothing like that will ever happen again. I don't know that that's true. By then there's some cable networks around and it had gotten successful, but that was a time when there were fewer options. There were still reasonable number of options. Today, the options are so unlimited. There's just so much out there, whether your time is spent on TikTok or Insta or watching television programs and streamers and this and that.

47:33The optionality is so much. The record keeping. If you make an entertainment product, movie or television series the amount of people who see it is your revenue stream what they're your reaction go back to the olden times today's times rarely but in theaters people coming into the place sitting in seats and they like it and they pay their money and whatever and you see them and they leave and they come and they leave and they come how do you deal when the business model, instead of being the audience reaction to it, is to take a subscription to Prime, whose business model is to get you to buy products on Amazon, where they offer you on the side movies and television programs.

48:20They could not care less whether one person or nine billion people see it. It's just whether or not we get more Prime subscriptions or the Apple environment, which is keep you in the closed circle of Apple rather than any one thing. So if you're a maker of these things or if you're in the vineyard of trying to create this stuff, it's just dismaying that the business models are just so vastly different. It's not the best environment for making work. If you add Netflix into that category? Well, yes, of course, Netflix is the leader of it. Hollywood is irrelevant. Worse than this. Yes, and people yell at me for saying that.

49:00First of all, it used to be that all these companies did was make movies and television shows from the top of their executives to the bottom. Now, making the product is the 68th or 78th division inside very large enterprises. It's just so down on the totem pole of stuff as an organizing process, the fun of it is gone. Is glamour gone too? never gone. It's just now in other areas. Where is Glamour now? It's certainly not where it was. Now it's dispersed, of course. Now it's probably an Instagram. It's the whole hegemony has now been transferred to the world of big tech. Is this going to be true?

49:47And this is the probably biggest question of AI, because it is possible that our entire worlds will be subsumed by further advances, AI advances of big tech, in which case in the end, we'll all be a simulation anyway. And as one of my friends said, we'll maybe have a happy ending. I saw these amazing photo spreads from Sun Valley in the 90s when entertainment was in its complete ascendance and blooming. You've been to these conferences your whole life. Does it now just feel like that center of gravity is entirely shifted to tech and the entertainment people are And after that, they are. It is true.

50:22The cultural stuff aside, and maybe it's just an old dog talking, but the fact that it has dispersed so, there's just so much now. There's so much optionality that everything comes and goes so quickly. It used to be there was a cultural event. Take one of the great cultural events, which was Roots, which was the seminal thing that went for 11 nights and captured 45, 50 % of the population of this country and lived in the cultural environment for months. You do good work today. It's here today. It's gone the next hour. I want to go back to the Flintstones portfolio. So you got MGM. Dot dash Meredith was just renamed to People.

51:08Talk about that business and print media. How have you made this a strong, it feels like an anachronism and yet it's a really strong business. How did you do that? Well, we're doing it, I hope. I spent actually, just before I got here, a really great two hours with one of our magazines is Travel Leisure, which is doing extremely well. And yet what's happening with Google is just, it is going, they say it goes slow and then it goes fast. It's going fast. If you depend on your life traffic from Google, from search, you're going to be close to extinct if that's what you do. And that's a huge issue put directly to the question.

51:49We were talking, this one magazine of ours doing very well, a million subscriptions, extremely strong digital life. But nevertheless, it's got this Google paradox hardly, which is direct searches are going. So I said to the creative people, Don't you have to kind of invert your business? You create content from People Magazine to Food and Wine. All these areas, this incredible goldmine of content, of ideas and subject areas, etc. And you publish them in both print and 10 million copies a year. You still have a print business and a big digital business. And they're doing really well at it. Certainly far better than a competition.

52:38But I said, back up four years ago, five years ago, and you're a travel and leisure. So you know something about the travel business. You know that, Lord, how come you didn't create White Lotus? How come it didn't come out of you? Because think of what would have happened if it did come out of you. And there's no reason it didn't other than you have not inverted your business. We own food and wine. If you're in the food and wine business and you know a lot about that and you know where trends are and you know what's happening. How come you didn't do Casamigos? If you think about our businesses that way, you succeed and fail, but you'll come up with hundreds of things to pursue that if some of them work out, you'll build a giant company.

53:21So the media becomes the marketing. Exactly right. For the product. Two closing questions for you. At the end of the book, there's this beautiful line where you got money and fame and all that good stuff, but your life has mostly been about building and building and building. and then your family built you into something resembling a person, quite a powerful closing line. What constituted that? What did your family do to build you up? They defined me. They became the fabric of my life. They became the reason. My children, grandchildren, soon great-grandchildren, that's the fabric of my life. I didn't seek it.

53:59Certainly I did seek it in some way because I got it. but without it, I'd just be pathetic and lonely. The closing question I ask everybody is the same. What is the kindest thing that anyone's ever done for you? The kindest thing anyone has done for me is to give me the security that they love me. Beautiful. Barry, thanks for doing this. If you enjoyed this episode, visit joincolossus.com where you'll find every episode of this podcast complete with hand-edited transcripts. You can also subscribe to Colossus Review our quarterly print, digital, and private audio publication featuring in-depth profiles of the founders, investors, and companies that we admire most.

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