Meeting of Moguls, if Not of Minds
By DAVID D. KIRKPATRICK (NYT) 2014 words
Published: July 14, 2003
SUN VALLEY, Idaho, July 12 - Like a gaggle of migratory birds, dozens of private jets return each July to the tiny airport in nearby Hailey, Idaho. There they unload titans of finance and the information industries, like Warren E. Buffett, Bill Gates and Michael D. Eisner, for a week of meetings, mountain biking and barbecued burgers here in Sun Valley. It is part of the annual media mogul summer camp organized by the investment banker Herbert Allen.
A year ago, the gathering felt like a hungover morning, full of remorse and recrimination over mergers and acquisitions consummated in the giddiness of the Internet boom. But when the moguls returned last week, with media stocks up from the lows of last summer, many seemed ready for a little hair of the dog, and at cocktail hour the conversations turned once again to speculation about who might be buying whom.
''Corporate Cupid,'' said the fund manager Mario J. Gabelli, summing up the mood as he left a picnic lunch by the resort's swan pond. ''Big lovemaking, big deals out of this thing; you are going to see a lot.''
The prime topic was handicapping the auction for Vivendi Universal's film and television studios, cable channels and theme parks. On hand to provide their own spin were several of the major players, including Sumner M. Redstone, John C. Malone and Barry Diller. Edgar Bronfman Jr., a bidder, was expected to attend, but his presence could not be confirmed.
Mr. Gabelli predicted that the Vivendi auction would be a catalyst for more deals, as would the recent lifting of the caps on the ownership of newspapers and television stations by the Federal Communications Commission.
Decades of deals and consolidation are making the annual Sun Valley conference more important to the industry than ever, bringing together the handful of giants that own the Hollywood studios, television networks, cable and satellite systems and television and radio stations.
''As the industry consolidates, you have fewer and fewer owners, and each of the owners have more reason to do business with each other, so in a place like this, where they are all here together, a lot of business gets done,'' William E. Kennard, a F.C.C. chairman in the Clinton administration, said as he was walking out of the resort's lodge on Thursday before heading to dinner in town. He was in Sun Valley as an executive with the Carlyle Group, a private investment firm. (He is also a director of The New York Times Company.)
But in a shift from past years, some of industry titans assembled said they doubted the wisdom of that deregulatory move and further industry consolidation.
Pausing in white tennis shorts and a T-shirt as he walked his bike across a lawn on Wednesday afternoon, Mr. Diller, chairman of the InterActive Corporation, and former head of Vivendi Universal's entertainment division in the United States, denounced the domination of the television business by a handful of ''oligarchs.'' Mr. Diller has argued publicly for several months that the half-dozen media conglomerates, owners of production studios as well as television networks and cable systems, have, in effect, collaborated to freeze out independent producers and lower the quality of new TV shows.
Another guest at the conference, Sir Howard Stringer, the chairman of the Sony Corporation of America and the former head of CBS, recently said he concurred. ''I am with Barry a little bit about all this consolidation,'' he said at a recent breakfast organized by The New Yorker in New York. Sir Howard said: ''If there is one reason why a comedy hasn't been created on network television in the last five years, it's because each network is trying to do it with one voice, and I just find that sort of mildly insane.''
But most at Mr. Allen's conference shrugged off those concerns. Mr. Redstone, the chairman of Viacom Inc., which owns CBS, MTV and the Paramount film and television studios -- making it one of the half-dozen companies that dominate television -- called such fears nonsense. ''Diller and Stringer are some of the most rational people I know,'' Mr. Redstone said, holding court with reporters in a lobby of the resort after a presentation on Wednesday, ''but that doesn't mean they can't make a mistake.''
Mr. Redstone and his fellow moguls were more concerned about gossiping and posturing about Vivendi's auction. Mr. Redstone, a suitor for Vivendi Universal's cable channels, went on to cast doubts on a rival bid from Mr. Malone, the chairman of the Liberty Media Corporation, noting that Liberty had recently agreed to spend $7.9 billion to take over the home shopping channel QVC.
But Mr. Malone, trailed by a crowd of reporters as he raced through the resort to a meeting the next day, slowed long enough to respond that Mr. Redstone was wrong. ''The QVC transaction really did not reduce our financial capabilities at all; it enhances them,'' he said, because Liberty will be getting additional cash flow.
At least one bystander was placing bets on the Vivendi outcome, at fast-changing odds. Before lunch on Thursday, the television entrepreneur Haim Saban bet reporters $5 that Liberty would win. Twenty-four hours later, he wanted to put his money on another bidder, Metro-Goldwyn-Mayer Inc.
''Write it down,'' he said. ''I got new information.''
In addition to MGM, the bidders include the General Electric Company's NBC unit, and Mr. Bronfman, who once controlled Vivendi Universal's Hollywood studios before selling them to Vivendi. He is now bidding in cooperation with Cablevision, although whether Mr. Bronfman or Cablevision's chairman Charles Dolan was in charge of that bid was a subject of some doubt at the event.
''Dolan is not a jerk,'' said Mr. Gabelli, a major shareholder in Cablevision, suggesting Cablevision was unlikely to let Mr. Bronfman take control of the businesses by using its money. ''Edgar needs wampum, and Dolan has wampum,'' Mr. Gabelli said.
Mr. Diller of InterActive Corp. turned heads at the conference in part because of his many possible roles in the auction. He was the top executive of the Vivendi Universal's United States entertainment division until he resigned this spring, and he remains a major shareholder. He also still has some say over what Vivendi does with its USA cable networks because of contracts signed when he agreed to sell the networks to the company two years ago. And Vivendi still owes his company $2.4 billion from that deal as well.
And Mr. Diller is also friends with Mr. Malone, who at the same conference last year said that he hoped to entice Mr. Diller to join him in a run at Vivendi's entertainment assets. With so many levers to pull and an insider's knowledge of the company, Mr. Diller might be a valuable ally. Asked about any possible collaboration, Mr. Malone said a nondisclosure agreement that he had signed with Vivendi precluded sharing information with his friend.
But Mr. Malone, who also controls a major shareholder in Vivendi Universal, added, ''He has a stake in it, and we have a stake in it, and we are friends.''
Mr. Diller, for his part, declined to comment on any conversations with Mr. Malone. But he appeared to be enjoying his unique view of the unfolding situation. ''It is the one area of my life where I am utterly passive,'' he said. ''If there is an opportunity greater than the $2.4 billion that they owe us, I suspect it will present itself through the process.''
Even Richard D. Parsons, the chairman and chief executive of AOL Time Warner and one mogul staying out of the auction, offered his take. Interviewed by CNBC at the conference, Mr. Parsons said: ''Sumner likes to go around and say, you know, content is king. And some of the cable people then say, 'No, no, no, distribution is king.' Where I come from, cash is king, so whoever has the cash has the whip hand.''
Mr. Parsons was seen having drinks Friday night in a group with Brian Roberts, chief executive of the Comcast Corporation, the cable company, stirring some speculation that arrangements were being made between their companies. AOL Time Warner, under pressure to reduce its debts, has recently raised enough cash that it may no longer need to follow through on plans to sell a minority stake in its cable division in an initial public offering. But Mr. Roberts also controls a minority stake in the cable division and has the right to force a sale, giving him a bargaining chip for future negotiations.
As usual, the conference consisted of a series of presentations on business or public affairs beginning at 7:30 each morning, followed by afternoons of private meetings, golf, tennis, and hikes. George J. Tenet, director of central intelligence, spoke privately to the moguls on Friday morning, the same day he issued a statement taking responsibility for controversial misstatements about Iraq in President Bush's State of the Union speech. Also on Friday, the television host Charlie Rose interviewed Mayor Michael R. Bloomberg of New York, a media mogul himself before running for office. He discussed the frustrations of his new role, like getting booed at parades, people who attended said.
But a presentation by H. Lee Scott Jr., chief executive of Wal-Mart Stores Inc., generated the most talk at the conference. He stunned the entertainment industry moguls, accustomed to doing business in limousines and four-star restaurants, with tales of Wal-Mart's culture of frugality, several people who attended the event said. He drives his own small car, he told the crowd, and when traveling, he and another executive share a room at the Days Inn.
The unmentioned ''elephant in the room,'' one executive said, was the impact of Wal-Mart's cost-cutting on other retailers and businesses. It has become a potent player in the entertainment business, thanks to its growing share of video, music and book sales.
But Mr. Scott's parsimony was not forgotten. People who attended said that at the next presentation, Viacom's chairman, Mr. Redstone, commended a handful of Viacom executives but failed to mention the company's president, Mel Karmazin, who skipped this year's event. The conspicuous omission revived simmering concerns among investors about the tense relations between Viacom's two leaders. Mr. Crawford, a fund manager at Capital Research, asked if Mr. Redstone and Mr. Karmazin would follow Wal-Mart's lead and also start sharing a room, drawing laughs from the crowd. Mr. Redstone, who is 80 years old and remarried last year, joked that he preferred bunking with a woman, according to people who attended.
The events of the conference were closed to the news media, but reporters were still allowed to book rooms at the resort as guests. Their exclusion reduced the journalists to lingering like paparazzi outside the presentations or in the resort's bar in the hope of contact with a passing media mogul.
An unusually large crowd of journalists turned up this year, sometimes overwhelming the targets of their interest. Surrounded by photographers as he returned from a bike ride, Leslie Moonves, the chairman and chief executive of CBS, said, ''I haven't had so many pictures taken of me on a bicycle since I was 8 years old.''
Correction: July 17, 2003, Thursday A picture caption on Monday about the annual meeting of media executives in Sun Valley, Idaho, misspelled the surname of a participant. He is Jim Wiatt, not Wyatt.