The end of Jean-Marie Messier's turbulent reign as CEO of Vivendi Universal is only the beginning of the latest version of one of the business world's favorite reality shows: What will Barry do? As soon as word went out that Messier was French toast, the wires were popping with speculation about where Barry Diller would end up. Would he run a spinoff of the U.S. entertainment assets for the Bronfmans ? or someone else? Buy some of the assets through USA Interactive? Buy some on his own and run it as a separate operation? Diller declined to comment.
The only certainties so far: Diller, as chairman and CEO of Vivendi Universal Entertainment (VUE), won't try to acquire anything from Vivendi, and ? whatever he does ? he will be one of the few involved with Messier to emerge in better shape than he started.
Inside VUE, which merged Diller's USA Networks with Vivendi's Universal Studios, one executive speculated that Vivendi's new management will ?repatriate the assets in an entertainment company where they could thrive? with Diller ?in some way controlling their destiny.? Externally, analysts view Diller, who manages VUE sans contract, as one of Vivendi's chief U.S. assets. ?Diller's one of the few people who maintains total credibility and respect,? says Matthew Hannigan of Janco Partners. ?They may be left with no recourse in terms of saving their investment.?
It's easier and a lot more fun to focus on Diller's future than it is to gauge the effect all of this uncertainty will have on the present and future of Vivendi's cable- and satellite-related assets. Messier's tangle of deals, aimed at putting Vivendi Universal in the now-not-so-glorious ranks of global media conglomerates, leaves the company with a portfolio that includes VUE, the joint venture created last December when Diller and Messier split the interactive and entertainment assets of USA. VUE houses USA Interactive with USA Network and Sci Fi Channel and emerging networks Trio and Newsworld International as well as Studios USA, producer and distributor of Law and Order and other cable TV staples.
Through its ownership of the Canal+ Group, Vivendi also has a presence on the delivery side of cable via Canal+ Technologies. Its MediaGuard and Media Highway are in 13 million households internationally, but very few of those are in the U.S., where the company has had problems breaking through. Canal+ Technologies is thought to be for sale, with various predictions pairing it with Liberate, News Corp's. NDS and possibly Liberty Media's new subsidiary Liberty Broadband Interactive Television.
The complicated deal with EchoStar that gave Vivendi Universal 10% of the DBS provider exemplifies Messier's belief that he was creating a synergistic media empire. Vivendi invested $1.5 billion in EchoStar in exchange not only for the equity but for promises that included space for five new channels to be developed by USA Entertainment and the use of MediaHighway on its high-end set-top boxes. But as was often the case with Messier's plans, the timing may have been off. A source close to the situation said the channels are stalled pending the EchoStar/DirecTV merger.
It may be tempting to look at Vivendi as one of the falling dominoes capable of changing the cable industry; from UBS Warburg analyst Chris Dixon's perspective, the changes at the top of Vivendi should have very little impact on the U.S. cable operations. Dixon suggests that Vivendi would be better off leaving the U.S. assets alone for now and focusing instead on the French side of the company.
To Dixon, the first order of business for Vivendi ? now that Messier has been given a reported $17.8 million severance package and shown the door ? is to decide what kind of company it wants to be: a conglomerate with various different operating businesses or a global, mediacentric company. He added, ?effectively, Vivendi Universal is half-pregnant, and it's very difficult to reverse that trend.? He sees buyers for the French telecommunications assets and Canal+ but says there are no natural buyers for the U.S. properties. ?Every one of the major media companies has a very full complement of major media assets.?
Some analysts predict a major restructuring by Vivendi. ?I think there's no doubt that Vivendi has to be rationalized, and that means peeling it apart,? says Janco's Harrigan. Says Dixon: ?Talking about breaking up the company and selling off the pieces is fun coffee table gossip, but it is much harder to do.?
As for the Diller show, don't expect a short run with a neat or obvious ending.
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