Battling Bigwigs

K.C. Neel

What makes a great rivalry? Certainly the character of the players is key to any successful contest. The players should be powerful people. They should have monstrous egos. Being bombastic helps. They should show a capacity for ruthlessness. Their rivals need to be worthy of battle, sharp-tongued, cunning and quick.

The rivalry should involve the pursuit of high stakes. If loss of life and limb are not the end result, a bloodthirsty battle for money and/or power will suffice. And good rivalry, like a good tennis game, should be played in public so spectators can savor and weigh each move.

Finally, any rivalry worth its salt needs to be revived periodically so that observers can savor all that delicious animosity and antagonism.

With that in mind, consider this: Rivalries abound in every aspect of life but nowhere more so than in the entertainment and media industries. The boardrooms of media companies are virtual hotbeds of political maneuvering, petty jealousy and back-stabbing.

With that in mind, let's consider media titans Barry Diller and Sumner Redstone. A high-profile media player, Diller is the type of man who generally gets what he wants. There is one problem, however. Diller frequently wants the same thing that Redstone wants. On that score, Diller comes up empty-handed every time.

The two executives have sparred over bits and pieces of Hollywood for years. Both are creative businessmen and stubborn to boot. Like two sharks, they've circled and snapped at a wide range of holdings over the years. When these two titans periodically cross paths over assets like Paramount and the WWF, expect blood in the water and a pack of hungry lawyers in their wake.

For that reason, the discord between Diller and Redstone tops Cable World's list of most competitive media and entertainment industry rivalries.

Still, Diller and Redstone let their lawyers do most of the talking. In considering rivalries, one should never overlook verbal displays of animosity, such as those shared by Time Warner vice chairman Ted Turner and News Corp. chairman Rupert Murdoch.

It started as a simple business rivalry. In January 1996, Murdoch announced he would launch a conservative news network - Fox News Channel - as an answer to the liberal Turner's CNN.

Lured by Murdoch's offer of launch incentives, cable operators eagerly signed up for FNC. But Turner, by then vice chairman of Time Warner, refused to carry the network in New York City, a crucial market for FNC's ad revenue. It was just a matter of time before Turner likened Murdoch to Adolf Hitler - and a world-class rivalry was born.

Can rivals be allies? Sure. EchoStar Communications' chairman Charlie Ergen and Hughes Electronics' topper Eddy Hartenstein are tough competitors in the DBS universe. Lawsuits between the two companies are commonplace.

But Ergen and Hartenstein dropped their swords earlier this year - at least for a while - to lobby the government for approval of delivery of local signals on their satellite systems. They were quite a team, that is until Ergen felt Hartenstein was doing his own deal with broadcasters. At that point Ergen came back swinging, which revived the rivalry just in the nick of time.

Even the best partnerships can turn nasty. Take Diller's relationship with his old friend Edgar Bronfman Jr., Seagram's CEO. Diller was instrumental in Bronfman's entry into the entertainment business years ago, coaching him on Seagram's takeover of Universal Pictures. No one was surprised when Bronfman gave Diller control of Universal's TV production assets; Bronfman got 43% of USA.

A year or so later, the relationship soured. Bronfman scuttled a couple of Diller's pet projects, including the purchase of NBC. Friends turned into enemies.

Technological rivalries could fill an entire magazine. We picked Napster and the music industry for our list, because it exemplifies the Internet's glory and its ability to crunch copyrights.

Some recording artists and the record labels that market their music believe Napster is stealing money owed them by allowing Internet users to download music free of charge. The folks over at Napster maintain they're actually helping the record companies sell product.

Rivalries come in all shapes and sizes. Some constrict business; others help contribute to a healthy competitive spirit that keeps the business vital. All are great dish. And, as the entertainment industry continues to consolidate and morph with the Internet, the stakes will become higher and the rivalries more acrimonious. Let the games begin.

Barry vs. Sumner Barry Diller and Sumner Redstone have been at it for years. Unlike the long-time rivalry between Ted Turner and Rupert Murdoch, which sports plenty of personal animosity, the antagonism between Diller and Redstone is generally rooted in their shared hunger for the same assets.

To be sure, both media titans share some of the same traits. Both are fiercely independent, aggressive and tough taskmasters. Both are skillful at luring the right talent for the right job.

After buying CBS earlier this year, it would appear that Redstone now has everything Diller ever wanted: a movie studio, a broadcast network and the power to make his own decisions.

Diller may call many of his own shots, but he's always had to answer to someone with more power.

Both Redstone and Diller have significant victories under their belts in the competition for power and the accumulation of assets. But when pitted against each other, Redstone has continually been the victor. The latest skirmish: Viacom snatched the coveted WWF from USA. Diller sued to keep the programming but ultimately lost the battle.

That's not the only time, however, that Redstone bested Diller. The two media moguls battled bitterly in 1993 over control of Paramount Communications. A vicious bidding war left Diller empty-handed and a whole lot poorer.

Redstone even beat Diller to the finish line when it came to owning a broadcast network. Diller tried to buy CBS in 1994 when he was chairman of QVC Inc. But major QVC shareholder - and Diller's boss - Comcast chairman Ralph Roberts clipped Diller's wings. Six years later, Redstone finagled a welcome merger with CBS.

"Now that Redstone can count on people like (CBS CEO Mel) Karmazin and (MTV CEO Tom) Freston, what chance does Diller have - especially since he's tied up trying to learn French?" asks one industry player rhetorically.

Of course, Diller has some heavy-duty allies in Liberty Media chairman John Malone and "wired world" billionaire Paul Allen. But ultimately, he lacks the overall, individual power Redstone has acquired over the years.

Some industry players believe the two executives are bound to meet again in a competitive arena. Some predict Diller will never be able to achieve the stature or gain the assets that Redstone has amassed. Cable World's morning line puts its money on Diller, who is definitely ready for a win.

Gates vs. Jackson Bill Gates underestimated U.S. Federal Court Judge Penfield Jackson. Microsoft's chairman was so sure he would prevail against the U.S. Justice Department's anti-trust case that he didn't even show up for the trial. Gates sent a taped version of his testimony instead. Big mistake.

Jackson's quick and heavy-handed decision to recommend a breakup of Microsoft because the company has "proved untrustworthy in the past" caught Gates off-guard. Gates and Microsoft have been trying to gain back their foothold ever since.

Jackson's ruling in June marked the end of a bitter two-year battle between Microsoft and the U.S. Justice Department, which charged the software giant with anti-competitive practices.

Jackson deemed in April that Gates had abused Microsoft's monopoly power to beat down his competition. Unlike other anti-trust cases - the Justice Department's suit against IBM lasted 13 years - Jackson's ruling was swift and decisive. Few observers expected a decision in such a short timeframe.

But Jackson's fleet decision wasn't the only surprising element of the case. He repeatedly rebuked Microsoft during the trial, chiding the company's attorneys for "mischaracterizing" the testimony of one witness and for trying to embarrass another. He criticized Gates' videotaped testimony as "not particularly responsive" to the prosecutors' questions.

Jackson denied Microsoft's plea to respond to the judge's ruling, sending it to the Supreme Court instead. The high court hasn't decided yet whether it'll hear the case. Gates and his CEO Steve Ballmer have chastised Jackson for his refusal to let them respond to his ruling. "We were denied that fundamental right," Ballmer says. Jackson remains unrepentant.

In the meantime, the U.S. District Court judge has given Microsoft four months to come up with a breakup plan of its own but has suspended any breakup until the high court rules on the case. However, Jackson has put a speed bump on Microsoft's business practices. Starting in September, Gates must offer computer makers the choice of installing a version of Windows with or without his Internet Explorer Web browser.

Gates vs. Case At first blush, there would seem to be little competition between Microsoft and America Online. Microsoft makes most of its money in operating systems and software. The bulk of AOL's revenues come from Internet access fees.

Yet Microsoft chairman Bill Gates and AOL chairman Steve Case have been throwing rocks at each other for years. Gates even threatened to either buy or bury AOL a few years ago. Neither has happened.

The rivalry seems based on little except mutual distaste. The two executives continue to wrestle over non-strategic yet prickly things like instant messaging. Case went ballistic when Microsoft originally connected to AOL Instant Messaging, primarily because advertisers did not give AOL credit for the extra viewers.

Now it looks like the rivalry between Gates and Case is moving into the realm of real corporate competition. Both firms are going after what many pundits consider to be the most lucrative part of the Internet - the first screen people see when they log onto the Net. They're also competing head-to-head with a TV version of their products that allows users to access the Web through their TV.

Analysts believe Case's AOLTV could pose a significant threat to Gate's WebTV. Clearly Microsoft believes that, too, because it recently revamped its WebTV service to include a new offering that executives say is designed to make it more competitive with AOLTV. Currently WebTV holds the advantage with about 1 million existing customers.

In the meantime, expect Gates and Case to continue jockeying for power. Gates has money on his side as the world's richest man. But Case's power base has been solidified with AOL's purchase of Time Warner, making it the world's largest entertainment company.

Diller vs. Bronfman Barry Diller and Edgar Bronfman Jr. were buddies with a plan. They cooked up a complex deal that landed Universal's TV production unit in Diller's back pocket in exchange for Bronfman getting a big chunk - and eventual control - of USA Networks. It was supposed to be a marriage made in heaven.

After all, Diller, USA's CEO, and Bronfman, Seagram's CEO, were old friends who allegedly dreamed up the deal over dinner. They supposedly shared the same vision. USA needed more production capabilities, and Seagram's Universal needed more distribution outlets.

But, like half the marriages in the U.S. today, this union was destined for divorce court due to irreconcilable differences.

To Diller's horror, more than one of his deals was scuttled by Bronfman, including the purchase of NBC. It was a deal that Diller worked painstakingly to cut with NBC's chief Bob Wright. Bronfman didn't want his 43% stake in USA diluted as a result of the deal and vetoed the transaction.

Now that Bronfman is selling Seagram to French water utility Vivendi, Diller may finally be able to rid himself of Bronfman.

On the other hand, Bronfman may finally get his hands on USA. Vivendi CEO Jean-Marie Messier has expressed public votes of confidence in Diller. But Bronfman will continue to lead the U.S. operations, meaning he'll continue to have veto power over Diller's business.

Of course, Diller could sidestep Bronfman and deal directly with Messier, especially if he speaks French. Bronfman, who is ironically from the very Franco-centric Montreal, Quebec, does not.

"If Barry and Jean-Marie hit it off," says one insider, "they could work closely to deliver products overseas and on the Internet. It could be beneficial to them both."

Either way, Diller will have to answer to a boss - something he has been loathe to do since he left News Corp. in 1992, after chairman Rupert Murdoch refused to give him equity in Fox.

WWF vs. WCW Every time the WWF slams WCW in the ratings race, Ted Turner probably seethes and Vince McMahon surely dances a jig.

After all, Turner, chairman of Turner Broadcasting, launched WCW in 1995 after McMahon, head of Titan Sports, dissed his invitation to go into business together. The competition between the two leagues has helped both sides gain attention. But WWF has clearly pinned WCW to the mat when it comes to popularity among TV viewers and attendees of live events.

Neither Turner nor McMahon invented professional wrestling. Indeed, the sport has been around since the turn of the century. But today, professional wrestling has become a colossal industry, and WWF is clearly at the top of the heap. Many viewers say they just like WWF more than WCW because of the story lines.

Turner figured that what's good for the goose must be good for the gander. So the network recruited top WWF writers Vince Russo and Ed Ferrara, who immediately began using successful WWF showstoppers that featured female talent in mud and evening gowns.

But the viewers, many of whom watched WCW to get away from the racy themes so prevalent on WWF, rebelled even further. Turner brought back an old writer who had helped WCW top WWF's ratings in the mid-1990s. But he miscalulated the effect it would have on the wrestlers. Four of the group defected to the WWF with much fanfare, which has only fueled the feud between the two networks even further.

Now that WWF is going to be affiliated with CBS and Viacom, the rivalry could become even more intense. Viacom chairman Sumner Redstone has the resources to put WWF in a very strong programming and marketing position. Turner may be losing his power base in the wake of the AOL-Time Warner merger. McMahon continues to gain strength from the expansion of his empire that went public last year. Neither Turner nor McMahon are likely to go down quietly. Let's Rrrrumble!

Ergen vs. Hartenstein Like so many rivalries, the battle of wills between EchoStar Communications CEO Charlie Ergen and DirecTV CEO Eddy Hartenstein started out as a competitive play. It didn't take long for acrimony to develop.

"These guys were bound to compete," says Jimmy Schaeffler of The Carmel Group. "Eddy is the country gentleman who tends to think twice before he says anything. Charlie is the hotshot cowboy who shoots from the hip."

Hartenstein never believed Ergen would make it big and dismissed EchoStar as a competitive threat, some observers say. That was a mistake. At one point the two execs considered combining resources to fight the cable industry. A deal never materialized.

"Eddy misjudged Charlie's tenacity when it comes to competing," says one executive who knows both men. "Eddy just didn't think Charlie was going to really go anywhere, and Charlie took that as a challenge. It created an 'I'll show you' mentality for him."

The DBS business has been a cutthroat industry from the beginning, and the competition didn't stop with the cable operators. When EchoStar was trying to get investment bankers to back a huge debt package Ergen was putting together, Hartenstein was trying to use the General Motors muscle to entice banks to stay away.

"This is a situation that started out as healthy competition, and it's unfortunately turned personal, which has hurt the DBS business as a whole," says one industry executive. "I'd like to hope they can put away their differences and settle that for the good of the industry.

"That said," the insider says, "the DBS industry is not the cable industry. It has never had the collegial, collaborative relationships that the cable industry had for so long. But then, the cable industry doesn't have that anymore either."

Armstrong vs. Malone Actions speak louder than words. And the actions of AT&T's largest individual shareholder - Liberty chairman John Malone - is speaking volumes these days. Malone is selling his AT&T shares like there's no tomorrow, and some company watchers are beginning to wonder whether there will be a tomorrow for AT&T chairman Michael Armstrong.

Malone says he still has confidence in Ma Bell and Armstrong, but he has unceremoniously dumped a quarter of his AT&T stock since Armstrong bought his Tele-Communications Inc. earlier this year. Malone and other investors appear to be losing their patience with AT&T's poor stock performance, and some company watchers are beginning to wonder how long Armstrong can hold on to Ma Bell's top spot.

Malone has sold $265 million in AT&T stock since the AT&T-TCI deal closed. And he's not making big money doing it. Malone unloaded a chunk in June worth $32.1 million when shares were at an all-time low. Malone's actions now appear to be having a devastating trickle-down effect on AT&T's stock price, some observers believe. AT&T's stock continues to free fall.

"Don't minimize the effect Malone has on (other) shareholders," one long-time expert says. Janco Partners analyst Ted Henderson calls it "The Malone Factor." If Malone is shedding AT&T shares, other investors are likely to jump ship as well.

Without question, Armstrong has his work cut out for him. He must turn around the decaying long-distance business, revive a lackluster response to AT&T Wireless and deploy broadband products including high-speed data, digital video and local telephony - all at the same time.

Armstrong continues to publicly beam confidence over his ability to turn AT&T into a world-class telecommunications giant. But clearly, the old girl's wrinkles continue to mar her looks, and Armstrong so far hasn't been able to turn the 100-year-old company into an ingenue investors desire.

"I don't know how long Armstrong can last in this game if he can't get the stock price back up," says one industry watcher.

Janco's Henderson is urging his clients to be patient - at least for a while. "I'd give Armstrong until at least the end of 2001 before I'd revolt as a shareholder," he says.

Turner vs. Case Ted Turner is a survivor. He has survived nearly a dozen attacks from business partners and fellow board members. But when AOL chairman Steve Case takes control of Time Warner later this year, most watchers expect Turner to leave the building.

Turner has no real place in the new hierarchy. And he's plenty sore about it. He's let it be known, in no uncertain terms, that he's ticked off. So far Case is ignoring Turner's grumbling, publicly stating that Turner will be right at his side following the merger. Few industry watchers are buying it.

Many pundits figured Turner would hit the skids when he sold his Turner Broadcasting System to Time Warner in 1996. But Time Warner chairman Gerald Levin - ever the peacekeeper - placated Turner by allowing him to continue running TBS' holdings.

Levin, who miraculously managed to keep a myriad of gigantic egos from running amok after the Time/Warner Communications merger over a decade ago, could pull off a coup again by keeping Turner within AOL-Time Warner's fold. But few observers expect the "Mouth from the South" to stick around.

"Ted represents yesterday's innovations and technology," says one industry watcher. "Steve is what tomorrow's innovations and technology are all about."

Even if Turner leaves his non-post at AOL-Time Warner, he'll still be a major investor in the company. Insiders are bracing for some walloping arguments over the company's direction in the coming months.

Many experts don't think Turner will end up on the righteous end of the stick either. "Ted's out to pasture," says one long-time industry player. "It's true, he created CNN and changed TV forever ... But the world is different now, and the new suits - even if they don't wear them - are in charge now."

Napster vs. Metallica The music industry, especially in rock n' roll's quarters, loves to fancy itself a rebel. But the feud between rock band Metallica and online service Napster proves that the rock industry isn't as progressive as it likes to think.

Napster has come under fire from big-name musicians including Metallica, Dr. Dre and others who claim the upstart Internet company is stealing music and giving it away for free. Metallica and the Recording Industry Association of America have sued Napster for copyright infringement, and experts say it could be a watershed case over copyright protection on the Internet.

Napster's CEO Hank Barry says that Napster is actually helping the music business by drumming up interest among consumers. "A chorus of studies shows that Napster users buy more records as a result of using Napster and that sampling music before buying is the most important reason people use Napster," he told congressmen during hearings held earlier this month on the issue.

Indeed, 70% of Napster members polled by a Wharton School of Business professor reported they've used the service to sample music before buying it. Some users said they've purchased music they might not have otherwise bought if they hadn't listened to it first on Napster. Barry says record sales have risen 8% in the last 6 months over year-ago figures. That's an increase of more than $1 billion a year.

But Metallica drummer Lars Ulrich maintains that "Napster highjacked our music without asking."

Meanwhile, a number of other music-sharing networks are trying to figure out how to capitalize on the trend financially. After all, this is about business, not rebellion.

MP3.com which lets fans swap songs for free by trading MP3 files, reached a settlement with a couple of big record labels last month. And the big five record companies - Universal Music, EMI, Sony Music, BMG and Warner Music - have started rolling out their own secured downloadable files with built-in electronic locks to prevent piracy.

HBO: The Sopranos snag 18 primetime Emmy nominations; RKO 281 nabs 13

Home Video: Blockbuster's announcement of yet another sexy VOD partnership is followed by yet another stock price drop.

Disney: The Maus Haus sequels to the Feds that AOL-Time Warner should be split up.