Can This Man Get a Job?

By John Greenwald

Scenes from the continuing come-uppance of Barry Diller: when his private jet landed near New York City at around 6 p.m. last Tuesday, the man who would be head of CBS had no idea that he was also coming down to earth from his latest flight of ambition. Ahead of him lay the prospect of suppers at the White House, chats with Dan Rather and interviews with world leaders. Not to mention the highest ratings of any network, record profits of $109 million in the second quarter and a chance to play an even larger role in bringing two-way television to Americans. All that would begin to be his in just a few hours, when the boards of CBS and Diller's QVC home-shopping network would meet to approve a merger of the two companies.

But wait! There on the tarmac stood the rumpled figure of Ralph Roberts, 74, and his natty son Brian, 35, who controlled the Comcast cable-TV company and were partners with Diller in QVC. Known as straight-arrow businessmen in a rough-and-tumble industry, the Robertses hated the merger with CBS and arrived at the airport with a letter that contained shattering news for Diller: to bust up the deal that had electrified Wall Street when it was announced last month, Comcast was offering $2.2 billion, or $44 a share, for the 84% of QVC stock that it did not already own, easily besting the CBS offer of $38 a share.

"We went into a conference room at the airport, and they told me what their intention was," said Diller, 52, who was still fresh from losing a six-month struggle to acquire Paramount Communications in February. "I gave them a big smile and said, 'It isn't a complete surprise. I'm surprised a bit at the lateness of it, but it doesn't come as a surprise, given our previous discussions.' I don't consider it as an act of evil of any kind."

If Diller wasn't furious at the Robertses, others were mad enough at the family to make up for the omission. "Hollywood couldn't have written a script like this," snapped a source close to CBS chairman Laurence Tisch. "All these cable-cum-broadcasting people, they have three traits: they're phenomenally greedy, they're phenomenally jealous, and they're filled with a lot of hate for their competitors."

. The Robertses' bid not only reaffirmed Diller's status as a mogul manque, but it left CBS on the block for a takeover attempt by anyone from the Walt Disney Co. to cable-TV magnate Ted Turner. By agreeing last month to join forces with QVC, Tisch, 71, had shown himself willing to cash in half of his 20% stake in the network and to hand the titles of president and chief executive officer to Diller. Now, with the QVC deal gone aglimmering, CBS had what amounted to a COMPANY FOR SALE sign on its black granite headquarters in New York City.

Tisch moved fast to limit the damage. Declaring that "the merger discussion is at an end," he immediately walked away from QVC. "There was no chance," Diller recalls. "We absolutely knew that if Comcast made a competitive offer that Mr. Tisch would be gone in 10 seconds." To keep CBS stock from collapsing over the failure of the deal, Tisch immediately launched a $1.1 billion offer to buy back 22.6% of the company's shares for $325 a share. At the same time, Tisch partly made up for the defection of eight major CBS affiliates to the Fox network in May by adding to the CBS lineup three stations owned by Westinghouse in Boston, Philadelphia and Baltimore, Maryland, and by forming a partnership with Westinghouse to acquire new stations.

The Robertses' bid ruptured a partnership with Diller that began when Brian Roberts brought the former head of Paramount studios and Fox broadcasting to QVC in December 1992. "Brian was very taken with Barry," says a cable-TV executive, "because when Barry turns on the charm, he can be quite impressive and effective. You have this older guy and this younger kid, and what really must have hurt is when Barry did an about-face. If he had gone to the Robertses and made them feel a part of the CBS deal, this might not have happened."

"You have to give Comcast credit," concurs an industry consultant. "When Barry was on the line for Paramount, Brian Roberts killed himself to support Barry. He worked the phones, he worked the press, he worked the investment community; he was an extremely loyal and effective ally in Barry's biggest battle. When a guy does that and the next thing you do is turn around and screw him, it seems to me he's entitled to better."

To the Robertses' dismay, the merger with CBS would have sliced Comcast's 15% stake in QVC to 4.9% of the new company; even though the Robertses would have profited handsomely from the deal, it would have left them with little voice in the fate of the shopping network they had nurtured. Moreover, regulations limiting cross-ownership would have kept Comcast, the nation's third largest cable-TV operator with revenues of $1.3 billion, from ever taking a seat on the merged company's board or increasing its holdings beyond 5%. "We were open with Barry about our predicament because of government regulations," says Comcast president Brian Roberts. "He said our alternative was to make an offer to buy all of QVC, and he said he would have no problem with that."

Still, Diller haggled with CBS over the treatment of options to buy 6 million shares of QVC stock. While Diller wanted to swap half the options for new ones in the merged company, Tisch balked at raising the issue before the deal was complete. Diller dropped his request, but it rankled the Tisch camp. "After they got engaged," says a source close to Tisch, "Diller demanded the dowry."

As the board meetings of QVC and CBS approached, the Robertses summoned Lazard Freres investment bankers Steven Rattner and Felix Rohatyn to Comcast's Philadelphia offices on Friday, July 8. Rattner flew in from Martha's Vineyard, Massachusetts, and Rohatyn was fetched in a Comcast plane from his summer retreat on Long Island, New York. The talk centered on financing the Comcast bid, with Brian Roberts nonetheless repeatedly asking, "Are we doing this only because we're angry?" After securing a $1 billion line of credit from the Bank of New York last Monday, the Robertses were ready to strike. They began placing calls to Diller at 2 p.m. on Tuesday, hoping to arrange a meeting at the Waldorf-Astoria hotel that evening. Discovering that Diller was en route to New York City from Los Angeles with CBS entertainment president Howard Stringer and others, father and son hastily arranged to meet the plane at an airport in Teterboro, New Jersey. Diller alighted and read their letter. Then he canceled plans for a dinner with CBS executives and rode back to Manhattan with the Robertses.

But that hardly ends the story. Diller seemed prepared to foil Comcast last week by actively seeking higher offers for QVC from telephone companies and other cable concerns. And even if no one else comes along, Diller can console himself with the $100 million or so that he stands to make by selling his QVC holdings to Comcast. But that is not likely to calm a restless Diller. "Barry's not a pig," says his close friend Diane Von Furstenberg. "The money is a consequence, but not his first goal. Barry has always fulfilled his dreams."

In fact, Diller could still wind up at CBS, perhaps by forming an investment group that buys the company. CBS insiders seemed open to such a possibility. "I think we gotta let the dust settle for a little while," says the source close to Tisch. But whether or not Diller ultimately joins CBS, the network of William Paley, Edward R. Murrow and Murder, She Wrote seems virtually certain to change hands before too many more seasons.

CHART: NOT AVAILABLE

CREDIT: TIME Graphic by Joe Lertola

CAPTION: DILLER'S UPS AND DOWNS

With reporting by Massimo Calabresi/New York, Suneel Ratan/Washington, Martha Smilgis/Los Angeles and Richard Woodbury/Denver