Interview: Part I: Barry Diller: 'If You Have Too Many Epiphanies, You're On Some Kind of Drug'

This story was written by Staci D. Kramer.

The next morning, when he sat down for an interview with paidContent, Diller was back in his own spacethe Frank Gehry-designed white-and-glass landmark in an expansive conference room not too far from the office he describes as Gehry's "kind of Ayn Rand concept." Literally, he was more than 30 blocks away that area; figuratively, he was even further from the Carnegie Building that housed his East Coast office back when he ran USA and other cable networks alongside his nascent interactive business. Ask Diller now about networks, and he might ask you, what kind? What follows in this and a second installment are edited excerpts from that conversation.

Staci D. Kramer: Last night, you talked about how at one point in the world's recent history all of media was consolidated in one very small space in Manhattan.

Barry Diller: The definition of evolution in five, six, seven blocks, was the entire decision-making apparatus for 95 percent of everything that people in the United States viewed in terms of information and entertainment, and the internet busted that all apart and dispersed that power everywhere. That's the real profound change.

You had an aha moment back in 1992 with QVC. When's the most recent time you said, aha, there's something that is completely changing the way I think about digital?

If you have too many epiphanies, you're on some kind of drug. I haven't had one about big macromedia other than that. That was a lucky take because I saw something early that was in primitive form of what was to come.

You also saw that possibility of people being able to reach out directly for that information and not have an intermediary.

Like many things, it started a couple of years before that for me when I actually started using a computer. This is '90, so the PC was just getting used a little bit then, not much, by people doing other than computational work. I started using a computer because Foxthis was before Fox Newsall of our television stations had news operations and I discovered that there was a service, a green screen, and I started using this green screen to retrieve news and information. That was the first time that I had done anything other than be a passive recipient of news from a newspaper or watching a television news show. That's the beginning, really, of this change that took clearly from there anywhere five years before the internet was being used.

You had an idea about synergies. Doing without the cable networks, splitting those off and going completely into the digital space, the idea that all of these things that worked together in one company couldn't work ...

The reason we sold our entertainment assets was, it appeared at the time it was probably not completely true but you never knowbut we thought there was no more expansion for us. We'd had a period a few years before when it looked like we would combine with NBC but the nature of our agreement at the time with Seagram's prevented it Vivendi (PA: VIV) would have blocked us, so in return for our freedom we sold the entertainment assets.

You've build some complicated things, you've undone them, you've built them back up again. You like to pull together a lot of disparate pieces that you see a thread in that maybe other people haven't always seen.

There's no question that there's a thread. The question is whether it's worth pulling on too much. I came to the realization that it couldn't be done in a reasonable amount of time. I came to the realization that a 'glomeration,' or multiple disparate assets, was a bad management concept, unless you were willing to give 50 years, 40 yearsI'm exaggerating, but a huge amount of time.  And I didn't think it was in the DNA of either the enterprise or of practicality. And I thought there was a better organizing structure, which was the spinning out of all of these into independent, freestanding entities.

The last spin-off date was nine months ago and, of course, in that period we went through first of all these companies carving their own independent identity, which takes a while. We went through a rather bad economic time, in terms of the market. All of those things made the early first results very poor. Now, the values are beginning to be understood. Two years from now, I think there's absolutely no question, none whatsoever, that spinning these into five separate companies was exactly the right thing to do.

You're still figuring out IAC.

We've obviously taken four-fifths of the company and pushed it out. The fifth that's remaining, IAC (NSDQ: IACI), which is in the search business and the local business and in the personals business primarilyand the emerging businesses, which we're downsizingthat's a very manageable hand, that's a small hand relatively compared to the very large pile of assets we had.

When I asked someone what they would ask you, they said, when's a big hit coming? I said, maybe they don't need another big hit, what they need is to make they already have work.

That's it. There's no question. What the company is now, it's not a holding company, it's a very round operational company. There is now no distance between the corporate and the businesses. They are being directly managed and I think much more intensively managed by definition.

It's easier to pay attention to the last three children after the first five leave home.

More than five. All of those businesses had other businesses attached to them, etc. The point is it's just a different concept, and yes, the point is, for us I'm not saying we're not going to make acquisitions because we have and we will but we don't really see us making acquisitionsunless an opportunity comes around the cornerthat are outside of our local, our search and our personals business.

And yet, at the same time you do keep investing here and there in content.

When you say content, what do you mean?

Entertainment, news and media ...

We have a smallbut much smaller than it was, a year ago we had 16 or 20 of themnow we have very few of what you call content businesses: College Humor is one, Daily Beast is one, and yeah, we're going to narrow down. We will have, more than likely, some pure media business that we'll support. (IAC confirmed Tuesday that it is shutting down Black-centric RushmoreDrive.com this week.)

By Staci D. Kramer