Media giant Barry Diller: ‘There’ll be 10% of the theaters worldwide in a few years’

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Barry Diller, Chairman and Senior Executive of IAC/InterActiveCorp and Expedia, Inc., looks on at the Wall Street Journal Digital Conference in Laguna Beach, California, U.S., October 17, 2017. Photo by Mike Blake/Reuters.

Media mogul Barry Diller recently made a splash in Hollywood when he told NPR that “the movie business is over.”

Diller began in the William Morris mailroom, rose through the ranks at ABC, and took the helm at Paramount in 1974. During his reign, the studio released hits including "Grease," "Terms of Endearment," and "Beverly Hills Cop." A decade later, he moved to Fox, where he ran the studio and created the Fox Broadcast Network.

He hasn’t run a movie studio since 1992, but he still keeps his eyes on the business of entertainment. 

Today, the 79-year-old is the chairman of Expedia and IAC — the parent company of Tinder and The Daily Beast, among many others. Through IAC, Diller has been a major financier of Broadway shows and independent movies produced by Scott Rudin — a subject that will be addressed in part two of KCRW’s interview with Diller next week.

This week’s conversation came about when host Kim Masters saw some online blowback to Diller’s recent NPR interview on the state of the movie business. Knowing that Diller is regarded by many as perhaps the smartest of his generation — or any generation — in this business, she asked him to  expand on his ideas.

KCRW: You said in a recent interview with NPR that “the movie business is over. The movie business as before is finished and will never come back.”

Barry Diller: “That's not really what I said. What I said was that because of streaming, because of the pandemic, because of the enormous production of long-form content … what we think of as a movie is evolving, and no longer means what it did just a couple of years ago. And that is going to continue … to vague out what that term ‘Hollywood’ or ‘movies’ represents. And I think that's just reality and inevitable. 

It doesn't mean that there's going to be no theaters in the United States. I think there'll be some. I don't think there'll be anywhere near as many as there are now. I do think that they're appropriate — IMAX, etc. — for big productions, where you need sound and lights and all of that extra, and where you need a communal experience. But for the normal [movie], for everything else, I don't think you're going to be going to theaters.”

"Because of streaming, because of the pandemic … what we think of as a movie is evolving, and no longer means what it did just a couple of years ago.”

Are we just commodifying what we used to call a “movie” to the point where its value is greatly diminished?

“Yes, that is what I meant. When you talk about value …  companies went from developing movies to putting together projects that could become sequelized. And the preponderance of the movie development activity didn't go to saying, ‘Gee, this is a good script. This is a really good story. Let's tell it.’ [It went] to, ‘Well, if we spent $200 million on this, and we create this and that, and bells, and whistles, and hats, and merchandise, whatever, we will have an ongoing asset.’ And that is a strategy — a viable strategy, certaintainly it was, for Disney. 

But that strategy became pervasive to force out any other strategy, i.e. the development of a number of projects [where] you pick the projects you want to make, and you see what happens without predetermining the marketing budget, which on big-scale movies is predetermined. So I think that that's what happened to the movie business. 

And then came the pandemic and streaming, which on the other end caused huge numbers of ‘long form projects’ — I don't call them movies — to be put in production, sometimes distributed for a week or two, sometimes not theatrically. But all of that contributed to … the irrelevance of ‘Hollywood,’ because it does not exist anymore. And … nothing lasts very long in these concepts. If you go with a big ticket movie, you blow it out in 5000 theaters. It's all over in a few weeks.”

You’ve been thought of as the hybrid businessman-movie guy who still took swings. How do you respond to comments that Paramount and Fox also put out films that were not necessarily wonderful ideas that were nurtured along? 

We missed a lot. I mean, we made movies that were turkeys. But we did make enough movies that weren't to lead the movie business at Paramount for eight years, and then at Fox for four of the eight years. So some stuff in that concept of what you just described, without knowing the end market, were really good and worked out well.”

You say Hollywood is over, but there are still companies making products that have been around for a long time, so they haven't died quite yet.

“I mean, it is what it is. You can say who cares, but it's no longer their first, second, third consideration. When movie companies were on their own, and I'm talking before all the consolidation, movies were basically the only thing they did. They were movie companies where the chief executive would rarely delegate the ‘go/no-go’ decision to anyone. And therefore, the senior person in the company was making the decisions and deeply involved in the process. 

Today, that is number 14, 18, or 32 in the corporate list of executive hierarchy. Meaning that because of consolidation, the actual making of the movies is way, way down. And in some of these companies, especially Disney, you can't even nail [or] name who is making that decision because of the way it's constructed, which is that the distribution side is basically the determinant of where that movie goes. So it's all mushed together.”

People who used to run a studio now have to find out from business numbers people where that project will end up. And sometimes it bounces around and loses its advocate. 

“That is a crazy idea that [today] you actually make a movie and you don't know where it's going. Is it going to streaming? Is it going to a theater? Or is it going to Sam's Club?”

“[Today] you actually make a movie and you don't know where it's going. Is it going to streaming? Is it going to a theater? Or is it going to Sam's Club?”

Is it worth it for everybody to go all-in on streaming? Is that going to work out?

“That is a level of future accounting that I don't think anybody has the capacity for. In the end, if you posit on one side making a film, controlling it completely, selling it first to various audiences, then in all of its after markets, selling your library, doing all of this, as compared to … only selling directly to the customer, which system will, in the end, have been more profitable? 

I would argue that not only do we not know, but that I think it's a pretty even trade, meaning I am not sure that streaming is going to be more valuable than selling your product to whomever for whatever without forcing it through your own distribution, consumer-direct business.”

What happens if you take away the event element of releasing films? I don't think you get a Harry Potter World, with all of the merchandise and theme park rides, if you release it on streaming.

“It’s very, very difficult to create one-off assets where standing on their own will ever have the values that we have known for the ‘Bond’ series, or ‘Star Wars,’ or anything. The ability to do that has been forever compromised. That's significant. All of the big returns have been made by these big, sequelized blockbusters that roll out every two or three years that are capitalized at $300 or $400 million, and that return over $1 billion.”

“It’s very difficult to create one-off assets where standing on their own will ever have the values that we have known for the ‘Bond’series or ‘Star Wars.’ The ability to do that has been forever compromised.”

 Is the movie industry just killing itself? 

“It's a great transition, which is not really much talked about, partly because there are no real answers to it. And partly because they're frightened to death of admitting the obvious here, which is that the direct-to-consumer business, by its very definition, is an entirely different playing field than going through traditional distribution avenues. It's completely different. And it has real, true consequences.

I don't know anyone who thinks there'll be … let's say optimistically, 50% of theaters. I think there'll be 10% of the theaters worldwide in a few years.”

When you were at Paramount, your staff  went on to have huge careers — Michael Eisner, Jeffrey Katzenberg, Don Simpson. I don't know that we have any mechanism for developing those skills anymore. The tail now wags that dog.

“I think it's true, because the training grounds are just so mixed up right now. I've always believed that the only thing you do is you hire people at beginning stages, let them swim or sink, and keep promoting them and never hire from the outside, or at least rarely hire from the outside. I still think it's true, but it's increasingly difficult.”

"I don't know anyone who thinks there'll be …  let's say optimistically, 50% of theaters. I think there'll be 10% of the theaters worldwide in a few years.”

You’ve talked very positively about David Zaslav taking over WarnerMedia and Discovery. As far as the whole big picture, can Zaslav save this? 

“He is a bit of an establishment executive. He worked in all different forms of media for a long time. And that is a different training ground than the people that either AT&T or — not that I don't respect him — [WarnerMedia CEO] Jason Kilar, who really came from Amazon and then Hulu. It's just a totally different atmosphere. And I do think that AT&T came in with extraordinarily heavy feet from the first hour of the first day, and destroyed a lot of value. David is certainly qualified. And the company is capitalized well enough, and it has enough access to markets, that at least he's a good contender, and I think has a chance.”

You’ve said that nobody could compete against Netflix. But are we seeing a little bit of wobble now?

“Let me clarify that. What I said is that Netflix … won several years ago. No one, I believe, will ever displace them for being the largest worldwide streaming service. That does not mean that other companies can't compete. It simply means that if they're going to go … thinking they can take over or destroy Netflix, or push Netflix down the rung, I think that's foolish thinking. I just think it's not possible. 

Notwithstanding the quality of their programming or whatever. Because they have so much programming. They're putting so much money down that it just seems impossible that tenough will squeak through to keep their subscribers rising over time. …  The issue for Disney, Time Warner, Amazon, and Comcast is: Can their costs dealing direct with the consumer ever equate to the lost revenue when they were able to deal with everyone? That's an unknown.”

On CNBC, you said that you had observed Bob Iger “being pushed to the sidelines by his successor, not very nicely by the way.” And he “certainly doesn’t deserve it.”

“I shouldn’t mouth off about things. Look, it’s not unknown that Bob Iger was going to be the content chief of that company until he left. I think that’s no longer true because I think Mr. [Bob] Chapek has simply decided that he’s the boss, and the board is backing him. That’s what I assume, but I don’t know.

… I would have never given up Bob Iger if I had a prayer and a chance to keep him energetically employed in running Disney.”

Bob Iger resigned abruptly, which still baffles many observers. 

“No, I actually think he did the really right thing. He said, ‘If I’m going to do this, there’s no reason to wait. It’s not fair to the company, it’s not fair to any other people.’ So he just said, ‘Get on with it.’”

He had pushed his retirement in the past. 

“When you say ‘pushed it,’ he’d set dates and they convinced him otherwise. I think he wasn’t going to be convinced this time.” 

Credits

Guest:

  • Barry Diller - Chairman and senior executive, IAC/InterActiveCorp and Expedia Group

Host:

Kim Masters

Producer:

Kaitlin Parker