Diller became a convergence convert in July 1992. As the story goes, he and his longtime friend (now wife) fashion designer Diane von Furstenberg were visiting the studios of QVC in sleepy West Chester, Pa. Von Furstenberg was considering launching a line of moderately priced clothing on the up-and-coming cable channel and wanted Diller's advice. But what fascinated Diller was a set of monitors that tracked phone-order volume. He watched in awe as the phones lit up to the rhythms of the on-camera sales pitch. "It was like waves coming onto shore," he says. "I looked at that and I said, 'Oh my God. I don't know what's going to happen, but this is going to be the beginning of things changing.'" In other words, eureka.
If broadcast media is a business built on a fuzzy faith in Nielsen and a nation of demographically sliced couch potatoes, then home shopping cable was a scientific revolution in selling. QVC could know - precisely and instantly - what appealed to customers and how much they were buying. Diller became convinced that the future of media lay in interactivity - an epiphany, it should be noted, that came a good four years before the Net broke through as an engine of commerce. Within six months, Diller became the chairman and CEO of QVC, invested $25 million for a 12 percent stake and began putting a new shine on the shopping channel by going after higher-end customers.
It wasn't long before he set his sights on bigger game. In early 1994 he tried to acquire CBS. (Only Diller knows whether this was a next step in his grand convergence strategy or simply a bid to grab a network for himself.) The QVC board opposed the idea, though, and by December 1994 Diller left the company. But he was by no means through with home shopping. Within eight months, he emerged as the CEO and chairman of QVC's nearest competitor, the Home Shopping Network, based in St. Petersburg, Fla. That's when Diller's strategy began to come into focus. He revamped HSN's strategy, improving production values and maintaining rigorous quality control. To improve efficiency and expand the direct-selling enterprise, USA acquired customer services company Precision Response Corp. in April 2000 and online apparel retailer and technology firm Styleclick in July the same year.
But it was the deal with Universal in 1998 that positioned Diller for the big time. In exchange for a 43 percent stake in his company, Diller took control of a collection of Universal's domestic TV stations and cable networks. It was an anticlimactic follow-up to the 1994 bid for CBS, but the strategic underpinnings were the same: convergence.
There were, of course, plenty of stumbles along the way. Diller dabbled in a string of forgettable Internet ventures, from the grossly underdeveloped Internet Shopping Network to the failed FirstJewelry.com. Then there was the doomed December 1998 spinoff of Ticketmaster Online-CitySearch from USA-owned Ticketmaster - an attempt to cash in on the market's thirst for Internet stock plays. The stock enjoyed an initial run-up, but by November 2000 it was trading below its initial offering of $11.62, a victim of a bloated budget and the market's disavowal of all things dot-com. The spinoff was folded back into Ticketmaster by January 2001.
More famously, Diller tried but failed to acquire Lycos in 1999. He had hoped to use the Internet portal as a gateway to all his properties, enabling him not only to distribute media but also to compete with the likes of Amazon.com for online retail dollars. But the $18 billion bid was eventually defeated by CMGI chief and Lycos investor David Wetherell, who bristled at Diller's lowball offer.
All along, USA has suffered growing pains as it sought to merge acquisitions into the company. Diller concedes that there was some "tissue rejection" with the purchase of CitySearch and Ticketmaster, for instance. "I would say we expected it," he says. But "the recent acquisitions we've integrated fairly well. We've proven that we've gotten fairly good at this."
