USAs Diller Eyes Bigger Fish


Barry Diller's hopes for building one of the
nation's largest media empires may have suffered a setback.

The Los Angeles Times reported last week that talks
with General Electric Co. on a proposed $20 billion stock swap that would merge his USA
Networks Inc. with GE's NBC Inc. had stalled after one of Diller's largest
shareholders balked at the deal.

Further confusing the issue were reports that Viacom Inc.
is also a leading candidate to acquire GE's "Peacock Network." GE chairman
Jack Welch has reportedly held talks in the past year with Sony Corp. and Liberty Media

Analysts said a potential acquisition of NBC was ideal for
Viacom, which has not articulated a "post-Sumner [Redstone, chairman of Viacom]

"It makes a lot of sense," said Tom Wolzien,
media analyst with Sanford C. Bernstein & Co. "You'd be able to put together
a nice package of entertainment and news. But it's still a matter of price and
details -- two minor things."

Viacom officials were not immediately available for

Meanwhile, Seagram Co. CEO Edgar Bronfman Jr., who owns 45
percent of USA Networks, reportedly vetoed a deal for NBC because it would have diluted
his stake in Diller's company.

A USA Networks spokesman said the company does not respond
to "rumors and speculation," while an NBC spokeswoman would only say, "We
talk to a lot of people."

Nevertheless, analysts called the proposed union a natural
fit for Diller, who could combine his USA Network and Sci-Fi Channel with NBC's cable
properties, which include MSNBC, CNBC and its ownership in Rainbow Media Holdings Inc.

The result would be a combined entity capable of selling
advertising across a wide demographic range, said Bruce Leichtman, media analyst with
Boston-based The Yankee Group.

"You go in with a slate of demographic categories. And
that's the name of the game: selling advertising," Leichtman said. "It
proves again that content is king."

Such a merger would allow Diller to develop programming
that could be fed directly to NBC through his Studios USA production unit, said Ed Hatch,
an analyst with Warburg Dillion Read.

Hal Vogel, an analyst with SG Cowen Securities, said the
stalled talks with GE don't mean that Diller won't try to satisfy his
"hankering for a network" at a later time, or even that Bronfman can't be
convinced to give his blessing to an NBC deal.

Long-term, Diller needs a deal like this if he is going to
continue to grow his company, Vogel added.

"The media world is consolidating," he said,
"and efficiencies of scale and brand names like this don't come along every day.
Sooner or later, [Diller] is either going to have to sell out or find a bigger apartment
for his ambitions."