Barry Diller spoke with Bloomberg’s Erik Schatzker about Donald Trump, the state of the TV industry, Tinder, Jack Dorsey and more at the Bloomberg Markets Most Influential Summit in New York today.
On Trump: “If Donald Trump doesn’t fall, I’ll either move out of the country or join the resistance…I just think it’s a phenomenon of reality television as politics and I think that that is how it started. Reality television, as you all know, is based on conflict…All he is is about conflict and it’s all about the negative conflict…He’s a self-promoting huckster who found a vein, a vein of meanness and nastiness.”
On TV networks and distributors: “Any business model that relies on a closed system is vulnerable…The business model, though, of believing that you can increase prices on the consumer to infinity — which is what has happened over the last 20 some-odd five years, that’s over. When you think that you can instead price your own programming at a cumulative premium, people who will, I think, do better are people who own individual programming because individual programs can be priced. “Game of Thrones” can be priced. “The Good Wife,” tiny little example. I went on last night because I had been gone, whatever, and “The Good Wife” came on and it’s on Netflix or Apple. And I like “The Good Wife” a lot but I don’t really watch broadcast television very much. So I punched it up; $44 for the season. You know, I bought it. Now I’m not the normal consumer, I grant you. But the ability to price individual programs for people who like them, you need much fewer people by definition because you can price them essentially advantageously.”
On Jack Dorsey: “You know, it’s not like, people say how do you allocate your time? Nobody I know who runs more than a soda stand does the kind of precise time allocation; he’ll bop from one to the other as issues arise. And if he has capacity as a manager, which we don’t know yet because Square is a developing company and he really did not manage Twitter — he founded it. He’s the creative drive of it. So, if he’s a good manager, handling two public companies is not that big a trick.”
On Tinder: “It’s blooming itself along and on every metric — and it’s now starting to actually have revenue, net revenue…I’ve now pretty sure it’s gone past the phase where if it wasn’t sustainable, it would have dropped.”
Barry Diller Full transcript below.
ERIK SCHATZKER, BLOOMBERG TV HOST: Good afternoon, everybody, friends, invited guests, Bloomberg television viewers around the world.
Great to be here, Barry. Great to see you again.
BARRY DILLER, CHAIRMAN AND SENIOR EXECUTIVE, IAC AND EXPEDIA: Well, thank you.
What can I do?
SCHATZKER: Well, answer some questions, how about that?
DILLER: Oh, god. OK.
SCHATZKER: Why don’t we begin…
You know because we’ve done this before that I like to ask you questions about valuations because you bring a different perspective to the question than, say, a trader would or a money manager would or a venture capitalist would.
And I want to begin with what I call and other people might also call the unicorn problem. They’re supposed to be rare, but there are, at last count, at least 131 privately held startups with a valuation of $1 billion or more.
Does that make sense to you?
DILLER: Well, I mean, it only makes 31 — it only makes sense in a close circle where it doesn’t matter because it’s all it is about really is dilution, which means that when you go with various financing rounds, the latter financing round dilutes the original. And so they have no reality. It’s not like — it’s not like anybody actually believes these valuations. What they are is new money coming in and old money argues the least dilution et cetera since they’re all betting on an unimaginably high upside. It does not matter.
So the only thing that matters is when the shoes drop. And what we’ve had is an enormous amount of money coming in, continuing money coming in and no shoes dropping yet of any real size.
When that begins to happen — because none of these companies make any money — so some certainly will. But when it begins to happen reality (INAUDIBLE), then in fact, valuations will be come more rational.
They’re just not now.
SCHATZKER: Is it possible to —
DILLER: And it doesn’t matter because it’s all —
SCHATZKER: If it doesn’t matter, should we be — should we collectively be paying less attention to it?
SCHATZKER: Just pretend it doesn’t exist?
DILLER: Yes, because it doesn’t exist.
SCHATZKER: Doesn’t matter if Uber’s worth $54 billion?
DILLER: Of course it doesn’t matter.
Why would it matter to nobody other than the people are being diluted they used to own X percent now they own Y because they brought in all this money. They got these presumably intelligent folk to say, OK to a $50 million, billion valuation or a $40 billion or whatever it is. But that’s because what they were buying into — and they’re investing in many different things. They’re buying into the, you know, not the 80-20, it’s probably the 99-1 concept, which is you hit 1, it pays for everything else.
So it does not matter. It’s no economic consequences.
SCHATZKER: Why does the surreality — let’s call it that — then persist?
Because we have seen some shoes drop. I can think for example of King Digital. That shoe dropped pretty hard. Zynga’s another shoe that dropped pretty hard.
DILLER: Yes, but it’s not — you know, in the scheme of it, more money has come in very few. We’re in a period now because we’re in this period of in — of the close-up mobile more than anything else. But also the natural development of the Internet. We’re now in this period of kind of hyper invention, hyper business formation of business, hyper idea formation.
So you’re going to have to see a whole sequence of things happen which they will happen and that will dry up the money. The valuations will get rational. And then you have also on the other side of this in the — on the buying side, not the selling side — you have people trying, paying opportunity costs. They buy something for $900 million; Disney buys Maker. It doesn’t make any money. This price, again, only makes sense if you’re saying I’m over here in this non-digital age. I want to get into this. I’ll pay this huge opportunity cost and maybe I’ll make something of it.
So you have those two forces. Eventually, I would say — I mean, I don’t want to predict this. I think it’s silly. But at some reasonable year, relatively near term, rationality, it’ll fall. I don’t mean it’ll fall — you’ll take the big pressures off both the buying and the VCing, the investing. But in the meantime, well, in the meantime, it’s craziness.
SCHATZKER: Well, and also, it maybe craziness, but in the meantime, you manage a portfolio. You’re in the business of buying things and selling things.
DILLER: But we don’t buy things at multiples that we don’t think are rational. We just don’t.
So if something is — first of