Media titans John Malone and Barry Diller knew they had their fair share of disagreements over the years, but like many couples heading to divorce, they apparently needed someone else to tell them that.

Enter Wall Street Journal reporter Jessica Vascellaro.

The media industry read with rapt interest her story in October that put in plain language how much tension had built up between the two over their partnership in IAC/InterActiveCorp. 

But as the two moguls duke it out in Delaware court this week, they keep invoking that story, day after day, as the moment that sent their relationship past the point of no return. 

Diller apparently understood the story as grounds to endorse a control structure for a spin-off of IAC businesses that would dilute the grip of Malone’s Liberty Media over the units. And that is what brought them to court today.
 
“It was kind of a verification in his mind they had gone over a significant line and the possibility of doing a transaction beneficial to both sides was becoming highly unlikely,” IAC Vice Chairman Victor Kaufman said when asked by Liberty’s lawyers.
 
IAC’s lawyers made liberal use of the story as well, asking Liberty CEO Greg Maffei whether he orchestrated the original interviews with himself and a usually press-shy Malone to send a message to Diller. They asked Maffei whether he tried to influence that story by flying the New York-based reporter out to Denver and talking up his views of Diller over several hours of travel time.
 
Maffei rebuffed that idea, saying  he didn’t come up with the idea for the flight, that there were other people on the plane and most of the time they spent playing the card game “Oh, Heck”:
 
[We asked Dow Jones about the flight. Here’s their statement: “The Wall Street Journal attempted to reimburse Liberty for the flight, but the company subsequently returned the check. In keeping with our guidelines, we still intend to reimburse Liberty. We stand by the fairness and accuracy of our story.”]
 
After it appeared, Malone said he had already guessed Diller’s reaction:
“I thought Barry’s not going to like this when he sees it. (Did you call Diller?) I should have but I did not. Because when I read it, it came across not the way I would have liked it to come across. 
    
In the end I did call. It was roughly two months later. (Apparently Diller told Malone of his one share, one vote plan during that call)”

(Photo: Reuters / Maffei in Sun Valley 2007)

John Malone is famous in the media industry for his complex deal-making skills that have confounded some of the best minds in business. But he seemed almost forlorn in Delaware court today when talking about the unraveling of his relationship with Barry Diller, the former television and film honcho who built up IAC/InterActiveCorp with his backing.About halfway through a rigorous cross examination by Marc Wolinsky, who was representing IAC, Malone’s responses gave us the impression that his lieutenant and CEO Greg Maffei had a hand in precipitating a difficult business dispute into all-out war. Here are some chapter headings from his direct testimony and cross-examination:The tension dates years back to Maffei’s role in Expedia’s sale to IAC. When Maffei was appointed CEO of Liberty Media in 2005, Malone said Diller branded it a “poor choice.”“I knew there was a history. I knew that Barry was complaining that there was no cooperation between Expedia and Hotels.com … he thought that was wrong. I’m not sure I was aware of any personality difference until much later.”By 2006, Maffei was making comments that questioned the solidity of Diller’s control over IAC, under a proxy agreement to vote Liberty shares. Barry had some feelings about that.“Mr Diller was very unhappy or upset that Mr Maffei would make these … claims or references, anything that would undermine his confidence that he had the voting power.”When Maffei and Liberty counsel suggested a way to weaken Diller’s proxy, Malone said he objected.“I told them that I regarded it as brain damage. (So what did you do when Maffei persisted in his argument?) I would assume that he has something in mind in terms of it being a viable legal argument, or because our lawyers are telling him they believe it’s a valuable and appropriate legal position.”By late 2007, Maffei took a more aggressive stance when it came to pushing Diller to compensate Liberty for the declining value of its IAC stake, Malone said.“I would say Mr Maffei believed it was in the interest of Liberty to try and separate our interests from IAC and Expedia. I think Mr Maffei can be pugilistic where these issues are concerned.”Because at the end of the day, Malone would be happy to make up with good ol’ Barry. Asked if he preferred to litigate their dispute in Colorado rather than Delaware, he said:“I didn’t want to have to sue Mr. Diller anywhere. I still hold him no ill-will and I still seek a win-win solution for our disputes. I don’t think any of us likes that we are having an open dispute after 13, 14 years of building value together.”Cue one Denver sunset please.(Photo: Reuters/John Randolph/ Liberty Media Corporation Chairman John Malone returns to Chancery court in Wilmington Delaware)

YouTube is making some new promises to advertisers who are still on the fence about this whole online video thing that was supposed to take off in 2006, and then in 2007, but forget about 2008 because people, there’s a recession on the horizon.

I sat with a couple of reporters today at the YouTube “Videocracy” event at a Manhattan club venue, where three floors worth of advertising partners and employees lounged on mini-sofas and heard about the wonders of targeted video.

David Eun scopes out content partnerships for Google and YouTube. He told us that the real story of digital video is not being told by big TV networks with their multimillion dollar productions, and called that content “just a sliver” of what the company is doing as it signs on 250 to 300 new partners a quarter.

“A lot of the best content … is coming from smaller video producers,” he said. An example? Some fine work by the professional bull riders association. If you’re an advertiser, and you think your sweet spot audience harbors a secret desire for riding rough, where else will you find them?
“They’re never going to get a cable network,” Eun said.

Another thing. The way those broadcast networks are still hoarding video only on approved sites and media players. It’s just not the right direction. (Did someone say Hulu?)

“We don’t work exclusively. We don’t require it. It’s old school. I call it (creating) a false scarcity,” Eun said.

We still came away with the feeling that online video advertising had a ways to go before becoming a jackpot to somebody. Maybe to Google, which is building more campaigns with its clients that can move from its search listings to video tie-ins.

“Most of the major brand advertisers we have on Google are engaged on YouTube or getting engaged,” Tim Armstrong, the company’s North American ad chief said.

It’s rare that Yahoo can boast a victory these days, with disappointing growth prospects for 2008 and a slew of job cuts on the way. But it scored a triumph in Barcelona, where carrier T-Mobile signed on to use Yahoo’s Web services for cell phones, displacing search market leader Google.

The deal covers T-Mobile subscribers in northern and central Europe and was announced at the Mobile World Congress. But the timing could not be better for Yahoo, which is trying to stand its ground in the face of a $42 billion takeover bid by Microsoft Corp.

It’s no secret that Yahoo’s mobile capabilities are well-regarded, nor is it hard to imagine that its easier to use search functions for cell phones is one of the reasons the company is such a tantalizing grab for Microsoft. Is a T-Mobile deal enough to add a couple of bucks to Microsoft’s original $31 per share offer? (Reuters)

As a footnote, Microsoft isn’t exactly treading water either. It just bought mobile software company Danger. (Reuters)

Keep an eye on:

• Beyond disrupting the TV schedule, the Hollywood writers strike shone a spotlight on broad issues facing the industry: how commercial time is bought and sold is badly outdated; show development is too costly; and, most troubling, audiences are shrinking. (Reuters)
• The end of the strike leaves many questions about the status of broadcast and cable shows. (TV Decoder)
• Layoff are expected to begin today at Yahoo. (PaidContent)
• Best Buy and Netflix back the Blu-ray next generation DVD technology. (Reuters)

(Photo: Reuters)

If more commercials start popping up on your cell phones, go ahead and blame your younger siblings. We looked at some new research commissioned by Amdocs that showed as many as 46 percent of 18 to 24-year-olds in the U.S. say they would accept mobile phone ads. 43 percent of young Brits said the same.
    
For the wider adult population, the level drops to 28 percent in the U.S. and 33 percent in the UK, based on a survey of more than 2,000 people. There are strings attached, of course, such as making sure the ads are in-sync with their consumption habits or giving them some free entertainment.
    
The study, conducted with KRC Research, is also no coincidence, since Amdocs is branching out into supporting digital advertising after years of providing big telcos their billing systems. The full data will be released this week at the Mobile World Congress in Barcelona.
    
Seth Nesbitt, VP product and solutions marketing at Amdocs, thinks a hybrid model of ad-supported services on mobile phones isn’t far away.
    
“Most likely we’ll see people trying a mix of a revenue split or a cost split, 25/75 (percent) or 50/50. The optimum way of structuring the arrangement hasn’t come out yet,” he said.
    
Another finding is that up to 33 percent of U.S. mobile users and 23 percent of British cellular customers would switch carriers for some cool new features. They tend to be the big-time mobile junkies who use the most expensive services. Is there a lesson here about the iPhone, Sprint?

(Photo of Vogue editor Anna Wintour courtesy of Reuters)

As if a 62 percent premium for Yahoo wasn’t enough to deter rival bidders, Microsoft executives had a special warning for Google.

He didn’t say “DoubleClick” out loud, but Microsoft general counsel Brad Smith made it clear the authorities would come knocking if Google so much as fantasized about making a grab for its nearest rival.

Here’s how Smith put it during a conference call with analysts today:
Any number of companies might take an interest (in Yahoo). I think there is really one company that cannot. That is Google itself. Given that Google has roughly a 75% market share worldwide for online page search, they are not in a position to do this. Given its super dominant market share, Google is clearly prevented by the antitrust laws from buying Yahoo or buying this business from Yahoo.

Smith went further to say that major media companies are already giving their blessing on the offer, suggesting they may want more than all Google, all the time when it comes to online advertising.

The reaction from publishers, which includes a lot of the media companies, has been very positive. They have been encouraging us to make this kind of acquisition. In fact, we have been getting unsolicited feedback this morning from publishers and advertisers that this is the right kind of step that is going to create a more compelling and competitive number two in the marketplace.

As a footnote, even as Yahoo’s share price slid further and further this month, many analysts were loath to say that a Microsoft deal was possible. Except one, and he’s not even an analyst anymore.

As we’ve argued, the Internet industry will not support four major generalists–Google, Yahoo, AOL, and MSN–and two of them need to combine. We like the Microsoft-Yahoo combination a lot, but we think a simple Microsoft swallowing of Yahoo would be a disaster. We think Microsoft should sell its Internet business to Yahoo in exchange for a significant chunk of equity. The resulting public entity would be able to recruit top talent, more effectively compete with Google, and operate independently of the Windows/Office machine. – Henry Blodget

(Photo: Reuters)

Oprah Winfrey is spreading her sphere of influence to cable television. In about 18 months she will launch with Discovery Communications the Oprah Winfrey Network, or OWN, to 70 million homes in the United States, replacing the sometimes raw footage of appendectomies and gout-swollen feet now programmed on the Discovery Health Channel.

The queen of daytime talk said the deal was actually more than 15 years in the making, well before Discovery chief David Zaslav came calling last spring to suggest a venture. Not two days before that meeting, she said in call to discuss the deal, she found an old entry in her diary that envisioned life beyond her talk show.

Cleaning out some drawers. I came across a piece in my journal 16 years now since. I had this vision of creating my own network using the platform of the Oprah Winfrey Show.

The journal entry included a line about creating mindful, not mindless, television, she said.

I wrote this when I was going through the conflict of the Jerry Springers, and everyone was going to trash TV … I had this vision for a long time and had just recently run across that piece in my journal. Literally I brought him (Zaslav) into my office and showed him that piece of paper … It was an instant connection.

That “connection” will soon become a full-fledged cable network with all programming vetted by Winfrey herself. She described it as a channel dedicated to unleashing human potential, digging deeper into the topics of health, relationships, child-rearing and charity she’s cultivated in hour-long segments, each afternoon, from Monday to Friday.

Who knows, maybe “The Oprah Winfrey Show” will also come to the new mothership, once the progam’s current distribution contract expires in 2011?

(Photo: Reuters)

Warner Brothers has told about 1,000 TV and film employees they can expect some layoffs soon because of the Hollywood screenwriters strike, firing a new volley in the dispute over how writers will get compensation for digitally distributed entertainment.

The Time Warner-owned studio invoked federal and California law to explain why it delivered the warning notices, and said it hoped to bring employees that are laid off back to work once the Writers Guild of America strike comes to an end. Warner Brothers did not say how many people may actually be laid off.

Some industry watchers say that Warner, and maybe other studios down the line, may use such notices to help drive home their view of a strike that is already wreaking more havoc in Hollywood than a clash between Godzilla and King Kong.

“In part this is probably a negotiating tactic because the studios want to continue emphasizing the collateral damage of the strike,” Jonathan Handel, an entertainment lawyer at TroyGould, told the New York Post.

Sounds like its worth checking the mail.

(Reuters)

(NYPost)

Keep an eye on:

• CBS and the Writers Guild of America settled a three-year-old contract impasse, reaching a tentative employment agreement for 500 newswriters, editors and others. (NYTimes)
• NBC News’ broadcast of a stripped-down Golden Globe Awards on Sunday raises questions about the heavy influence of the entertainment division on its sister news organization. (LATimes)
• MySpace unveiled a new MySpace Celebrity site devoted to entertainment culture. The portal will feature news, including gossip aggregated from People magazine’s Web site, blogs, and multimedia content. (CNET)

(Photo: Reuters)

So, where are they?

The New York Times and Washington Post report that the Fox Business Network is bringing in a bit more than 6,000 viewers in the daytime and about 15,000 viewers in prime-time.

Of course, it’s barely been three months since Fox Business launched on cable with a resounding battle cry, vowing to take on a well-entrenched CNBC with plainer talk on business and personal finance.

But the data, which could not be publicly released by Nielsen because its falls below a 35,000-viewer threshold, shows Fox’s Roger Ailes has his work cut out for him in building a serious CNBC-killer. CNBC averaged more than 280,000 daytime viewers and 234,000 in prime-time.

“It’s absolutely no surprise,” Kevin Magee, Fox’s executive vice president, told the Post. “This is the way you build a network. You get on the air, build your shows and hope the audience finds you. It’s still incredibly early.”
(Washington Post) (New York Times)

Keep an eye on:

• U.S. album sales plunged, and even digital music growth slowed in 2007 as the music industry has yet to find a real alternative to free downloads on the Web. (Reuters)
• The parent company of the popular Jewish online dating site JDate has put itself up for sale, people close to the auction said Thursday, and is already in talks with several prominent media companies. (NYTimes)
• New rules recently issued in China would restrict the broadcast of Internet videos to sites run by the state. That could be bad news for a growing legion of privately owned Chinese video-streaming sites, although enforcement of other efforts to rein in Chinese Web content has been spotty. (WSJ)
• The Writers Guild Of America confirmed that “a discussion took place yesterday between [its member] Jay Leno and the Writers Guild to clarify to him that writing for The Tonight Show constitutes a violation of the Guilds’ strike rules.” Leno admitted on the air during his first show back from strike hiatus that he wrote his own monologue.(Deadline Hollywood Daily)

(Photo: Reuters)

The simple proposition of telling people whether it is raining or sunny could set a new benchmark for media valuations, with the Weather Channel going up for sale for $5 billion, according to the New York Times.

The cable channel’s parent, Landmark Communications, is already attracting interest from the likes of NBC, News Corp and Comcast, the Times reported. A big part of the draw is the Web site, Weather.com, with more than 32 million people checking in monthly.

If the Weather Channel can fetch that asking price, what could be in store for shopping channel HSN, which is due to split from parent IAC/InterActiveCorp, or the family of Discovery cable channels, which John Malone is letting loose to public investors?

(New York Times)

Keep an eye on:

• The UK will become the first major country where advertisers will spend more on Internet ads than on TV ads, media agency GroupM predicts. (Guardian)
• Is Jay-Z starting a record label with Apple? Some says yes , others no.
• Tom Wolfe, one of the iconic names in American publishing, has left Farrar, Straus & Giroux after more than 40 years to join French media and defense company Lagardère SCA’s Little, Brown imprint. (WSJ)
• Plaxo, an early social networking site that helps people keep their address books updated, is up for auction and is seeking as much as $100 million. (NYTimes)