Viacom Was ‘Smart’ to Have Content Yanked from YouTube, Diller Says

“In contrast to what happened in the music business, where they stuck their heads in the dumb sand for much too long, I don’t think that’s going to happen on the video side,” Diller said. The “only issue for Viacom” is content availability, and “they have every right to say to YouTube, ‘You're not going to get it,'” he said. There’s no doubt Viacom and other media companies will make all their content available “through all sorts of other outlets,” as long as they receive “fair commerce” payment in return, he said.

Media companies are fixed on not allowing YouTube “to become as strong in the distribution” of Internet content as HBO once became in the distribution of movies, Diller said. At issue is whether content companies will be based on subscription or ad revenue, but there’s no doubt they'll be paid, he said. Diller didn’t answer directly when asked if he would have done the same if he were the head of Viacom because he didn’t know all “details” of the company’s talks with YouTube: “But I certainly would have said, ‘Let me be really clear with you. You're not going to take this stuff that I made in my house and massage it and control it for other people. That you're not going to do.'” Diller said he hasn’t “a clue” what actions like Viacom’s bodes for the future of YouTube -- now owned by his Google rival.

It’s the “perfect time” to invest in the development of original programming on the Internet, now that there’s “a pipe big enough to carry video and audio and data in a single stream,” Diller said. In a couple of months, IAC/InterActive will launch a satirical current-events site it’s tentatively calling “23/7,” Diller said. Growth for the company through original programming will come organically, rather than through acquisitions, though it will remain open to buying “anything that walks,” Diller said, drawing audience laughs.

That many potential acquisition targets are overvalued is great incentive to avoid them, Diller said. There’s “enormous froth” in today’s media market, Diller said. “How could it be rational? There’s a ton of money that’s flowing” into the market from venture capitalists, and “desperate” media companies are willing to jump at high-risk acquisitions to jump-start sagging businesses, he said. “Rupert Murdoch bought MySpace for $600 million” when it had no revenue, he said. “It worked out. But mostly buying things for more than they're worth doesn’t tend to work out. That’s a general rule.”

Buying AskJeeves for $1.7 billion in 2005 and converting it to Ask.com was “absolutely a risk,” and “still is a risk,” Diller said. The acquisition met with scorn among company insiders who feared the effects of Ask’s 5th-place rank in a market dominated by Google, which had 10 times the share, Diller said. But the company was swayed because Ask’s search is “in many cases, a much better experience” than the competition, he said. “So I think we got a great product, and I don’t care who the leaders are.”

Ask.com today has a 6% share vs. Google’s 47%, Diller said. Double-digit share for Ask is an attainable goal, he said: “I don’t think media models are winner-take-all, everlastingly.” If Google were to reach such market domination that there were no longer any ad-supported search networks, “we're all in some trouble,” Diller said.

Other Diller revelations: (1) There’s not a lot of “innovation” or differentiation taking place in e-commerce retailing, Diller said. “There is very little merchant on the Internet,” he said. (2) The problems at his HSN shopping network are “self-made,” Diller said. “We took our eye off the daily business a couple of years ago, and we made a series of merchandising mistakes.” HSN is showing “a little” evidence of turning around, but such recoveries don’t happen in a “flash,” he said.