IAC and MGM update: part 2
Upcoming posts (in no particular order): Gartner, Verisk, Visa/Mastercard, Tractor Supply, Apollo, Zoetis, and CCC (maybe)
A few months ago, I got around to reading Barry Diller’s memoir, Who Knew. The guy’s career basically toured through every phase of modern media - talent agency, broadcast television, movie studio, fourth network (Fox), cable/home shopping - and culminated in an internet holding company we know today as IAC.
IAC, founded in the midst of the dot-com mania, positioned itself as a sober counterweight to the era’s frenzy:
I started with no business model other than liking companies that had some actual revenue and profits as opposed to sexy-sounding ideas and big talk. I turned an icy eye on the early schemers and hustlers who spent huge marketing dollars to build audiences but had no path to actually making any money. We survived all that because of our values of fiscal prudence, but we were also always willing to take a flier on a good idea, though we would never bet the company on a single transaction.
Over time, and again with no foresight, we did evolve into a unique business model: the anti-conglomerate conglomerate. If you own dozens and dozens of disparate businesses, you’re certainly a conglomerate. And we’ve housed as many as sixty different brands. But I had become opposed to the concept of agglomeration. Bigness for bigness made no sense to me. When I decided a business was sufficiently developed, we’d spin it out into an independent entity. As we built up all these entities, I thought managing them centrally wasn’t the best way. Once they achieved some scale they ought to stand on their own – make their own decisions with independence from the mother ship. We’ve done that now with ten separately traded public companies.
The payoff to this approach has been decent but lopsided, with a few extraordinary outcomes (Match, Expedia, and Live Nation/Ticketmaster) intermingled with a long tail of mediocre-to-disappointing ones (LendingTree, Angi, and Care, among others).
But even the successes can be retrospectively painted as failures depending on your starting point. Vimeo was acquired last year for $1.4bn – a roughly 4x return on the ~$326m IAC put into it across 15 years of ownership, but a steep markdown from the $5bn at which it raised primary capital in January 2021 and the $8bn valuation at which it was spun off later that year. Match’s $8.5bn market cap sits well above the roughly $3bn it paid to assemble its dating portfolio, but far below its 2021 peak of $50bn. HSN, another IAC property, was acquired by QVC/Liberty in 2017 in an all-stock deal valued at $2.6bn. But QVC recently filed for Chapter 11, casting doubt on the viability of the linear-TV home-shopping model in a world of e-commerce and declining traditional TV viewership. LendingTree could have been a great outcome had you sold it in 2019, when its valuation his $5bn. Not so much today, with its $540mn market cap languishing below the $626mn to $734mn IAC paid for it.
IAC’s two most significant and indisputable wins so far are Expedia and Ticketmaster. Expedia today commands a ~$28bn market cap vs. IAC’s ~$5bn cost basis1. Ticketmaster, which merged with Live Nation in 2010, has been even more lucrative. IAC shareholders’ stake in the combined company would be worth ~$14bn2 today against an initial investment of $678m, excluding the $1.4bn that IAC realized just prior to Ticketmaster’s spinoff.
Reading the memoir, one gets the sense that Diller often found himself torn between the prestige of running legacy media and the excitement of whatever was emerging at the edges of it. At various points in his storied career, Diller stepped away from industries at their peak and into messier or less mature ventures. He left ABC for Paramount when network TV was still dominant and resigned as CEO and Chairman of Paramount to launch a challenger network, Fox. After Fox ballooned into a credible fourth network, he again resigned as CEO and Chairman in pursuit of QVC at a time when home shopping was mocked: