Prize Fight

When Barry Diller bought a half-stake in Ticketmaster Group last May for $210 million, the most widely asked question in Hollywood wasn’t about the central business issue: whether he could integrate the ticketing company with his home-shopping and television stations.

Everyone wondered whether Diller and Ticketmaster Chief Executive Fredric Rosen, two strong-willed executives known for bulldozing competitors and getting their own way, could work together.

The answer is in. They can’t.

The relationship between the two men, after starting out as a ginger dance between two successful executives hoping to find a compatible relationship, has fallen apart in the last month. The two are in sharp disagreement over Diller’s offer to buy the rest of Ticketmaster.

In a conversation two weeks ago, sources say, Rosen told Diller he didn’t want to work for him and that if the deal goes through, he will leave the company when his contract is up at the end of the year. Diller’s blunt response, according to two sources: “Who would want you?”

In either case, the result is an increasingly hostile contest over the future of Ticketmaster. Diller, through USA Networks, the company he controls, has offered about $25 per share for the remaining half of Ticketmaster. Rosen has declared that offer inadequate because of the strength of the business’ international and online growth.

“There is a special committee evaluating the value of the company and I have informed them that in my opinion the USA offer isn’t high enough,” Rosen said Thursday.

Several key Wall Street investors agree that the price should be $30 or more.

“Ticketmaster under the aegis of Fred Rosen is just terrifically positioned for the era of electronic commerce,” said money manager Mario Gabelli, whose investment group has raised its stake in the company to more than 5%. “Since they cut their deal with [USA Networks], the fundamentals improved dramatically, and if they want to proceed with the deal, they’re going to have to pay up for the electronic commerce.”

Sources say Rosen, who favors Ticketmaster remaining a public company, would like Diller to back off. In that case, Rosen would line up an investment group to buy USA Networks’ holdings in Ticketmaster.

Diller declined to comment Thursday, except to say the stake isn’t for sale.

Industry sources said that while Diller respects what Rosen has done in building Ticketmaster, he believes Rosen has overestimated his own importance to the company. Rosen’s open hostility to the deal has infuriated Diller, sources say.

“Diller feels that Fred takes an unreasonable position on everything,” said a source. “You can see him as a chairman who’s overprotective or just greedy.”

Rosen, meanwhile, has told those close to him that although Diller may be terrific at running a television or movie business, he is skeptical of Diller’s ability to create new businesses based in significant part on Internet and phone transactions.

Although the matter at hand is the price of Ticketmaster, the dispute has spilled into issues of business strategy, independence and personality. If you were to rank the egos in Hollywood, both men might well land high on the list. Many observers doubted from the start that they could work together.

“They are two very high-ego, high-maintenance people,” said one investor. “Both are fiercely independent.”

Some critics suggested that Diller has had a mixed record keeping strong executives working for him since the days when he ran Paramount Pictures and his No. 2 was Michael Eisner.

Both Diller and Rosen are men of considerable accomplishment in the business world. Diller, 56, has become an almost legendary figure in the entertainment industry for building the Fox television network, but he also ran Paramount and pioneered the movie of the week for ABC before that. Today, Wall Street is betting that he can multiply the value of the seemingly disparate assets of USA Networks, which is the combination of HSN with most of the television and cable division of Universal Studios.

Rosen, 54, turned Ticketmaster, a fledgling company in 1982 with little value and powerful competitors, into the dominant ticketing company in the country, valued by the market at about $670 million. He has aggressively attacked those he perceived as opponents, including launching a recent court challenge to Microsoft over Internet linking to the Ticketmaster Web site.

Both men are known for being tough, even ruthless, when they need to be. And both have gotten rich along the way. Diller is now worth several hundred million dollars, while Rosen has a more modest fortune, estimated at about $70 million.

The relationship didn’t start out badly. Diller told Rosen from the beginning that he wanted him to continue running Ticketmaster.

Sources say the relationship began to sour last summer, after Rosen approached Diller about taking on a larger role in Diller’s company, then known as HSN and comprising the Home Shopping Network and a group of television stations. Diller said that wasn’t going to happen.

Rosen become more restive, sources say, as it became clear that Diller wanted to oversee Ticketmaster in the hands-on way he manages all his operations. Rosen has operated Ticketmaster for years with unusual independence for a CEO and wanted to continue doing so.

“Fred’s always had independence and Barry’s being Barry, asking questions, having people calling him and asking him to explain things,” one source said.

Rosen’s model for building Ticketmaster has been to create a series of exclusive relationships with live entertainment venues around the country, and those around him believe part of the value of the company lies in those relationships.

“Once he leaves, the lions come off the chairs,” a company source said.

But unlike Diller, who controls 70% of the voting shares of USA Networks, Rosen is essentially an employee of Ticketmaster, albeit a well-compensated one, earning more than $4 million in salary and bonuses as the company’s CEO last year.

Rosen also has grants of about 1.3 million shares of Ticketmaster, worth more than $30 million today, and overall a stake of about 5% in the company’s stock.

Because Rosen doesn’t control the company as an owner, critics say he has overplayed his hand by overestimating his importance as the entrepreneurial builder of Ticketmaster. They contend the company might actually do better by bringing in a less expensive CEO who could find ways to cut costs.

Critics also say that in the interest of pushing up the value of his own options, Rosen may blow a deal with USA Networks that could be beneficial to most shareholders.

Rosen said he was doing nothing more than carrying out his fiduciary duties as a CEO to enhance shareholder value. “At 54, my life is about family and fun, and at the moment this represents neither,” Rosen said.

One major investor noted that Rosen’s personal interest in getting a higher price is completely consistent with his shareholders’ interests.

“He’s trying to extract the highest value and Diller’s trying to steal it,” the investor said. “This is strictly a commercial battle. Nobody’s doing anything wrong.”

That source said it was likely that Diller would follow through on the proposal to buy Ticketmaster, but at a higher price. But the source said Diller could also decide to drop the offer and spin his stake in the company off.

Diller is known as a tenacious deal maker who doesn’t lose easily. But he has backed away from big deals before, including battles for Paramount and CBS when he was chairman of QVC and believed the price was too high. That’s one reason the investment community has deep respect for Diller.

Sources also said he could easily let Ticketmaster go because it isn’t essential to his major business opportunities--television programming and distribution, and electronic commerce through home shopping. However, analysts note Ticketmaster has a strong online business and believe it could fit with Diller’s plans in electronic commerce.

Another industry source said Diller will temporarily back away from the deal, buying only enough shares on the public markets to control the company. In that scenario, Diller will wait until Rosen leaves the company at the end of the year, install a more malleable CEO and then decide whether to try to buy the rest of the company.

The shares of both companies have more than doubled over the last year. Ticketmaster eased 13 cents to close at $26.75 on Nasdaq on Thursday. The stock traded as high as $28, a record, on Wednesday. USA Networks shares fell 38 cents to close at $49.63 on Nasdaq.

The independent committee evaluating the USA Networks offer is expected to make a recommendation next month.

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Clash of the Titans

Ticketmaster Chief Executive Fred Rosen and media mogul Barry Diller, who bought a half stake in the company last year, are wrangling over the value of the lucrative ticketing business, sources say. The two are known as tough-minded businessmen who are used to getting their own way:

Fred Rosen

* Age: 54

* Wealth: About $70 million

* Visions and strategies: Taking control of a tiny ticketing company in 1982, Rosen developed business model that would make it the dominant ticketing company in the U.S. The key to his success was signing venue owners to exclusive relationships by sharing ticketing revenues. Rosen sees vast opportunities for growth internationally and in online sales. He believes the company is worth at least $30 a share, but that the company is most valuable operating independendtly as a public company.

*

Barry Diller

* Age: 56

* Wealth: Several hundred million dollars

* Visions and strategies: Diller made his reputation in his 20s by pioneering television movies and miniseries at ABC. He was CEO at Paramount and later astounded the television world by building the Fox network for News Corp. Now Diller control USA Networks and is trying to exploit businesses in television--both programming and distribution--and in electronic commerce through the Home Shopping Network and Ticketmaster. Diller believes that the ticketing giant is worth about $25 a share and that it can be effectively combined with his other assets.

Sources: Baseline, Times reports