'Retreat' Seems to Fit Mood Of Media's Big Gathering
SUN VALLEY, Idaho, July 12 - Dozens of private jets filled the tarmac at the tiny airport in nearby Hailey, Idaho, this week as top communications industry executives gathered for golf, river rafting and outdoor ice skating here at the annual retreat held by the investment banker Herbert Allen, a summer camp for media moguls.
But with many media company stocks trading near lows for the year, the mood this year was more chastened and anxious than during the merger-minded gatherings of years past. Conversation centered on the cash squeeze gripping the media industry and the new scrutiny of its accounting techniques.
The falling stock prices mean that top executives' jobs are no longer so secure and the atmosphere was rife with gossip -- including talk about the future of Robert W. Pittman, the chief operating officer of AOL Time Warner, and about relations among the board members of Viacom.
''Everyone has been humbled a little bit,'' said Henry Kravis, of the buyout firm Kohlberg Kravis Roberts & Company.
Many at the conference noted with schadenfreude that their rival, Jean-Marie Messier, the former chief executive of Vivendi Universal, canceled his presentation here because of his unexpected ouster amid the company's shortage of cash.
Others said with surprise that Ron Sommer, chief executive of the German telecommunications company Deutsche Telekom, elected to attend, even though his board was moving to seek his resignation. (His attendance could not be confirmed.)
The declining prices of media industry stocks and bonds created a surreal feeling of relative poverty among the assembled moguls, leaving their companies hard pressed to raise cash or make acquisitions, and their personal portfolios a little lighter as well.
''I used to be rich, not lately,'' said John C. Malone, the billionaire cable investor who is chairman of Liberty Media, stretching his legs in the scorching heat outside one of the retreat's closed-door discussions of corporate strategy and current events. Shares of Liberty Media have fallen by roughly half this year, along with those of many other cable and media companies.
Mr. Malone was among the most closely watched figures at the conference because of his role on the periphery of two of the biggest continuing dramas in the media industry. For one, he is a major shareholder in Vivendi Universal, which is expected to hold a fire sale of its subsidiaries, possibly including Universal Pictures, to raise cash.
But the current paradox of the media industry is that although many companies want to sell businesses, none of those that would have been eager to bid a few years ago have the wherewithal to buy now.
In the case of Universal, some have speculated that Mr. Malone would team up to buy it with Barry Diller, the chairman of USA Interactive and head of Vivendi's American entertainment business.
In an interview, Mr. Malone did not rule that out. He said he had discussed the matter with Mr. Diller. ''At the moment, he has decided to lighten up on the entertainment side, which he thought was peaking,'' Mr. Malone said. ''But Barry is like everybody else'' and he would be interested at the right price, Mr. Malone said.
Mr. Diller, seen mountain biking near the resort, was not available for comment.
Mr. Malone is also one of the biggest shareholders of AOL Time Warner, whose shares have been battered by concerns about its accounting and declining online ad revenue at its AOL division, and he has recently asked regulators to remove restrictions on his votes as shareholder. He was prevented from voting because of his previous roles in other media companies. His request has fueled speculation that he might seek a more active role there as well, but he said he had no desire to seek a seat on the board.
But the chance to vote his shares would give him leverage. He said that he was offering advice to Richard D. Parsons, who recently succeeded Gerald M. Levin as chief executive, and seeking to play the role of intermediary in helping AOL Time Warner end a long-running deadlock with AT&T Comcast over breaking up a cable industry partnership.
His public advice to Mr. Parsons: ''Hang in there.''
Meanwhile, some of AOL Time Warner's rivals were gloating over its travails. Relaxing in the lobby of the Sun Valley Lodge on Wednesday evening, Sumner M. Redstone, chairman of the rival media giant Viacom, now said he had turned down an invitation to merge with AOL before Time Warner did. ''I said in the nicest way, 'I really don't trust your currency,' '' he said. ''Unfortunately for Jerry Levin, whom I like a lot, he made the wrong decision.''
But Mr. Redstone has not yet put to rest a lingering concern about Viacom's own merger with CBS: his past clashes with Mel Karmazin, former chief executive of CBS and now president of Viacom, another subject of much interest at Sun Valley.
Mr. Redstone said the two had reached a cease-fire, but a final armistice remained to be signed. ''We agreed that we are not going to talk to each other about his future until the end of the year,'' he said.
Under the terms of the merger agreement, he said, he can replace the Viacom board members who came originally from CBS in the spring, increasing his control of the situation.
''I would then be operating the company as I did before for 13 years,'' he said.
Still, he said, he planned to renominate most if not all of the CBS board members and no final decision about Mr. Karmazin had been reached. ''I am getting along with him better than ever, and I really do believe he is very good at what he does,'' Mr. Redstone said. Mr. Karmazin declined to speak to reporters.
Others at the retreat craned their heads for a glimpse of Mr. Pittman, one of the executives once credited for AOL's explosive growth.
He was passed over for the job of chief executive of AOL Time Warner, and now that AOL's advertising revenue has fallen off he has come under fire from executives within the company from the former Time Warner. People close to him have said that he has recently grown tired of being treated as a scapegoat for the falling stock price.
But dressed in jeans and a sports shirt and chatting with the Bertelsmann chairman, Thomas Middelhoff, on Thursday, Mr. Pittman seemed relaxed and unconcerned. He declined to comment on his future, but today, Edward Adler, a company spokesman, said, ''Bob is currently chief operating officer and nothing has changed.''
Predictions of the future, once commonplace at Mr. Allen's events, were scarce this year. Mr. Kravis, of KKR, noted with satisfaction that his investment fund had not made an acquisition in the last 18 months, leaving it with plenty of cash to spend. But after the merger boom of the 1990's, he said, finding acquisitions was more complicated because so many companies had become so big.
''A midsize company is now $500 million,'' he said. ''It takes a lot of money.''
Mario Gabelli, a leading media industry investor, took a more philosophical view of the overall situation, saying that creative destruction is an important part of capitalism. He said the current downturn inaugurates another round of reshuffling in the media industry.
''One of the questions that comes up here is: How does Mount Hollywood get divided up this time?'' he said.