To Diller, this smacks of what happened 25 or so years ago, when bros from Silicon Valley search engines—not just Google, but also Excite, Yahoo!, Lycos, and AltaVista—convinced old-line newspaper and magazine publishers to slap their content on the web without charging for it. The pitch was something along the lines of (to be read a la Jeff Bridges in The Big Lebowski): “Hey man, there’s this new thing called the internet and everything on it’s free and you better get with the program, man.”

Faster than you could say “web crawler,” the publishers acquiesced and the search engines (which eventually became mostly Google) said, “Thank you very much,” and took all the advertising revenue, which in turn decimated the news industry. 

“What we’ve got to do before this gets down that track and becomes destructive,” Diller says to me urgently, “[is] set rules in place and procedures that protect the ability of publishers to actually publish—or there’ll be no publishing.”

Like George W. Bush famously gaffed, “Fool me once, shame on you. Fool me—you can’t get fooled again.”

In fact, not getting fooled again is exactly what Diller and leaders of other media companies have in mind when it comes to AI absconding with their intellectual property. To that end, Diller has been in touch with major publishers, including

News Corp

(NWS), owner of Barron’s parent Dow Jones, and Germany-based Axel Springer to convince them to band together to fight this perceived menace. (The publishers declined to comment.)

Diller also says he and other media executives have been communicating with

Microsoft

(MSFT) and

Alphabet

(GOOGL). Microsoft has a multibillion-dollar investment in OpenAI, owner of ChatGPT, and has incorporated the ChatGPT large-language model, or LLM, in the latest version of Bing, its heretofore also-ran search engine.

Alphabet
’s

(GOOGL) Google has a competing product, Bard, based on a rival LLM. The goal of those discussions, says Diller, is to come to an agreement about how content can be licensed in this scary new AI world. (Last month, News Corp CEO Robert Thomson said his company was in talks with an AI firm about compensation for using the publisher’s content.)

Diller, 81, might not leap to mind as a great lion of the publishing business. Yet despite his stock taking a beating lately, he possesses a number of qualifications that some of his cohorts lack. For one thing, he has been in the game for decades—negotiating media rights since the mid-1960s as a junior executive at ABC. Brokering an agreement among the publishers—and between them and the AI crowd—speaks to Diller’s skill set. Navigating through that complexity could well require iconoclastic thinking, another strong suit of Diller’s.

Sitting down with Diller in IAC’s offices this past week had me considering his iconoclasm. There’s the blue blazer over the ill-fitting untucked denim work shirt that looks like it was last worn at Woodstock. The hairdo that only Terry Bradshaw could love. And the brutal frankness.

Diller’s architectural ambitions, too, are powerful manifestations of his “think different” thinking, in particular IAC’s strikingly futuristic, Frank Gehry–designed headquarters along the Hudson River, completed in 2007. The New York Times wrote that the structure’s “constantly changing character imbues the building’s exterior with an enigmatic beauty.” Nearby is another Diller creation, Little Island, a 2.4-acre artificial island in the Hudson cum public park funded largely by Diller and his wife, Diane von Furstenberg, (to the tune of about $300 million, he says), which opened two years ago. 

Even more singular, though, is IAC itself. Part media holding company, part incubator, part private-equity firm, IAC really is a category of one. “We’re kind of an anticonglomerate conglomerate,” Diller says. “We build up companies, and when we feel that they’ve gotten to a stage where they should be independent, we spin them out. We’ve done it 12 times thus far, and then we start the cycle all over again. We’re in the process of building up again.”

Companies spun off include

Expedia Group

(EXPE),

Match Group

(MTCH), and Ticketmaster. New acquisitions include media company Meredith and a 17% stake in

MGM Resorts International

(MGM). The deal making can be dizzying and, as with any portfolio, diamonds can turn into dogs. 

“Truth be told,” I said to Diller, “your stock has been—” “Doing terribly,” he cuts me off to say. True that. IAC is down a staggering 68% over the past two years, versus a flat

S&P 500.

What happened?

“We bought Meredith for about $3 billion a year and a half ago,” he says. “The advertising market hasn’t been exactly robust in the past year. The other thing is that we probably underestimated the difficulties in integrating Dotdash [a digital publisher] and Meredith, which was primarily a print publisher. It was very messy. We overestimated the early turn results. And then Angi Home Services [the old Angie’s List] was going through a total revolution at exactly that same time.” Diller expects the businesses to rebound in the latter half of the year. If the stock doesn’t rebound, then “I would be angry,” he says.

Historically, long-term shareholders have been rewarded by keeping the faith. An IAC Investor deck from June boasts $60 billion in value created for investors since 1995, with a compound annual growth rate of 13% versus 10% for the S&P 500 over the same period. (To be sure, IAC’s returns are lower today.)

So, Diller is focused on getting IAC back on the outperformance track and reining in the AI beasts. I ask Diller who exactly makes up the last category.

“I don’t know, at this point, really who the fight is against,” he says. “The two principal players right now, you’d have to say, are certainly Microsoft and Google’s Bard. I’m not so sure they’re enemies in this. I think they may be collaborators. Microsoft doesn’t have much to risk because it only has 3% of the search business and very little advertising. Google has a great deal to risk.…The truth is, we’re knocking on each others’ doors. The outreach from them is equal to ours.”

I asked Google and Microsoft about this. “We have a long record of developing tools to help news publishers monetize their content and strengthen their relationships with their audience,” Donald Harrison, Google’s president of global partnerships, told me by email. “As we develop LLM-powered features, we’ll continue to prioritize experiences that send valuable traffic to the news ecosystem. It’s very early days and we’re continuing to work with the ecosystem, including news publishers, to get their input.” Microsoft declined to comment. 

On the subject of Microsoft: Early last March, The Wall Street Journal reported that the Justice Department and the Securities and Exchange Commission were investigating large trades that Diller, his stepson Alex von Furstenberg, and billionaire media executive David Geffen made in

Activision Blizzard

stock (ATVI) in January 2022, before that company agreed to be bought by Microsoft. Diller strongly denied there was any insider trading afoot. “It was simply a lucky bet,” he told the Journal. When I asked an IAC spokesperson if Diller was in the clear, they responded: “There is no ‘clearance,’ but we have not heard directly from the regulators in some time.”

Another facet in his AI fight is that Diller must tread lightly when cooperating with other publishers so they don’t violate antitrust provisions. “I’m admonished by our lawyers to be very careful. We’re going to have to get the approval of regulators. The problem is it’s the Sherman Act, and the penalties are criminal as well as civil. We could do it in a trade group, but that can only go so far.” (On Thursday, an industry trade group released a statement of principles for use of content in AI systems.)

“We can’t just say stop the train. We have to say, here are solutions to that train going down the track,” says Diller. “That’s what we’re after. How do we coexist?”

That is the question, isn’t it?

After the interview, I remind Diller of the time we saw each other driving in Manhattan. It was a sunny weekend morning, still so early that there was only a smattering of traffic. I had driven my Ford Escape across Central Park, took a right on Fifth Avenue, and paused at a light. “And then,” I tell Diller, “you pull beside me in a beautiful, white Rolls-Royce convertible with the top down.”

“It was a Bentley,” Diller said pointedly. “I would never drive a Rolls-Royce. But yes, I remember. I waved.”

Write to Andy Serwer at andy.serwer@barrons.com