Universal Executives Look to Diller for Rescue

Up and down the halls of Universal Studios on Tuesday there were periodic outbursts--20! 19! 18!--as assistants yelled out updates on the deteriorating Vivendi Universal stock price.

“Everyone’s stock options are worse than underwater,� one executive said. “They are anchored to the bottom of the ocean.�

As dire speculation swirled through Wall Street about the financial future of Vivendi Universal, the big question at the Hollywood studio centered on the plans of the company’s most influential U.S. executive, Barry Diller: Will he buy Vivendi’s movie, television and theme park divisions? Will he ride to their rescue?

But the word most used to describe Diller today is “coy.�

“Barry’s waiting, and so we’re waiting,� said one executive, who like the others, asked not to be identified.

According to executives close to the storied mogul, Diller is doing what he has done for the seven months since he was put in charge of Vivendi Universal’s non-music entertainment operations. Which is to say, very little.

The current theory among Universal Studios executives is this: Diller is betting that the French soon will realize he is their best bet for increasing the value of their Hollywood assets. And when Vivendi Universal comes calling with an offer to sell him the studio as a way to pay off its huge debts, Diller will decide whether he’s interested.

After cashing Vivendi Universal’s $275-million check at the end of the year--a bonus from last year’s purchase of his USA Networks--some guess that Diller will let go of his old dream of owning a Hollywood studio.

“He really isn’t focused on this place,� said one executive. “Barry doesn’t consider Universal his problem.�

The staff at Vivendi Universal Entertainment would appreciate a boss who would lead a buyout of the division, cutting them loose from the mess in France and restoring the value of the stock.

The problem is that Diller doesn’t appear to be so inclined.

The first signal Diller sent to the staff was memorable. He kept now-ousted Vivendi Universal Chairman Jean-Marie Messier and studio President Ron Meyer waiting for more than an hour to introduce him to the senior staff. After only 15 minutes of glad-handing, Diller was gone.

“Barry has been a minimalist at Universal,� one executive said.

Diller spends most of his time in New York focusing on his other company, USA Interactive Inc., an e-commerce business that has made him a billionaire. He’s been clear that he would not involve USAI in any purchase of Vivendi Universal assets.

Still, Diller has made some efforts to keep the studio stable and in shape to survive the current turmoil. The top executives all have new contracts. And he has dangled the idea that he is working on a new incentive plan to replace the sunken Vivendi Universal stock options.