Letter #23: Barry Diller (1996)

1996 IAC Shareholder Letter (Back when it was still called HSN, inc.)

Hi there! I go by KG, and I love studying the history of business and investing. I’ll be sharing some notes from one Investor/Shareholder letter per weekday (mostly from my compilations) here.

Today’s notes are on Barry Diller’s 1996 HSN (now IAC) shareholder letter. 1996 was Barry Diller’s first full year in charge of operations. In this letter, he covers the company’s turnaround strategy and future vision.

This letter is one of my favorites — it’s short, witty, and full of knowledge. I previously tweeted some highlights here:


This report is still being printed on the lowest cost paper obtainable. *

  • As seen in the picture in the tweet above, this is printed on the very front of the annual report.

  • It’s funny yet true to the company’s values — strict financial controls

*Unlike last year, when we cited poor performance as the reason to save money on our Annual Report, forced economy is no longer our issue — thought it’s not altogether bad as a continuing goal, but without the forced part. The results for calendar year 1996 are contained in this report, and while a year ago I said I hoped those results would support a glossy, color-filled and expansive report about our future, I still can’t see any compelling reason to go through the time and expense that it takes to put one of them together. Maybe in the future, when there’s a clear marketing imperative it would make some sense, but for now we’d rather just give you the facts and get on with the work.

  • Again, funny but true to the company’s values

  • Glossy annual reports are a waste of time — See Steve Jobs’ first annual letter for Pixar (Steve Jobs Compilation; Page 86)

  • Put your head down and build

But before doing that, let me add the following:

  • Heads down working is the ideal state, but there are some important matters to address — we’ll tell you stuff when it’s important

So much has happened during the last year in the life of the Company that it’s hard just to know how to catalogue, much less cogently explain just exactly how we got here. First, I can’t be sure at what point in time or from which of the three predecessor companies you, our shareholders, came from. I would assume everyone is aware that we, HSNi, are the combined operations of Home Shopping Network, Silver King Communications, and Savoy Pictures. Suffice it to say that we are now one company and making enormous efforts to act like one. Given the newness (four months) of the combination, this is an everyday struggle that should ebb within the year.

  • IAC was really started when these three companies combined

  • I’m always surprised by time horizons — integrating all operations and culture within a year is a daunting challenge

What I think is the important story, and I believe a positive indication for our future, is contained in the saga of the Home Shopping Network during 1996. Without the leadership of Jim Held, President and CEO of Home Shopping Network, it’s unlikely we’d have the same story to tell. It’s a corporate bromide, that word leadership, but that’s exactly what Jim Held provided about every exhausting day of the year. The Company lost $62 million during the previous year, the spirit and verve of the business were no existent, and much restructuring work was necessary in every part of the operation.

  • Leader is EXTREMELY important — departure from Buffett’s famous “Find a business so simple an idiot could run it”

  • Before Jim Held, the company was unrprofitable, had no culture, and operationally challenged

The work during 1996 involved a) keeping the core business afloat, b) working out of the more than $100,000,000 of distressed merchandise at attractive, ie marked down, prices while c) at the same time teaching the customer to not expect price cuts on every item, and d) changing the mix of products sold to their rightful balance while introducing e) new product as quickly as it could be sourced by f) mostly new employees who had to be: g) identified, h) convinced the Company wasn’t about to go under, i) hired, acclimated and tasked alongside the valuable cadre of people already employed and out of patience who needed to be j) convinced this management was serious in its commitment to put the Company back on a path of sustained growth. Whew.

  • 1) Keep core business afloat

  • 2) Get rid of distressed merchandise without losing TOO much money

  • 3) Prevent customers from expecting cheap goods

  • 4) Fix mix of products

  • 5) Introduce and bring new products to market quickly

  • 6) Manage new employees

  • 7) Hire the best new employees

  • 8) Convince employee candidates the company wasn’t going under

  • 9) Train the new employees and integrate them into company culture

  • 10) Show a real path to salvation/monetization/growth

I could go through the alphabet a few more times with the tasks that Mr. Held and a group of dedicated executives have been performing. The fact is that Home Shopping Network is now a solid group of both old and new employees with one clear direction, which is to dominate the future of Electronic Retailing in all its forms.

  • Employee pool a solid mix of veterans and fresh blood bound together by a common vision — every company needs a strong vision/culture (Again, see Netflix Culture Deck or Ben Horowitz’s book)

  • Clear goal — *dominate* the future of Electronic Retailing — It’s the crazy ones who actually change the world.

The core of our business currently is clearly Electronic Retailing: it represents substantially all of our revenue and profits. During this next year we plan to begin to develop our Broadcasting assets, which primarily consist of our 12 Silver King stations, beyond their current use of transmitting Home Shopping Network programming. We also have identified electronic commerce, interactive transactions and our full service fulfillment operations as areas where we have a natural competence that we believe when properly tasked can provide substantial growth as stand alone businesses.

  • Understand core value proposition

  • Explore the edge of your circle of competence

  • Look for adjacent expansions

  • Focus on business(es) (units) that can be stand alone businesses — very important for VC investors — don’t bet on an acquisition

With a strong financial base, disciplined focus, and a large appetite, there is a world of opportunity to challenge us. I know that during this last year we’ve laid a solid foundation in both operations and management and that I and my colleagues are anxious and motivated to build thereupon. With your continued support, we will surely do so.

  • Focus: strong financial base (balance sheet, unit economics), disciplined focus (management and operations), large appetite (market expansion, growth)

  • IT’S TIME TO BUILD, especially in difficult times, whether that be a market downturn or a company rough patch


If you’ve got any thoughts, questions, or feedback, please drop me a line - I would love to chat! You can find me on twitter at @kgao1412 or my email at kevin@12mv2.com.

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