Barry Diller's New Thorn: Live Nation

Late Friday, a Delaware judge ruled in favor of IAC/InterActiveCorp (IACI) Chief Executive Barry Diller over Liberty Media's (LCAPA) John Malone, in their battle over who controls IAC.

This is the first step in allowing Diller to move forward with his plan to break $6 billion IAC into five different companies. But, it's no guarantee that that will happen anytime soon, especially considering the ups and downs of the stock market.

Making some of IAC's more successful divisions, like Ticketmaster, stand-alone does offer value for shareholders -- but investors are less likely to be excited to invest in the under-performing divisions, like HSN Home Shopping Network and LendingTree. (Yup, the mortgage business isn't so hot right now.)

Ticketmaster may be one of IAC's strongest assets: it has a virtual monopoly on ticket sales for concerts, sporting events and theater. And, while the rest of the music industry is struggling, with CD sales on a consistent decline, theater tickets have grown for nine straight years.

But Ticketmaster is facing some big competition: when its exclusive deal with Live Nation (LYV), the world's largest concert promoter, expires at the end of 2008, Live Nation plans to launch a competing service that many expect to steal 15 percent of Ticketmaster's revenue.

To enable the spinoffs, Diller is looking for private equity to invest in the stand-alone divisions. He was talking to Elevation Partners, in which U2 frontman Bono is managing director, about investing in Ticketmaster. But, that won't happen now: U2 just made a 12-year-pact with Live Nation.

Live Nation will produce the band's concerts, manufacture merchandise, license its image and run its website and online fan site. This follows an even more expensive 10-year, $120 million deal Live Nation made with Madonna, which also included distribution of recorded music and publishing. U2 will continue to publish its music through Vivendi's (VIVEF.PK) Universal Music Group, but the rights it's selling to Live Nation should still be worth about $70 million, based on the value of Madonna's deal.

These deals with big concert stars U2 and Madonna guarantee Live Nation ticket access when it launches its service rivaling Ticketmaster.

But in a way, Live Nation is also paying to nail down an arrangement it already has -- Live Nation has promoted U2's tours for the past decade, and a division of the company manages its website. (That explains why LYV stock dropped a bit on this news.)

But this strategy of snapping up artists is clearly what Live Nation feels it has to do to face its old and new rivals -- the music labels -- which it has taken on, by starting to distribute big-name music.

What's Ticketmaster's plan? CEO Sean Moriarty told me he's not worried. Diller will simply have to find private equity investment that's not associated with Bono.

But don't take my word for it: Click to watch my exclusive interview with Moriarty.