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Call it Interactive Barbarians at the Gate.

Viacom raised the stakes in the ego-fueled bidding war for Paramount Communications last Friday, leaving all eyes turned to QVC Chairman Barry Diller-who controls the next move and isn't likely to back down.

Viacom announced a startling $8.4 billion merger agreement with Blockbuster Entertainment Corp., subject to shareholder approval but not contingent on winning Paramount. The deal allows Viacom to raise the cash portion of its Paramount bid to $6.5 billion, $1 billion more than the cash portion of QVC's offer.

Based on Friday's final stock prices, QVC's total offer remained higher than Paramount's, a point stressed by the QVC camp. But Chris Dixon, an analyst with PaineWebber, said those numbers are meaningless since QVC and Viacom stocks are likely to fluctuate widely in the next two weeks. Viacom's move extended the bidding process to Jan. 21.

At press time, QVC had no comment and was giving no indication of its next play. But observers aren't counting Mr. Diller out.

"It's gone way too far for him to back down, so he will probably come back with a slightly higher offer. This is an ego thing for him now," said Doug Ahlers, general partner with interactive consultancy Modem Media, Westport, Conn. "The key is, can he fund a higher offer? The belief is he can."

Mr. Diller may go back to his own partners, particularly BellSouth Corp., for more cash. BellSouth has so far agreed to invest $1 billion in QVC, while Advance Publications and Cox Enterprises have each ponied up $500 million.

If software is king in the new media age, Paramount is clearly a crown jewel, given its extensive entertainment holdings.M

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