Michael Wolff on Liberty's John Malone: What Is He Actually Hunting?
The mercurial mogul is watching nemeses Sumner Redstone and Rupert Murdoch like a hawk as his Lionsgate stock swap and troubles with the Comcast-Time Warner Cable merger keep Hollywood guessing.
This story first appeared in the April 10 issue of The Hollywood Reporter magazine.
Among the ground-shifting variables in the media business — including how fast over-the-top unbundling happens, the outcome of the proposed Comcast and Time Warner Cable merger and the end date of Rupert Murdoch and Sumner Redstone — are the intentions of John Malone.
A few years ago, when I was trying to write about Malone, the Ivy Leaguer from Connecticut who turned himself into a Denver-based rancher and a media mogul, I interviewed one of his lieutenants who assured me that Malone was well into retirement, merely holding a variety of more or less passive stakes in diverse media companies. In fact, before that — when he had sold TCI, once the nation's largest cable company, in 1999 — he seemed, too, headed into the sunset.
And now, at 74, he may well just be a would-be retiree left holding a hodgepodge of media assets, which he's trying to sell down in a tax-efficient manner. But, as well, it also is possible that he holds the pieces of a puzzle that could come together at any time in a genius design. That's Malone — Dr. John (among a variety of advanced engineering degrees, he has a Ph.D. in operations research from Johns Hopkins) — diffidence and passivity existing in some apparent harmony with vision and ruthlessness.
Most of his holdings, through arcane structures, fall under a suite of companies all called Liberty (Liberty Media, Liberty Global, Liberty Interactive and Liberty Broadband) that seemed more about maintaining a certain corporate confusion — with constant trading and swapping of assets and stock classes between the companies — than about establishing a singular brand. But the present pillars are Charter Communications, the fourth-largest U.S. cable company; Discovery Communications, a cable content company (Discovery, TLC, Animal Planet); Starz, a premium channel; and Liberty Global, which, with its European holdings, is the world's biggest cable company.
Together, these pieces make Malone one of the most powerful figures in media; but apart, as tradable assets, not so much (e.g., he now is completing the sale of his stake in DirecTV to AT&T). As a mogul, he always has been much more interested in efficiency, and in avoiding onerous tax consequences, than power.
Still, putting it all back together might be both efficient and a hell of a last hurrah. One indication of a renewed Malone ambition was a stock swap in February between Starz and Lionsgate. That put Malone on the Lionsgate board, setting him up as a possible acquirer of the studio behind The Hunger Games. Another is the very real possibility that the Justice Department will scuttle the Comcast-Time Warner Cable merger. The consensus is that TWC, after more than a year on ice, can't stay alone and that Malone's Charter is its most likely buyer (Charter was trying to buy it before Comcast swept in).
Indeed, Malone, with his long memory of the cable wars, has a cool enmity toward Comcast CEO Brian Roberts — many media hurrahs are built on a persistent need to beat the other guy. Also, David Zaslav, the Malone lieutenant who runs Discovery, has been — against Discovery's obvious interests (it's negotiating deals with Comcast) — loudly opposed to the Comcast-TWC merger. He wouldn't, the thinking goes, be shooting himself in the foot on his own. In other words, Malone is in on it.
Malone watchers believe that he also is keenly focused on the other variables. If his on-again-off-again nemeses Redstone, 91, and Murdoch, 84, are coming to their end, that means potential instability in the industry, which means opportunity. Discovery, for instance, a midlevel player in the content power structure, probably needs to be traded or combined, with Viacom among the ideal partners. Executives at Viacom believe Malone lieutenants — among them the bankers that coordinate the endless shifts in Malone properties — are most assiduously retailing rumors that Viacom's Philippe Dauman will buy CBS at a premium price, a persistent report that Viacom consistently denies but that helps send its stock down. Likewise, the rumors of Charter dropping Viacom channels from its service also help to soften up Viacom for a post-Redstone offer.
If the media world now is largely divided between distributors and content makers, the Malone view always has been to see the ultimate advantages between the two. That was how he played the cable game to such dominance (famously taking interests in channels that sought TCI carriage) and that is the opportunity, the thinking goes, that now is becoming clearer in the OTT game.
Although the current discussion is about online programmers gaining clout, the future discussion is about who controls the cloud. Is the cloud most efficiently harnessed through Comcast broadband, box and package (its X1 box strategy)? Or is Comcast vulnerable to a broadband and content package that features a bring-your-own-box strategy with Roku, Apple or whatever? That's a fight Charter/TWC-Discovery/Starz/Lionsgate/Time Warner would be uniquely positioned to wage.
Unlike others with outsized ambition, Malone, pursuing disruption and dominance, might cash out at any time. It's the curious and compelling thing about Malone. His joy isn't from the red carpet, but from not paying taxes.