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As the $43 billion deal awaits regulatory approval, billionaire media mogul John Malone is touting the planned megamerger of Discovery and AT&T’s WarnerMedia.
Speaking during the Paley Center’s Paley International Council Summit, which was webcast Tuesday, the chairman of Liberty Media and Liberty Global and biggest Discovery shareholder said there were challenges in such big deals, but he was optimistic. He was interviewed by Liberty Global CEO and vice chairman Mike Fries.
Malone has often spoken about the need for more consolidation in the media and entertainment industries to boost businesses’ scale. The largest shareholder in Discovery, he is supporting the merger of Discovery and AT&T’s WarnerMedia to form the newly titled Warner Bros. Discovery, which was unveiled in May with an expected close by mid-2022 and will be led by Discovery CEO David Zaslav.
Asked about the merger, Malone said, “I love David. He is a force of nature. I have never seen a guy with more energy,” adding that he is “extremely competent,” meaning, “if anyone can pull off this kind of combination, it will be David.” Malone also argued that the cost and revenue synergies will “easily” exceed $3 billion to $4 billion a year. Management has targeted $3 billion in annual cost synergies so far.
Questioned about the debt load of the merged firm, Malone said with low interest rates, strong free cash flows and synergies, things should play out well. “This will still be a relatively huge free cash flow generator,” he said about the combined company.
Malone also addressed the streaming wars, saying, “I am not sure that the race for just broad entertainment is the whole game.” He instead argued that “it is a whole series of games, and you don’t have to win every game.”
Discovery’s global linear distribution can help in launching streaming offerings, the mogul also argued, touting “built-in promotional synergies that should enable it to be uniquely successful without increasing a lot of overhead on a country-by-country basis.”
Also, with the ice cube of traditional linear TV “slowly melting,” companies must also support traditional linear TV or “the historical infrastructure as it transitions, so you want to be very friendly and supportive of your existing distribution,” Malone said. “The skill set here is going to be how do you take what you got and mutate it” to make it address current consumer preferences.
Malone also noted that beyond subscription video-on-demand services, advertising-based offerings will also be successful. “There’s lots of challenges in making this transition,” he added, though, comparing Zaslav in relation to Discovery’s WarnerMedia deal to “the dog that caught the bus” and must now decide what to do.
On Nov. 4, Lionsgate, in which Malone used to be a big shareholder, said it was exploring its options for Starz, considering a separation of the pay TV and streaming business and its studio operations.
“Big tech is increasingly a natural monopoly,” because these companies are “so scale-driven,” making competition difficult once that scale is reached, Malone said about technology giants. Can they self-police to “not abuse their power” as they become “increasingly monopolistic”? The mogul said that would be “very, very difficult” for any CEO as these companies keep looking for more growth and opportunities. “Clearly, the guys who are already giants should not just go out there and buy out any kind of competition that might be showing up,” Malone said, but argued that is not what they are doing. Instead, “they see the next big technology and they have so much capital that they can acquire” it and then “dominate that new sector.”
Malone was also asked about the metaverse and its future. “There is no question that the youth are living in a digital world increasingly, and I can’t help but think that a lot of males, at least, are avoiding growing up and living in this artificial world.” He also argued that “they are not sure what to do in this world.”
Addressing the coronavirus pandemic, Malone said, “I just got my booster [shot] a week ago, didn’t react well to it.” He said his wife, Leslie, had no reaction to her booster vaccination. “We are still very cautious,” Malone summarized, citing the higher risk of COVID-19 for older people and pointing out that he didn’t attend the World Series, which Liberty’s Atlanta Braves won. “We have been reasonably healthy, hiding out most of the time.”
Asked about vaccination mandates, Malone, a known libertarian, said he was all for vaccinations, but “not in favor of mandates,” preferring to leave such decisions to people and companies.
Liberty Media houses assets like audio entertainment giant SiriusXM, the Atlanta Braves baseball club and the Formula One racing circuit; Liberty Global operates cable systems in international markets.
On Tuesday, Fries did a lightning-question round with Malone, who shared that he would be a buyer of Amazon, Google, Apple, Comcast and cable giant Charter Communications, in which he owns a stake, while calling himself “probably a buyer” of Facebook/Meta. Asked about ViacomCBS, the mogul said, “I would say fairly valued right now.”
How about Netflix, which he had called overvalued last year? “I give you the same answer,” Malone said. How about Disney? “Same answer as Netflix,” he replied. And how about Roku? That stock is “maybe a little overvalued,” Malone said.
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