Liberty Media CEO Forecasts "Circular Firing Squad" for Hollywood's Streaming Wars

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John Malone

Billionaire investor John Malone also touted the increasingly valuable game of TV sports content during the company's investor day.

Liberty Media CEO Greg Maffei on Thursday warned that Hollywood's escalating and costly streaming wars will eventually undermine the pay TV industry.

"OTT will drain linear TV first, but OTT players will drain each other in a circular fire squad, in our judgment," Maffei told his company's investor day gathering of analysts. The investor presentations included Liberty Media chairman John Malone touting the increasing profitability of TV sports content.

"Sport rights still have an enormous amount of market power, like all live entertainment. It's unique, exclusive, timely and can still attract large audiences," Malone argued.

As he discussed the current streaming wars involving Hollywood and Silicon Valley, Maffei pointed to mounting challenges for the scripted video space, including a glut of original content and competitors chasing "illusory global growth."

"Our focus now is a more attractive space, where we are spending our time and dollars: audio," Maffei added as he pointed to more favorable economics for production and distribution of content than in linear TV or video streaming.

Maffei argued consumers are spending more time listening to audio content, as opposed to an increasingly crowded and competitive video space, and there was an upside for Liberty Media from investing in the audio space.

"There are limitations where you can watch videos — you can't do it in the shower, you can't do it at work and definitely don't do it while driving," he told investors. And unlike the video space where the industry has seemingly reached peak screen, the audio market is set to grow exponentially.

Maffei pointed to the fast-growing podcast market, where listenership is expected to grow from 90 million monthly podcast listeners in the U.S. market currently to 132 million monthly podcast listeners in 2022.

"We believe the ear is under-monetized versus the eye," he argued. As with video, the podcast market is also seeing a proliferation of exclusive deals.

SiriusXM and Pandora have their own exclusive deals, starting with Howard Stern and extending to superhero podcasts from Disney-owned Marvel and sport podcasts from LeBron James' Uninterrupted network and the NFL.

Malone, during his annual fireside chat during the Liberty Media investor day, discussed TV sports rights. Liberty Media owns the Atlanta Braves and Formula 1 and was reportedly outbid by Sinclair Broadcasting for Disney's 21 Regional Sports Networks.

Malone said the value of TV sports rights, as streaming players increasingly eye professional sports leagues as content offerings, will be decided by who gets the upside, whether that's team owners, their players or distributors who aggregate content.

"Clearly the history of the big bundle in cable and satellite is that the power of sports rights has driven the consumer cost unrealistically high and is a large reason why there's cord cutting going on," he argued. Malone added increasing competition from streaming players for sports rights is driving the valuation of sports rights even higher.

Malone's comments on sports rights follow Liberty Media's Formula 1 division unveiling a new agreement to keep races on ESPN and ABC through 2022. At the same time, contracts for the sport’s leading west European broadcasters are up for renewal in 2021, and analysts see that as a key barometer on whether Formula 1 can monetize increased fan engagement in long-established media markets.

"When you think about F1, those rights are definitely undervalued.... We hope to see those sports rights continue to grow there and I think we've got real upside to that," Maffei said as Liberty Media positions itself for those renewal talks.