[opendtv] Malone Takes Global View on Cable | Multichannel
- From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
- To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
- Date: Mon, 1 Dec 2014 10:33:48 -0500
Bert may find reason to celebrate some of what John Malone said at a recent
investors conference. Then again, I think Malone is confirming most of what I
have been saying, especially this part:
> The industry also has struggled with the issue of rising content costs. On
> that front, Malone said the linear approach — in which distributors bundle
> desirable programming into a package they hope will be profitable and doesn’t
> cost so much that viewers will defect — would eventually go away.
> “I predict that that model will change over time,” he said. “In some cases,
> it will change with the cooperation and involvement of the distributor,
> particularly as you make the change from linear to random-access.
By the way Bert, "random-access" is another. Way of saying video on demand.
Regards
Craig
http://www.multichannel.com/malone-takes-global-view-cable/385898
Malone Takes Global View on Cable
The cable industry faces the prospect of more regulation, more competition from
over-the-top providers and more consolidation overall, but Liberty Media
chairman John Malone said fears that the cable business is headed for the scrap
heap are exaggerated.
Anyone with any history in the business knows that cable’s demise has been
predicted almost from its start more than 50 years ago, and the industry has
managed to survive, and thrive, through it all.
Lately, though, the naysayers have been in overdrive, seeing the overhanging
threats of Title II regulation and “cable killer” over-the-top video packages
coming from Sony, Verizon Communications, Dish Network and others.
Malone has weathered his share of onerous regulation and competitive threats in
the past, and he offered some needed perspective at his company’s latest
investor day.
NOT PANICKING
The spur was President Obama’s statements favoring the stricter Title II
approach to broadband oversight. Malone said he believes Federal Communications
Commission chairman Tom Wheeler, who has favored a hybrid approach in the past,
will work out a compromise, though the option of Title IIbased common-carrier
regulations can’t be ruled out.
“My guess is Tom Wheeler will be able to thread the needle here and do
something that satisfies some cosmetic concerns,” Malone said. “There is no
abuse that anybody can point to that is material that will justify a
heavy-handed government intervention at this point.”
The industry also has struggled with the issue of rising content costs. On that
front, Malone said the linear approach — in which distributors bundle desirable
programming into a package they hope will be profitable and doesn’t cost so
much that viewers will defect — would eventually go away.
“I predict that that model will change over time,” he said. “In some cases, it
will change with the cooperation and involvement of the distributor,
particularly as you make the change from linear to random-access.
“I think you’re seeing increasing friction because of the price pressure on
content,” Malone said. “So much of the oxygen has been taken out of the room by
sports and the rising cost of sports that it’s putting pressure on distributors
who are trying to control costs wherever they can and are likely to put more
pressure back on the weaker suppliers than the ones they would like to
retaliate [against], but they can’t.
“It really is a phenomenon we are seeing,” he added. “If 80% of the incremental
price pass-through is going to the sports supplier, there is very little room
for inflation or budgetary increases for the non-sports-driven.”
One way to combat those rising costs is for distributors to get bigger,
something Malone has been a huge proponent of, especially through Liberty’s
investment in Charter Communications.
Liberty’s $2.6 billion investment last year in of 27% of Charter’s stock helped
fuel the MSO’s attempt to acquire Time Warner Cable. And though Charter
ultimately did not win that prize — Comcast did, in a $69 billion deal that
should close early next year — the midsized operator reached a compromise that
will double its footprint in a series of swaps, sales and spins after the
larger deal is completed.
Charter is expected to be a major player in an anticipated consolidation wave
after the close of the Comcast-Time Warner Cable deal. Malone said he sees
Charter as a vehicle for rolling up the sector’s smaller companies.
As technology becomes more complicated, Malone said, the ability to offer new
services in a rational way would drive industry consolidation.
SCALING TO INNOVATE
“Small guys just can’t do what [Charter CEO] Tom [Rutledge] is doing,” Malone
said. “They’re not going to be able to do virtual call centers. They’re not
going to have the ability, even if they had the scale, to buy global equipment.
They are not going to have the technical staff to be able to keep up with it.
All of these things are driving toward larger ownership.”
That thirst for scale will continue even if the Comcast-TWC merger isn’t
completed. Malone said if regulation becomes the straw that breaks the
Comcast-TWC deal’s back, he hopes Charter would be ready to swoop in.
“Hell, yes,” Malone answered as to whether he hoped Charter would rekindle its
pursuit of TWC if the Comcast deal were scrapped. “That being said, we’re happy
with the deal that was negotiated. In many ways, in our view, it’s a better
deal than going after 100% of TWC.”
Regards
Craig
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