Content is king: The complicated network of John Malone, Charter and Lionsgate
Earlier this week, Lionsgate (The Hunger Games, The Hurt Locker) announced that Discovery Media and Liberty Global will each pay $195 million for 5 million of its shares. Entertainment industry insider baseball? Maybe. But it was news of the deal’s architect — “Cable Cowboy” John Malone — that should worry consumers and regulators alike.
To understand the significance of the Lionsgate deal and why it matters, it’s important to understand the history of Malone’s dealings. Starting out at AT&T’s Bell Labs, he went on to cut his teeth in the cable industry by building what became the nation’s biggest cable provider, TCI.
TCI was a pioneer, “bigger is better” kind of cable company, gobbling up independent cable operators and expanding rapidly to meet shareholder demand. Malone was dubbed by then-Senator Al Gore as the “Darth Vader of Cable” for fighting must-carry regulations that require a cable provider to carry locally licensed television stations.
But Malone really shocked the world when he sold TCI to AT&T for a whopping $48 billion — showing his prowess at orchestrating incredibly complex transactions.
The deal left him in control of Liberty Media, which he’s steadily transformed into an all-out media empire, with holdings and stakes in everything from the Atlanta Braves to Sirius XM and the concert promoter LiveNation. And he’s the largest shareholder and Chairman of Liberty Global, a major cable player in 12 European countries.
So, you’re probably asking yourself: does the Lionsgate deal you mentioned earlier have anything to do with the pending Charter/Time Warner Cable merger?
Yes. Let’s review: Charter wants to acquire Time Warner Cable in a deal that would place it behind Comcast as the country’s largest cable operator — forming a duopoly to further consolidate the market.
John Malone is Charter’s biggest shareholder — and while he doesn’t wear the CEO hat, he’s pulling the strings on this acquisition of Time Warner Cable, and if he’s successful, it’s the realization of this quote from 2011:
“Cable is pretty much a monopoly now.”
Whoah. If the consumer impact of the deal itself and Malone’s monopolistic ethos don’t ring enough alarm bells, read on.
Malone has been aggressively candid over what he thinks of Internet content providers: they’re pulling scores of subscribers and consequently, profits, away. So naturally the instinct of any good monopolist is to “meaningfully play” (his words, not mine) — or acquire — content providers. And like the proposed merger of Charter and Time Warner Cable, consolidation of online content providers leads to higher prices, less competition and worse service for you and me.
Yesterday, those ambitions came to pass. Lionsgate announced that Discovery Media and Liberty Global would buy stake in the company. And guess who sits on the board of Lionsgate, is the largest shareholder of Discovery Media, and if you recall, the largest shareholder and Chairman of Liberty Global?
So this all begs the question: if John Malone is pulling the strings at Charter and is the chief architect behind the pending merger with Time Warner Cable, can we expect an aggressive “New Charter” that will follow in the “Cable Cowboy’s” quest for complete control?
It should certainly ring alarm bells for the FCC and the regulators tasked with giving the Charter-Time Warner Cable deal the green light.