UPDATE: Liberty Media's Malone Predicts More Media Upheaval
October 16 2009 - 5:13PM
Dow Jones News
John Malone, chairman and controlling shareholder of Liberty
Media Corp., said Friday that he expects "massive restructuring and
consolidation in old media," but that change is unlikely - at this
point - to include his company purchasing NBC Universal.
At the company's Investor Day, Malone said he was not in talks
to buy NBCU, but that he had been approached by Goldman Sachs, an
adviser to General Electric Co. (GE), which is in negotiations to
surrender majority control of NBCU to Comcast Corp. (CMCSA,
CMSCK).
Malone, a media mogul known for tough deal-making, said he'd
consider buying NBC Universal at the right price, which he put at
around seven times real cash flow, while the reported deal between
GE and Comcast implies a value closer to 11 times.
Instead, Malone said he'll watch to see what happens as Comcast,
the nation's largest cable provider, seeks an ownership stake in
NBCU, which owns television networks, a major film studio and theme
parks. He spoke of the value of combining the power of media
distribution with the ability to create content, which he said has
been "diminished by regulatory limitations."
If federal regulators allow Comcast to complete such a deal on
attractive terms, Malone said "every major distributor will be
looking at opportunities to go vertical and follow suit because it
is a fairly straight-forward way to create value."
Liberty Media's meeting Friday came after a difficult year for
the global economy that was particularly hard on media businesses,
already grappling with a slowdown amid the rise of digital
communications. In late 2008, Liberty Media suffered sharp declines
in its three tracking stocks, which reflect the company's holdings
in DirecTV, QVC and Starz Enertainment, among other properties.
However, this year, the stocks have largely recovered after the
company undertook a restructuring of its debt load.
"These are historic times in terms of technology finally
changing what are profound lifetime experiences," Malone said. "The
world is dramatically changing, and the question is how do each of
our units adapt to that. What alliances, partnerships or
investments should we be making to ride the wave instead of getting
drowned by the wave?"
Malone's right-hand man, Liberty Media Chief Executive Greg
Maffei, credited companies like Apple Inc. (AAPL) and Google Inc.
(GOOG) for capitalizing on the tectonic shifts taking place in the
media industry, but he said the Internet has destroyed more value
in Corporate America than it has created.
"It's a handful [of companies] that have hit the home run versus
the long tail of destruction," Maffei said. "For the most part, the
consumer has really benefited from all this. Not the
companies."
In the case of Liberty Media, Maffei acknowledged some mistakes
but said the company has "avoided the most crazy media
stupidities."
"Avoiding the pitfalls and the big dollar losses is really where
we've succeeded," he said.
Liberty Media said its planned merger of DirecTV Group Inc.
(DTV) with its majority holdings in the satellite TV provider, and
other assets, remains on track to be completed soon. Analysts have
speculated the transaction could pave the way for a sale of DirecTV
to a telecommunications company, like AT&T Inc. (T).
On Friday, Malone said DirecTV will have a new chief executive
"within the next month or two." Its former chief executive, Chase
Carey, was recently hired as chief operating officer and vice
chairman at News Corp. (NWS, NWSA), which publishes this newswire
and The Wall Street Journal.
Malone said maintaining "a close and long-lasting relationship
with the telcos is an important part of the CEO's job, whether that
results in a transaction or an extension" of existing
partnerships.
Meanwhile, Maffei predicted that Liberty Media's largest
business, home-shopping network QVC, will show a rebound in its
financial performance over the next year, noting that it faces
"easy comps" in the second half of this year and the first half of
next year.
"We will, I think, have the opportunity to shine on the top line
and the bottom line with the opportunities to cut costs," Maffei
said.
QVC has been a weak spot for Liberty Media amid a broad slowdown
in consumer spending caused by the global financial crisis and
recession. Its second-quarter revenue fell 4.4% to $1.68 billion,
including a 2% drop in the U.S. Excluding items, operating income
before depreciation and amortization fell 3.6%.
-By Nat Worden, Dow Jones Newswires; 212-416-2472;
nat.worden@dowjones.com