Go to the mobile version of this Web site.

Login | Contact Us | Site Map | Paid archives | Electronic edition | Subscription Questions | Extras

Liberty Media's Malone: 'We are a nation of whiners'

'Scary' economy, energy woes concern Liberty Media mogul

By Jeff Smith, Rocky Mountain News (Contact)

Published August 1, 2008 at 4:32 p.m.
Updated August 1, 2008 at 9:23 p.m.

Text size  
John Malone, who recently bought DirecTV, is poised to become the biggest TV/video operator in the world. He talks to reporters at Liberty Media in Englewood, Colo., on Tuesday.

Photo by Preston Gannaway © The Rocky

John Malone, who recently bought DirecTV, is poised to become the biggest TV/video operator in the world. He talks to reporters at Liberty Media in Englewood, Colo., on Tuesday.

Related Links

More Tech & Telecom

More stories »

What's on John Malone's mind these days?

The U.S. economy - the worst he's seen. The country's flawed energy policy. America losing its leadership position in science and engineering.

And, of course, business.

Malone's Douglas County- based Liberty Media now has a controlling stake in DirecTV, the country's largest satellite television company.

Including separately held Liberty Global, Malone properties serve more than 35 million video subscribers in the U.S., Europe, Latin America, Chile, Japan and Australia.

Malone also owns Starz Entertainment, a provider of movie channels and original programming, and most of Discovery Communications.

All of which makes Malone one of the world's media and entertainment moguls. Forbes this year listed him as the 553rd- richest person in the world, with an estimated net worth of $2.2 billion.

In an 80-minute interview with the Rocky, the Liberty Media chairman said he and his executive team are looking at ways the various entities could cooperate in developing technology and content, and possibly acquire more properties. That also includes exploring joint programming initiatives with crosstown rival Dish Network Corp., the country's second-largest satellite TV company.

"The idea of orchestrating cooperation amongst people who otherwise are competitive, it's like mother's milk," Malone said.

Malone hasn't always had the reputation as someone who cooperates.

He recently got into a legal spat with friend Barry Diller over the structure of a spinoff of IAC/Interactive Corp., which holds such properties as Ticketmaster and Home Shopping Network.

Malone has a long history of butting heads with regulators as well, and once was dubbed the "Darth Vader" of the cable TV industry.

But things are pretty quiet now. Earlier this year, Liberty Media settled and mostly won a dispute with the Internal Revenue Service over $2 billion worth of deductions.

The self-professed Libertarian, who has engineered deals that deferred billions of dollars of taxes, said he has given money to John McCain, whom he calls "very honest." His first choice for president, though, would have been New York Mayor Michael Bloomberg.

Malone, who spoke in a conference room at Liberty Media's headquarters in Douglas County, comes across as relaxed and soft-spoken but firm in his convictions. He likes to expound on the issues of the day, from a scientific perspective. He has a doctorate in operations research from Johns Hopkins, and a background in mathematics and engineering.

Although he's not involved in day-to-day operations (Greg Maffei is CEO of Liberty Media), Malone says he keeps on top of things by talking frequently with his executive teams. He also conducts strategic-planning sessions, such as a recent three-day retreat at his Wyoming ranch for Liberty Global management.

"The nice thing about that for a guy like me is you get to meet the younger management members," said Malone, who is 67 years old, but said he has no plans of retiring. "It's not just one-on-one of me beating on a CEO." The afternoons are free for "bonding," he said, such as fishing and horseback riding.

Kit Spring, an analyst with Stifel Nicolaus in Denver, thinks Malone's grand plan is to gain full control of DirecTV and engineer additional tax-free deals and spinoffs, rather than to become a Rupert Murdoch-type celebrity.

April Horace, an analyst with Janco Partners in Greennwood Village, generally concurs.

"John doesn't have the kind of ego (to want a high profile)," said Horace, who formerly was with Malone's Tele-Communications Inc. "He's clearly driven (but) I think the biggest driver for him is much more focused on increasing shareholder value."

She noted Malone recently invested nearly $100 million of his own money into Liberty Capital. And when she recently added up the value of all of his various Liberty-related stock holdings? They totaled $2.1 billion, nearly his entire estimated net worth.

Following are excerpts from the interview:

You grew up a New York Yankees fan. Is it a bit strange to own the Atlanta Braves?

I was an avid Yankees fan (as a boy). I had a paper route. Everywhere you went people would have the Yankees games on the radio. When I was probably 13, I could take the train down and go to the games.

But keep in mind we were the biggest shareholder in Ted Turner's company when he owned the Braves. So we had a long relationship from the mid-'80s on until Turner was bought by Time Warner. I went to a number of Braves games with Ted and Jane (Fonda). It's invigorating for (our) company to have a team to root for.

You recently bought more stock in Liberty Capital ($95 million). Why did you decide to do that?

It's kind of a like a Rubik's cube. To me it's just a fascination with a complex set of assets and liabilities. It's a little bit like when you go to a race track and bet because it increases your interest.

Can you give some examples of possible synergies between DirecTV and some of your other assets?

Well, of course, at the moment it's an autonomously managed company. Synergies can only be generated if it's a win-win between the entities. For instance (let's say) Discovery Networks wants to develop a new channel. If you do find something you think is worthy of people watching, you can essentially make it available through Direct(TV). And then LGI (Liberty Global) is pretty well distributed in Europe and parts of Asia. So if you put the two together you have big reach.

My pet project right at the moment is science. There's a lot that could be done in terms of presenting the problems of civilization from a more scientific perspective. So instead of politicians arguing about energy on a "you can't, you can, you can't, you can, you can't," maybe we can put a few facts on the table.

Where do you stand on global warming?

Global warming is conjectural in a sense because we've seen temperature variations historically that are quite a bit greater than we've experienced in modern times. On the other hand, we are now at a level of CO2 in the atmosphere that exceeds anything we can measure from the ice records from the last million years. So we're in uncharted territory. What I do know is that eventually we're going to run out of fossil fuels. We're in a serious national economic distress because of our failure to understand energy and our energy needs and deal with it in advance. I think drawing attention to sustainability of all kinds (is important) whether it's energy, water, minerals, the ability of our immune systems to fight off evolving bacterial infection.

You've been through a lot of economic downturns before. How would you compare this one with others you've experienced?

To me this is the scariest one in my business career. If the banking system broadly defined loses $800 billion and they're leveraged 20-to-1, that's something like $16 trillion of deleveraging that has to take place in financial values. That (plus the decline in housing values) is a devastating double whammy. And then add the $700 billion cost of importing expensive oil when we're already deep in hock to the rest of the world.

America was the place to be. We've kind of frittered that away. We've lived beyond our means as a country and in many cases as individuals. Sooner or later that's going to come back in a compression of standard of living. We are a nation of whiners. This generation has never seen hard times. What's a hard time? I guess maybe you can't go to the movies. You can't buy HBO.

The thing that scares me the most is our technological capabilities relative to the rest of the world. I think Steve Ballmer (Microsoft CEO) said 80 percent of all the scientists and engineers in the world will be in Asia by 2025. We still have some of the best graduate schools in the world. But 70 percent (of the science and engineering students) are foreign nationals. They can't get a green card. Not only do we pay to educate them, we kick them out of the country. And in 10 to 20 years they're going to be founders of the firms that will be competing against the Apples and Intels and the Microsofts here. So we're almost deliberately committing intellectual property suicide in science and technology with our immigration policy.

Why doesn't the company become more actively involved in Colorado's civic community?

Well, we do a fair amount but we're a global company really; we're not a local company. (Malone also has foundations active in land preservation and providing private-school scholarships to bright kids).

What are your personal media habits?

Well, my wife hates it because I'm a news junkie. And when I'm not doing that I'm either watching Discovery Science or Discovery History or the History Channel. We were in CNN from the beginning, we were in Fox News from the beginning, and we're still in CNBC - we were co-creator of that. And we still own the Lehrer News Hour (MacNeil/Lehrer Productions). That's sort of a charitable thing.

Do you have any gadgets that integrate the Internet with the TV?

I haven't taken the time to install them at home (laughs). But certainly in the end people are going to want random access to everything in good quality. I do think that it will become second nature that you can sort of get anything you want when you want it. (Malone said he doesn't have a BlackBerry but he does have cell phones, designed to work in different places).

My wife is into equestrian sports, and we actually have a rider and horses going to the Olympics. The NBC guys were telling me that all of what they call secondary (events) - the ones that they don't broadcast in real-time or on basic channels - are going to be available on the Internet, which I think is an example of serving niche interests in an efficient and effective manner. Now I know that watching them on a laptop off the Internet is not going to be like putting them on a large screen in high-def. But it's a huge improvement over asking the husband of the lady who rides our horse to bring his video camera and bring back (footage).

Can we read anything into your decision to back (Liberty Media CEO) Greg Maffei at the possible expense of your personal relationship with Barry Diller?

Well, it was tough because a lot of the things that Greg was saying were true, which is that Barry's hot hand had gone very cold. They had a long history of not particularly caring for each other. I think I probably erred only one time, which was an interview I gave with The Wall Street Journal where I was not more careful with my phraseology, and I think that led to a reaction by Barry, which then led to a reaction by me. That was unfortunate for both of us because ultimately the way we ended up is probably where we would have negotiated. It was just unfortunate, but that's sometimes the way personalities have to work out.

You still consider Barry a friend then?

I do, I do. And we still can work together.

You have Overture Films now. Is that just a business decision or a personal one?

No, what that is, is final insanity. I fought that off over the years. Everyone wants to make movies. And we tried that back when we owned United Artists without much success, and now we're trying it again with Overture, primarily because Starz has a big appetite for movies. And we also have a DVD distribution company.

The strategy - modest-budget films, the sweet spot . . .

Everyone says that, and then they run into a Will Smith who wants to make a movie and suddenly it's not a small budget thing. I don't think we're going to hit any big home runs. But we don't want to strike out either.

But this isn't personal, such as Phil Anschutz trying to get a certain message or theme out?

No, if you're looking for that in me, look at Discovery. That's more my personality.

Do you think your tax avoidance strategy has ever gotten in the way of business opportunities?

I think there have been times when I've probably leaned a little too hard on avoidance. Generally speaking, I think it's an important parameter as you figure out a business strategy. You try to look at the issue of, "Am I better off deferring the tax or paying the tax?" Some of those calculations in hindsight have turned out not to work out the way you like, but that has to do with your ability to predict the future. I would frequently say that the No. 1 thing a company gets when they hire me is the luck of the Irish. We've been blessed to have great teams, and we've achieved rather remarkable economic returns over the long term.

TCI's return was over 5,000 percent.

That would be 50-to-1. Actually it was like 124-to-1. Everything's a function of when you measure from, but I think for 15 to 20 years we had the highest return of any public company and, then, Liberty hasn't been bad. It's been 24-to-1 since it came into existence, which is 2,400 percent. That's pretty good. So there is a methodology there that just isn't random or variable.

Comments

  • August 1, 2008

    8:32 p.m.

    Suggest removal

    jbowen43 writes:

    Did you ask him about his large land holdings and his sweet deal with GOCO Colorado?

  • August 2, 2008

    8:14 a.m.

    Suggest removal

    Earthside writes:

    Malone says: "We are a nation of whiners. This generation has never seen hard times. What's a hard time? I guess maybe you can't go to the movies. You can't buy HBO."

    What a hypocrite ... Malone's whole business career has been NOT about providing a quality product to consumers, but rather about making the 'big deal'. Indeed, if the nation's economy is in a mess, it is exactly because of the high finance, leveraging hocus pocus he has practiced and encouraged.

    If Americans finally do stop buying HBO and satellite TV and his empire crashes ... my bet is that it will be Malone who will be doing all the whining. (Although, he is clearly so removed from the financial stresses of everyday, working people that he will never know "hard times.")