Back in February, word began to spread that longtime frenemies John Malone and Rupert Murdoch were eyeing a joint acquisition of the UK’s Channel 5. Malone-backed Discovery Communications and BSkyB, majority owned by Murdoch’s 21st Century Fox, have now reportedly gone ahead and sewn up a deal. Broadcast reported that Discovery and BskyB are nearing an announcement they have acquired the broadcaster in a deal valued at £350M, which would give the former a 70% stake and the latter 30%. But media entrepreneur Richard Desmond’s Northern & Shell, owner of Channel 5, has said it received several bids and was still evaluating them, according to Bloomberg. The free-to-air broadcaster was thought to be seeking a buyer with about £700M to spend, but many were skeptical it would fetch such a price; Desmond paid about £103.5M for it in 2010. Other companies that have been said to have shown interest include Viacom, Turner Broadcasting, BT, NBCUniversal and Saban Capital.
Channel 5 is notably the home of Big Brother, although its contract for the show expires in 2015. The net also airs U.S. dramas like Under The Dome, CSI and Person Of Interest; weekly average ratings hover around 4%. Read More »
Are longtime frenemies John Malone and Rupert Murdoch about to partner on a UK venture? That’s the word on the street according to The Financial Times which reports that the Malone-backed Discovery Communications and BSkyB, majority owned by Murdoch’s 21st Century Fox, are in talks on a joint bid for Britain’s Channel 5. The free-to-air broadcaster, which media entrepreneur Richard Desmond acquired for £103.5M in 2010, is thought to be seeking a buyer with about £700M to spend. The FTA channel has raised the antennae of several media companies with parties rumored to have shown interest including ITV, Turner Broadcasting, BT, NBCUniversal and Saban Capital. The latter is eyeing the possibility of merging Channel 5 with the UK’s Channel 4, creating the market’s third-largest broadcaster by audience. However, such a deal would require regulatory approval and the privitization of Channel 4. The discussions between Discovery and BSkyB have focused on the latter taking over Channel 5’s advertising sales operation, sources told the FT. Channel 5 is notably the home of Big Brother, although its contract for the show expires in 2015. The net also airs U.S. dramas like Under The Dome, CSI and Person Of Interest, but it’s previously dropped such titles as Once Upon A Time and Justified. Its weekly ratings hover around 4%.
Malone and Discovery, … Read More »
This should give the Discovery chief a little more job security at a time when the air is filled with deal talk following Comcast’s $42.5B agreement to buy Time Warner Cable. Liberty Media Chairman John Malone gave significant rights to his Class B shares — equal to about 29.5% of Discovery’s total votes — to David Zaslav in a February 13 arrangement just disclosed in an SEC filing. The Discovery CEO can vote them if Malone doesn’t choose to do so. And Zaslav has exclusive rights to buy them if Malone decides to sell. They’ll negotiate a price and, if they can’t agree, Zaslav has a right to match any deal Malone negotiates with someone else. The agreement is only good as long as Zaslav is CEO or on Discovery’s board. It recognizes “your successful tenure with Discovery” and expectation that it will continue under a new contract that runs to the end of 2019. There are a few caveats, though. The agreement doesn’t apply if someone buys Discovery, and Zaslav can’t give anyone else the rights to Malone’s shares. Malone controlled 6.1M Class B shares — about 93% of the total — when Discovery filed its latest proxy statement last year. The B shares have 10 votes apiece compared with 1 for each of the publicly traded … Read More »
Listen to (and share) episode 60 of our audio podcast “Deadline Big Media With David Lieberman.”
Deadline’s financial editor talks with host David Bloom about Sony’s big investor meeting this week and the changes and cuts it’s promising to make to enhance the health of its “vital” entertainment unit; the race between Sony and Microsoft as each finally launches long-awaited next-generation videogame consoles; more big cuts at the long-suffering Tribune Co.’s newspapers; and John Malone and Charter Communications look like they’re about to go hunting for more cable companies.
Deadline Big Media Episode 60 (.MP3 version)
Deadline Big Media Episode 60 (.M4A version)
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The 3% jump in early trading stands out on a morning when most stocks are down. Investors are intrigued by weekend reports led by one in The Wall Street Journal that Netflix is talking to cable companies including Comcast about the possibility of making the streaming service available on their set top boxes. The company already has an arrangement like this with Virgin Media in the UK. But the U.S. is a different story. The Journal notes that talks “are in early stages and no deal is imminent” citing “people familiar with the matter.” Pay TV companies have seen Netflix as a rival. It will take a lot to persuade them that it won’t encourage subscribers to cut the cord with cable or satellite TV — or watch Netflix instead of their VOD services. Indeed, last week Liberty Media’s John Malone — the largest shareholder in Charter Communications — urged cable companies to develop their own broadband alternative to Netflix. Brean Capital’s Todd Mitchell says that he doubts Netflix will make much headway with large operators such as Comcast — but might with small ones that “are moving away from managing their own on-demand libraries.” Some are offering subscribers broadband-connected TiVo DVRs in place of a conventional set top box. There’s a school of thought that operators can put up with some video cord cutting if Netflix encouraged more people to subscribe to their highly profitable broadband … Read More »
Listen to (and share) episode 54 of our audio podcast Deadline Big Media With David Lieberman. Deadline’s executive business editor talks with host David Bloom about John Malone’s call for more cable consolidation and cooperation in the face of an existential threat from Netflix and its ilk; broadcaster plans to go to the Supreme Court as they pursue injunctions against Aereo; a whole raft of news on Twitter as Comcast partners with it and Nielsen tracks it; and more stock machinations by 21st Century Fox as it tries to accommodate U.S. broadcast-ownership rules while fending off critics.
Deadline Big Media, Episode 54 (MP3 format)
Deadline Big Media, Episode 54 (M4a format) Read More »
The chairman of Liberty Media compares the growing sense of bitterness in pay TV to the dysfunction in Washington: There’s so much tension lately between programmers and distributors — especially over pricing — because “like [in] the political system, the moderates have been driven out of the business,” John Malone told an investor gathering. Internet video services led by Netflix have become so popular that they’ve pressured traditional pay TV companies to focus on short term gains instead of deals that would create long term value. Netflix has an advantage using the Internet because it reaches the entire country and its “local distribution is incrementally free.” Hollywood programmers sell to Netflix because it’s “found money.” Yet cable operators are hamstrung. “As big as Comcast is, it has a 25% footprint. You can’t buy national programming when you have that kind of footprint.” Distributors also shot themselves in the foot by waiting so long to roll out their TV Everywhere streaming services. If they’d moved more quickly then ”we’d be looking at new revenue streams and the ability to manage ad skipping and so on.” Instead, they’ve “created this window of opportunity” for Netflix. Read More »
UPDATED: John Malone’s company will give Wall Street a lot to talk about today. Shares in Liberty-controlled Sirius XM are already up about 2% in pre-market trading after it said that it will add $2B to its share repurchase program, which will include a buy-back of $500M worth of Liberty’s stake. That will leave the media holding company with 52% of the satellite radio service. In addition to that deal, Liberty says it recently completed a transaction to recover 6.3M of its shares that Comcast held. In return for its stock, the cable giant picked up Leisure Arts Inc, $417M in cash, and Liberty’s rights to a revenue-sharing deal with CNBC. Liberty also says that it will sell $500M in debt to help it pay off what it calls “privately negotiated cash convertible note hedge and warrant transactions.” It warns that the process of unwinding those deals “could have the effect of decreasing the trading price” of Liberty’s stock. In addition to all that, Liberty Interactive — a separate company that Malone controls — said that it will create a tracking stock for QVC (along with its 38% interest in HSN), and spin off its 57% voting stake in TripAdvisor. The new company will be called — what else? — Liberty TripAdvisor Holdings. The transactions are complicated and expected to be tax-free — characteristics of most Malone deals. Investors will hear more about … Read More »
Liberty Media’s John Malone and other execs are pounding the drums for cable and satellite companies to merge — in part to help hold down their rising programming costs. You’d expect outlays to fall as big companies apply the relatively low rates they pay across a larger collection of subscribers. But International Strategy & Investment Group analyst Vijay Jayant says today that the net shift in value to distributors from programmers would not be meaningful. AMC Networks, Viacom and Fox likely would see the greatest loss in their values while CBS, Discovery, and Comcast’s NBCUniversal would see the least. (He looks at outlays for basic channels; prices for premium services, regional sports networks, and VOD likely wouldn’t be affected by mergers.) If Charter joins Time Warner Cable, the blended company would save about $532M in 2014 as monthly programming outlays for their estimated 15.4M customers fall to $27.92 per subscriber from $30.80. By 2018 the savings would rise to $903M as the combo paid $38.08 instead of $43.21 for 14.7M customers. If DirecTV merged with Dish Network the satellite companies could save $525M next year, with costs dropping to $33.99 per sub from $35.28 for 34.1M customers. … Read More »
Don’t look for Liberty Media Chairman John Malone to add a cable company to his own portfolio. Although he believes the industry is ripe for consolidation, it’s “unlikely that we would participate in buying stakes in other cable companies other than helping Charter,” CEO Greg Maffei told analysts today. Liberty owns about 27% of Charter, and has been eyeing merger deals with companies including Time Warner Cable, Cox, and Cablevision. Maffei didn’t rule out a hostile deal, although he’d clearly prefer one to be friendly. “I don’t think we’re making a hard statement about where our future lies,” he says. “Ultimately you have to reach some kind of consensus.” He also echoed Charter CEO Tom Rutledge who said earlier today that he’s interested in a merger, but doesn’t consider it a must. A deal “may come to pass. It may not,” Maffei says. Liberty’s investment in Charter “wasn’t conditioned around that optionality.” Maffei says he’s upbeat about the opportunities to sell video programming, despite growing talk from execs including Cablevision CEO Jim Dolan about a future where cable companies just offer broadband — allowing others to provide video over the pipe. But Maffei says that operators will have to think more seriously about replacing today’s all-you-can-eat pricing for broadband with a model that charges people based on how much capacity they use. “There is a risk in a world where you have increasingly … Read More »
Talk of a possible merger between Charter Communications and Time Warner Cable appears to be re-surfacing. John Malone-backed Charter reportedly is working with Goldman Sachs Group to pursue a bid for the nation’s second-largest cable company, people with knowledge of the situation tell Bloomberg. Liberty Media’s Malone fanned the speculation of a possible deal after his company paid $2.6B for a 27.3% stake in Charter last May. “Malone has clearly thrown down the gauntlet,” Paul Sweeney, an analyst at Bloomberg Industries tells the news organization. “He believes the cable industry needs further consolidation.” Charter rose 2.95% to $128.23 at 1:28 PM ET. The shares have climbed 63 percent this year through yesterday. Time Warner Cable, up 17 percent in 2013, rose 2.4 percent to $116.64.
Related: CBS-Time Warner Cable Talks Getting Ugly?
John Malone is the largest individual investor in DirecTV and a former kingpin of pay TV, so why not offer advice to the satcaster’s lone rival? That’s just what he did Thursday at Allen & Co.’s annual mogul gathering in Sun Valley. The Liberty Media chairman told reporters that he urged Dish Network chairman Charlie Ergen to merge with DirecTV for the greater good of the pay-TV industry. “It would be good if DirecTV could combine with Echo or Dish or whatever Charlie calls it now just because scale economics in the media business drives down costs and makes it possible for larger investment,” Malone said, according to Bloomberg. “You need larger — I’m not saying monopoly players — but you need larger players.” Combining the satellite rivals would create the world’s largest pay-TV company, which Malone says would give the merged company increased power over programming and carriage decisions. It also would provide Dish with an opportunity to grow following its failed efforts to buy Sprint and a major stake in wireless broadband company Clearwire. But the FCC might object to a Dish-DirectTV combo. Regulators rejected their merger effort 11 years ago saying it would leave many rural viewers with just one pay TV provider. Malone clearly has deals on his mind. He’s known to be exploring … Read More »
Allen & Co Hollywood moguls are arriving at the 31st annual Allen & Co investment conference in Sun Valley starting today — and this time there’s something fun awaiting them. For years now the mogulfest has been mostly a showbiz snorefest with not a single entertainment panel on the official schedule. But my sources say this year’s features a Friday media panel consisting of Rupert Murdoch, John Malone, and Barry Diller. In other words, a trio of enemies who have sued or badmouthed each other so much over the years that it’s hard to imagine them sitting in the same room much less conferring politely together. The other sessions appear to be way less enticing:
Wednesday: Sports discussion featuring NFL Commissioner Roger Goodell; Presentation by Google co-founder Larry Page.
Thursday: Panel entitled ‘Cyber Insecurity’; Economic growth discussion led by NYC Mayor Michael Bloomberg; Presentation by the President of Mexico; Discussion about the future of universities moderated by Andrew Ross Sorkin.
Friday: Panel about the environment; Interview of King Abdullah II Of Jordan conducted by Tom Brokaw; Media panel with Rupert Murdoch, John Malone, and Barry Diller; Interview of Facebook COO Sheryl Sandberg by Charlie Rose; Political discussion with Jeb Bush and Bill Bradley.
Saturday: Discussion with Bill and Melinda Gates.
Debt holders shouldn’t be as enthusiastic as stock buyers seem to be about the talk of a possible marriage between Time Warner Cable and Charter Communications, Moody’s Investors Service warns today. Liberty Media’s John Malone fanned the speculation of a possible deal after his company paid $2.6B for a 27.3% stake in Charter. That has contributed to a 14.6% jump in Time Warner Cable‘s stock price over the last month. But Charter, with a market value of $12.7B, might bite off more than it can chew if it goes after TWC, which is valued at $31.9B but probably would cost a buyer much more. Even if Malone paid for half of the $40B that might have to be borrowed to make a credible offer, the company created by a Charter-TWC merger would be left with about $60B in debt, “making it the largest high-yield non-financial corporate issuer by far and among the ten largest investment grade non-financial corporate issuers,” Moody’s SVP Neil Begley says. Charter’s need to borrow for a megadeal “would likely result in higher credit risk for bondholders” since Malone “would likely want to limit his dilution and exert effective control in the transaction or series of transactions.” Lenders also are at risk because their agreements with TWC don’t give them special rights if there’s a change in control. And the company doesn’t have a dominant shareholder (like … Read More »
You can’t attribute the 9.4% increase in Cablevision‘s share price today — and 23% jump over the last five days — to the day’s only solid news: Charter just closed the deal announced in February to pay $1.63B for Cablevision’s systems in Colorado, Montana, Wyoming and Utah. No, investors are more excited by new reports that the Dolan family — led by Cablevision founder Charles Dolan and his son, CEO Jim Dolan — may finally be willing to sell the company, and that Time Warner Cable as well as Charter want to kick the tires. TWC has long salivated to combine its crown jewel cable system in Manhattan with Cablevision’s franchises in New York’s outer boroughs and suburbs including Long Island. Up to now, the Dolans haven’t been interested. The family tried to take the company private in 2007, but shareholders rejected the offer. Cablevision’s stock took a roller-coaster ride as execs grappled with growing competition from phone companies led by Verizon’s FiOS and restructured operations — including spinoff deals in 2010 for Madison Square Garden, and in 2011 for AMC Networks. But Cablevision’s stock price has been virtually dormant since the beginning of 2012, at least until the latest speculation-fueled run-up. The change: Liberty Media’s John Malone recently paid $2.6B for a 27.3% stake in Charter — run by former Cablevision COO Tom Rutledge. They’re eager to snag Time Warner Cable. Read More »
Apparently so, according to a Reuters report. The No. 2 cable operator has spoken to Cox and Cablevision about possible deals “in recent months” and continues to be interested in them, the news wire says. Execs recognize that the cable industry is mature and poised for consolidation. But they’re also cool to the idea of combining with Charter, a much smaller company that’s seen as a stalking horse for John Malone after his Liberty Media paid $2.6B for a 27.3% stake. The problem: Charter, which has a market value of $12.5B, likely would have to take on a lot of debt in order to buy Time Warner Cable, valued as $32.7B. And Evercore Partners’ Bryan Kraft notes that TWC’s board might “see selling now as premature if it believes management is righting the ship.” TWC already has rejected Malone’s overtures, leading him to take his case directly to its investors, The Wall Street Journal says. TWC, which has about 12M video subscribers, is the only cable company big enough to turn Charter into a major industry player. Investors have waited for years, though, to see TWC (which controls the system in Manhattan) combine with Cablevision (which dominates NYC’s surrounding boroughs and suburbs). TWC has had to bide its time because the Long Island-based Cablevision — with a market value of $4.5B — is controlled by Charles … Read More »
Shares in Time Warner Cable, Charter, and Cablevision popped this afternoon after Bloomberg reported that the one-time King of Cable is “exploring scenarios” to help Charter buy one of the other companies. Investors have speculated for weeks about a deal, seen as a real possibility since May when John Malone‘s Liberty Media paid $2.6B for a 27.3% stake in Charter. Today’s story took things further, citing unnamed sources who added details — including one who said that Malone and Charter “would like to get a friendly deal done [with Time Warner Cable] in the coming months.” Charter needs to show that it can afford to play; its $12.5B market value pales next to Time Warner Cable’s $31.7B. A buyer likely would have to pay much more: Evercore Partners’ Bryan Kraft says this week that TWC shareholders would want “a significant premium” to compensate them for giving up control, accepting additional risk, and creating most of the cost-saving synergies. Read More »
Related: Liberty To Pay $2.62B For 27.3% Of Charter
STAMFORD, Conn. & ENGLEWOOD, Colo. (May 1, 2013) –Charter Communications, Inc. (Nasdaq: CHTR) (“Charter”) and Liberty Media Corporation (Nasdaq: LMCA, LMCB) (“Liberty”) announced today that Liberty has completed its previously announced agreement with investment funds managed by, or affiliated with, Apollo Management, Oaktree Capital Management and Crestview Partners to acquire 26.9 million shares and 1.1 million warrants in Charter Communications, Inc. for $2.6 billion, which represents a 27.3% beneficial ownership in Charter using shares outstanding as of December 31, 2012, and a price per share of $95.50.
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No need to guess what accounted for the big increase. When Liberty Chairman John Malone calls the shots, big money decisions are almost always driven by a desire to minimize taxes. (One of SVP Albert Rosenthaler’s chief jobs last year was to “participate actively” in the Reforming America’s Taxes Equitably (RATE) Coalition, which lobbies for lower corporate tax rates, according to the Liberty proxy filed at the SEC today.) Liberty execs loaded up last year, the proxy says, because ”we wanted to avoid a potential loss of the compensation deduction” if tax laws changed this year, which seemed to be a real possibility late last year as the country approached the so-called fiscal cliff. That contributed to Maffei‘s lopsided compensation package which included $875,109 in salary, a whopping $53.9M in option awards, $2.2M in non-equity incentives, and $252,323 in other compensation. The total makes Maffei the second highest paid Big Media CEO for 2012 — behind CBS’s Les Moonves who made $62.2M — based on the proxies filed so far. Malone, who controls 43.1% of the company votes, defers most of his compensation and just collected $807,366, +50.7%. All of the other execs named in the proxy saw their packages increase anywhere from 589% to 706%.