Inside Broadband: Will Workman
Where Does John Malone Want to Go Today?
I'm glad I don't compete with John Malone. I know Brian Roberts
will become Cable King once Comcast's $72 billion acquisition of
AT&T Broadband goes through and he's sitting on 21.2 million
cable subscribers (knowing Roberts, he's already crowned himself),
but Liberty Media's John Malone is the guy I'm watching.
Malone bailed out of TCI and @Home in 1998, selling his cable assets
to C. Michael Armstrong at AT&T for a whopping $43 billion.
While working his deal, Malone managed to retain control of Liberty,
get $5.5 billion in cash for putting Liberty on AT&T's books
and another $3 billion in tax savings going forward - all the while
getting AT&T to take on Liberty's liability.
INTERACTIVE ACQUISITIONS
Four years later, Malone looks like a genius. @Home has collapsed
and AT&T was crippled as it spent billions to upgrade the TCI
systems Malone had acquired and run into the ground, setting up
Comcast's bid.
Meanwhile, Malone managed to split Liberty Media away from AT&T
before the collapse and has been building an asset portfolio including
substantial cable holdings in Europe, a 49 percent chunk of Discovery
(which, rumors say, he might sell) and other prized holdings.
If I did compete with Malone (hey, a poor pundit can only dream,
right?), I know he'd be keeping me awake at night.
Because now he's up to something on the interactive TV front.
Just look at these pieces acquired by Liberty Media's Liberty Broadband
Interactive Television Inc. (LBIT) unit since May:
- OpenTV, in which LBIT bought a controlling interest for $185
million. OpenTV and Liberate are the top two providers of middleware,
the operating system in set-top boxes that works with various
applications, including interactive TV.
- Wink Communications for $99.9 million. Wink makes software
that allows programmers to inject interactivity, giving viewers
on-screen icons to click on for extra information, sports scores
and targeted advertising. DirecTV, Echostar and numerous cable
operators support Wink TV programming, which is being built into
a number of current cable boxes.
- ACTV. LBIT is still in talks to acquire the interactive advertising
company.
That's called acquiring an interactive TV arm for cheap, folks.
Malone also persuaded a highly respected interactive TV guy, Pete
Boylan, to take the reins at LBIT after leaving Gemstar-TV Guide.
VISIONARY?
Clearly, Malone smells two things: bargains and opportunity. The
bargains are there for the taking on the shattered interactive TV
landscape. The opportunity is that in the void created by so many
disasters, none of the surviving players has shown the vision or
the muscle to follow through on interactive TV's promise.
Two of the most obvious failures still standing (barely) are AOL
and Microsoft and their interactive ventures, AOLTV and MSNTV. (In
the next column we'll look at what those bozos at Microsoft and
AOL have been thinking on the interactive TV front.)
What makes Malone's moves so important?
Well, Malone's visions are more far-reaching and complete than
those of most of his contemporaries. While we may not be able to
see all his game plan unfolding, some aspects stand out.
For one, there's perhaps no more significant technical development
that could revolutionize TV's business model than the PVR, and media
companies know it. That's why you'll never see mentioned in PVR
ads or marketing the devices' ad-skipping features - the big programmers
forced PVR suppliers TiVo and Replay to accept this as a condition
of receiving content rights.
But once the PVR gains critical mass - reports for PVR distributor
TiVo show strong subscriber increases - users will learn to time-shift
their programming and eliminate ads.
Reduce the ad revenue stream, and TV programming will have to find
another means of support.
POP-UP POTENTIAL
Enter interactive TV. With interactive advertising you have the
ability to target ads to the consumers most likely to respond, plus
a feedback channel. If I'm watching the Food Network and a pop-up
announces a deal on a new steamer, I might try it.
On a related front, Liberty's Game Show Network venture with Sony
Corp. has also been pushing the interactive TV envelope, building
a 90-minute interactive programming block in primetime.
Nearly half of GSN's viewers using PCs to play along with the interactive
game shows have broadband connections. With cable struggling to
find true broadband content to boost the cable modem value proposition,
GSN is one of the few programming providers they can turn to.
With everyone in cable focusing on VOD (at least in the U.S.; Europe's
another story), the other interactive TV legs have been largely
ignored. And that's a mistake I think Malone has noticed. He must
realize that cable, with its inherent two-way capacity, is uniquely
positioned to make interactivity the cornerstone of TV's future
business model.
Figuring how those other interactive TV pieces can attract users
and be made profitable is left to cable's big guns, because they're
the only ones with critical mass and money to remain committed to
interactive TV long term. But the way I figure, AOL Time Warner
is still making sense of its massive self, while Comcast will be
perhaps years in digesting AT&T.
That's why it's Malone I'll be watching.
Will Workman is a former senior editor of Cable World magazine
and editor of MediaView, a monthly newsletter for the Asian cable
industry. You can reach Will at willworkman@hotmail.com
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