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.
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.
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.
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.
You can reach Will at email@example.com