Liberty Media's Malone seeks cable consolidation
We caught up with Liberty Media Chairman John Malone at the Allen & Co. conference, where he called for massive consolidation in the cable business.
"Comcast is large enough to, we think, do OK. The rest of the industry needs consolidation in our view in order to get more scale economics," Malone said. "Whether A merges with B, or B buys A, or A and B and C get together to form a joint venture to do things that have to be done, in larger scale. Some people have interpreted that to mean [Time Warner Cable] should be a player in it, and they probably should. They should be a consolidator because they're the second biggest," said Malone, who made the comments at the annual Sun Valley, Idaho, gathering.
Time Warner Cable CEO Glenn Britt so far has rebuffed Malone's advances. Sources tell me Britt thinks a deal wouldn't be beneficial for shareholders.
But it's clear Malone hasn't lost interest in striking a deal. Malone already owns 27 percent of Charter Communications, and in addition to Time Warner Cable, is also looking at Cablevision, and Cox, which is private.
Malone's big focus is scale economics, and it's not just cable. He's also eyeing growth in satellite TV, saying he thinks DirecTV and Dish should merge. "In order to improve the services to the consumer, you need to be larger. I'm not saying monopoly players, but you need larger players, who are able to make bigger, longer-term investments." DirecTV and Dish have not commented publicity on Malone's call for consolidation in the space.
Why is Malone so interested in cable? It's all about growing broadband demand. When it comes to cable TV programming, he said, cable "lost out to the satellite industry." But its appeal is the fact that cable is the "primary supplier of broadband connectivity, and it happens the cable networks are ideal to grow their speeds."
Malone said the cable industry is better positioned to evolve "than anyone else," and demand for broadband is rising.
Why the interest now? Malone sold shares of DirecTV, so he's no longer prohibited under antitrust law from having companies he's invested in, in turn invest in U.S. cable assets.
How does Hulu fit into his vision of consolidation? Malone doesn't advocate Time Warner Cable purchasing Hulu, but said, "If the cable industry were to invest in Hulu together in the U.S. or even globally, that would make sense because now you're starting to talk about scale that allows you to do things that you can't do if you're geographically limited."
And Malone says those geographical limits, what he calls "Balkanization," have always been cable's biggest challenge. "Even as big as Comcast is, they're still only about 20 percent of the market."
Malone walked in with an Allen & Co. managing director, Paul Gould, and has been in back-to-back meetings with various CEOs in the cable space. We'll see if all these meetings lead to a deal.
(CNBC is owned by Comcast's NBC Universal unit.)
—By CNBC's Julia Boorstin. Follow her on Twitter: @JBoorstin