When the American billionaire John Malone failed in his first attempt to become a major player in the British pay-TV market a decade ago he questioned Rupert Murdoch’s power by dubbing Sky the Death Star. It was a rich comment coming from a man whose fearsome reputation for deal-making in the wild west days of the cable TV market in the 1970s and 80s led Al Gore, the former US vice president, to nickname him Darth Vader.
Last week’s move by Malone’s Discovery – he holds the most voting shares at almost 30% – to buy Scripps Networks in a deal worth $14.6bn (£10.9bn) marks the latest move among the titans of media vying to dominate the global pay-TV market.
The 76-year-old’s global ambitions mean he frequently crosses swords with Murdoch on his way to becoming the most powerful challenger to the octogenarian’s empire in the UK and Europe.
Sky has the problem of card sharing. Virgin has the problem of no encryption, and cheap boxes to buy. Anybody can purchase a box, plug it in, run the 'self-tune' and they have all the channels. Not so simple with sky. Its also very difficult for Virgin to determine who is using an illegal box on their netwrok.
Virgin Cable Boxes Hacked Celebrity 2017
Malone’s latest deal will add UKTV, owner of 10 channels including Dave and Gold, and Food Network, which broadcasts shows such as Nigella Express, to a burgeoning European portfolio that includes Eurosport, which paid almost £1bn for Olympic TV rights, Bear Grylls’s shows and channels including Animal Planet and Discovery.
Over the years Malone’s sporadic skirmishes with Murdoch have varied from fierce to frenemy-like.
Earlier this year, Malone’s Liberty Media bought Bernie Ecclestone’s Formula One in a deal valuing the sport at about $8bn, an asset Murdoch had looked to buy – Sky has TV broadcast rights in the UK, Germany and Italy. He rubbed it in by promptly installing Chase Carey, a former top executive at Fox and once Murdoch’s right-hand man, as chairman.
“We bang into each other all the time,” Malone said recently. “I have absolutely the highest respect for Rupert.” That may be, but the man known as the “swamp alligator” among Wall Street traders for his cut-throat tactics, is one of the few to have got the better of Murdoch and threaten the family empire.
In 2004, when Murdoch was de-listing News Corp from the Australian stock market so it could list in New York, a small window appeared when hugely valuable voting shares, through which the Murdochs maintain control of their empire, suddenly became available.
Malone secretly built up a stake of about 18% in News Corp votes, becoming its second-largest shareholder and threatening the family’s cast-iron grip. After a two-year standoff he used the stake as leverage in an asset swap that won him Murdoch’s controlling stake in DirecTV, the largest satellite business in the US.
He had the chance to strike again in 2011 when a weakened Murdoch was forced to pull his $8bn bid to take full control of Sky as the phone-hacking scandal engulfed his UK newspaper business. However, Malone passed up the opportunity, saying that in previous deals Murdoch had acted with the “greatest integrity” and he did not want to give him a “hard time”.
“Malone’s stakes tend to be strategic and he is a prolific deal-maker,” said Claire Enders, of Enders Analysis. “Malone and Murdoch have complementary business approaches. They are healthy frenemies.”
An opportunity Malone didn’t pass up was fulfilling a long-held ambition to create a pay-TV powerhouse in Britain when Liberty Global, his primarily European cable business which has a presence in over 30 markets, struck its biggest deal, acquiring Virgin Media for £15bn in 2013.
A year later Malone looked set to achieve what NTL had failed to do in 2006 and acquire ITV, Britain’s largest commercial, free-to-air broadcaster. It had been James Murdoch, then chief executive of Sky, spying the threat the combination could make, who thwarted NTL when he swooped in to buy a 17.9% stake for almost £1bn and block the move.
Ironically it was Sky, which had been ordered to sell down its stake over competition issues, that opened the door for Malone by selling a 6.4% chunk to Liberty Global in 2014. The following year Malone upped it to 9.9% but the expected takeover, which could cost £9bn, has so far failed to emerge.
Malone believes ITV is overpriced and is facing uncertainties, such as the impact of the rise of streaming services, while London-listed Liberty Global does not generate any revenues in dollars so hasn’t benefited from the post-Brexit slump in the pound.
Murdoch, meanwhile, is also aiming to strengthen his pay-TV empire, as viewers move away from traditional packages for online services such as Netflix and Amazon, with his protracted £11.7bn bid for full control of Sky across Europe, which is currently bogged down in the regulatory process.
Malone’s power can be seen in the way he at times uses his businesses to work in concert to push a deal through, as he did when Discovery and Liberty Global paid £500m for All3Media, the maker of Skins, Midsomer Murders and The Only Way is Essex.
Malone could look to marshal his forces to provide a rival to Sky and BT in the £5bn-plus auction of Premier League rights due to kick off at the end of the year. Before the last auction David Zaslav, Discovery chief executive, said that he had held talks with potential partners over joint bids for premium sports rights such as football.
Discovery has eyed numerous assets in the UK, including expressing interest to the government in buying Channel 4 when it was being considered for a £1bn privatisation. It also looked at Channel 5 when Richard Desmond put it up for sale, ultimately pulling out with MTV-owner Viacom, in which Malone has a small interest, seizing control.
Malone’s eclectic range of investments includes TripAdvisor, the world’s largest live event company Live Nation, the US digital radio company Sirius, the Atlanta Braves baseball team and shopping channel QVC.
He also has a stake in Lionsgate, the studio behind films including La La Land and TV dramas Mad Men and Orange is the New Black.
“For the last few years there has been rapid consolidation in the media sector internationally and an almost ubiquitous investor behind this game is Malone,” said Alex DeGroote, research analyst at Cenkos Securities. “He is very patient. Stealth and long-term planning are Malone’s hallmarks.”
Malone has used part of his $7.9bn fortune to become a “conservation activist” and is the largest private landowner in the US. His 2.2 million acres puts him just ahead of his old friend and business partner Ted Turner, the founder of CNN.
He also owns a castle and the former estate in Ireland of Tony O’Reilly, who owned the Independent before the Lebedevs. This despite a supposed aversion to flying which means his holiday of choice is said to be a family vacation in a super-sized Winnebago.
Malone has started planning his succession at Discovery and Liberty Global by giving their chief executives, Zaslav and Mike Fries respectively, the first right of refusal if he sells his stakes.
However, he has made it clear he is not quite ready to hang up his spurs just yet. A decade younger than Murdoch, Malone looks like he will remain a thorn in the side for the next generation of the clan, sons James and Lachlan, who are gradually taking over the reins.
On the horizon remains the potential of a £100bn mega-merger between Liberty Global and Vodafone. The two companies have had on-off talks over the past two years, focusing on the possibility of some form of “asset swap” in the UK, and recently agreed to merge their Dutch businesses. If a deal came off it would pose the biggest pan-European threat Murdoch has faced, and a fair-sized global headache, with Sky UK just beginning to get into the mobile market.
The man once nicknamed the cable cowboy is not ready to ride off into the sunset just yet.
MALONE’S EMPIRE
Liberty Global
Virgin Media
ITV (9.9% stake)
TV3 in Ireland
All3Media (50%) TV production group behind shows including Skins, Midsomer Murders and The Only Way is Essex
TV and broadband operations in 30 territories, mostly Europe, including Latin America and the Caribbean
Liberty Media
Formula One
US satellite radio group SiriusXM (68%)
Atlanta Braves baseball team
Live Nation, world’s biggest live event company (35%)
Discovery Communications
(He has most voting shares, almost 30%)
Eurosport, which owns European TV rights to the Olympics
All3Media (50%), joint venture
Channels including Discovery, TLC, Animal Planet
UKTV, owner of 10 channels including Dave and Gold (50% with BBC Worldwide)
Food Network
Investments through other Liberty vehicles or personally
QVC home shopping TV business operating in the US, UK, Germany, Japan, Italy, China, France
Travel sites Expedia and TripAdvisor
Lionsgate (8%) studio behind La La Land, Hunger Games and TV shows including Mad Men
Starz, premium cable channel group bought by Lionsgate in which Malone had a stake
Small stakes in Time Warner and Viacom, owner of MTV, Nickelodeon and Channel 5