In his recent interview on the Paley International Council Summit, John Malone discussed the reasons why today’s tech and media giants will continue to dominate. Here’s an excerpt from the interview:
MIKE FRIES: Have you learned anything about yourself up there in Maine these last months or this whole nine month period? Anything John Malone’s learned about John Malone he didn’t know going in?
JOHN C MALONE: Well, I learned that my instincts to diversify, right, are–
MIKE FRIES: Yeah.
JOHN C MALONE: –prudent. I’ve also had a lot of time to think about what’s evolved here, in terms of technology and business structure. And it is very fascinating to watch it. Because if you go back 25 or 30 years, I was the monopolist, I was under antitrust scrutiny, I was enjoying the benefits of scale economics domestically, and I was toying with the idea of whether or not that scale economics could go outside the US.
And as you know, Liberty Global was an effort to expand the footprint and gain scale.
MIKE FRIES: Sure.
JOHN C MALONE: As you sit there and watch these globally distributed, global scale businesses that have at least three monopolistic characteristics. One, massive scale enhanced by globality. Number two, network effect. The bigger they are, the more people need to, and businesses need to, associate with them, right? And number three, their own internal ecosystems, which allow them to broaden out and use their scale economics.
Nowhere is this more powerful than in those business models that have a high fixed and low variable cost. So you’ll find the greatest strength is in those entities that have that characteristic. You know, we saw all that early with Microsoft. Really, the first global content company, software content company, that had global scale and came under antitrust scrutiny as it approached the 90% plus market share.
What my observation would be that the regulators are going to have a hell of a challenge. In our case, at TCI, what they did was put in regulations limiting how many video services we could have an ownership interest in.
MIKE FRIES: Sure.
JOHN C MALONE: Fortunately, they stated it as a percentage of the number of channels. So when we were able to multiply channels with digital technology, it kind of took the lid off how many programming services we could have an economic interest in. And that’s how a Liberty Media was created in the first place.
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Malone also provided one word responses on whether he would be a buyer or seller of some of the biggest names in tech and media. Here’s another excerpt from that interview:
MIKE FRIES: All right. Here we go. Now we got 2 minutes. You and I do this all the time. And we should have something scrolling across the bottom, “this is not professional investment advice.” But I’m going to ask you, are you a buyer or seller? Going to give you 10, 15, 20 things. You’re just going to quickly tell me buyer or seller. Or if you don’t have a strong view, you can tell us why you don’t have a strong view. Let’s start. Are you a buyer or seller? Apple.
JOHN C MALONE: Probably a buyer.
MIKE FRIES: Amazon.
JOHN C MALONE: Definitely a buyer.
MIKE FRIES: Google.
JOHN C MALONE: I think, OK, they’re– I would own that stock.
MIKE FRIES: Facebook.
JOHN C MALONE: I would own that stock. These are all subject to regulatory intervention.
MIKE FRIES: OK, good caveat. Netflix.
JOHN C MALONE: Overpriced.
MIKE FRIES: Disney.
JOHN C MALONE: Overpriced.
MIKE FRIES: I told David, I would ask this, Discovery. You love it.
JOHN C MALONE: I love it. I love it.
MIKE FRIES: Course you do. How about studios generally? Studio business.
JOHN C MALONE: Really tough.
MIKE FRIES: Movie theaters?
JOHN C MALONE: Dying.
MIKE FRIES: OK. Broadcast networks? Does it matter what do you call them anymore?
JOHN C MALONE: It doesn’t matter. I think the traditionalist vehicle is going to go.
You can watch the entire interview here:
https://www.yahoo.com/entertainment/paley-international-council-summit-2020-143318569.html
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