ANAHEIM — A day late but hardly a dollar short, Time Warner vice chairman Ted Turner and Tele-Communications Inc. chairman and CEO John Malone rolled into the California Cable Television Assn.’s 1996 Western Show on Thursday to sit on, and dominate, a panel discussion about technology.
Malone, long-winded and a tad cranky, imparted the message that it’s time for cable to wake up and smell the profit or drown in its own red ink.
Turner, as cagey and flip as ever,gave the impression that he’s tired of this whole game and wouldn’t mind taking his marbles and moving somewhere considerably quieter, like the afterlife.
Timing not impeccable
The timing of his address to the industry could hardly be worse for Malone. His TCI stock has been down for so long that he was driven last week to lay off 2,500 employees and cut and freeze the salaries of his executives. His systems are also at war with cable networks, demanding fees for carriage and dropping such established services as E! Entertainment and Comedy Central on many systems in favor of newer networks like Discovery’s Animal Planet that pay hefty per-subscriber fees.
Malone, while predictably remaining bullish on digital technology and telephony businesses as well as coming modems and Internet applications for cable, threw down the gauntlet to the industry to stop the perpetual investment cycle that has roadblocked much of a return on investment.
“The curse of the cable industry over all of these years is that every year, the debt goes up; every year, the money gets reinvested and then some,” Malone said, “and I think that’s a paradigm that has to change as this industry matures. This industry needs to restructure itself so that it actually does generate earnings.
“Let’s be honest about it, guys: The cable industry has the lowest return on investment capital of any major business in this country … This industry is not a cash alligator that should eat every nickel it raises.”
Maintaining he is still a “great believer in the wire,” Turner said he “feels great about the future” of cable even though he is saddled with “the same $2 billion I had a year ago. I’d like it to be $3 billion.”
Turner in an info funk
But within an hour, Turner, perhaps burned out on the conversation moderated by CCTA prexy and general counsel Spencer R. Kaitz, griped that he is suffering from “information overload” in his life, burdened with “100 channels and no time to watch any of them.
“I’ve gone about as far as I can go in this life,” Turner concluded. “I sort of envy the departed. They don’t have to worry about (any of this) anymore.”
Malone, noting that he has a “$5 billion or $6 billion equity stake” in the telephony business, is unwilling to accept the idea that new and ancillary areas of his core cable business need to be explored simply to bring the bottom line and cash flow back up to speed.
“Investment in new business should be voluntary, not mandatory,” Malone said.
But Malone is counting on those businesses to thrive. He said Thursday, for instance, that he expects 25% of cable subscribers to have wireless set-top boxes atop their TV sets, which will open up channel capacity for a series of new niche channels that at the moment have nowhere to go.
Both Malone and Turner defended the thriving practice of those fledgling niche nets buying their way onto the air by forking over per-subscriber fees upfront in exchange for carriage.
“Access to homes is worth something,” Turner reasoned. “In some ways, you’ve just got to look at it as the cost of doing business. I see nothing wrong with paying for it.”
Don’t mention him
When the subject of his arch-nemesis, News Corp. chairman Rupert Murdoch, was raised, Turner puffed up his face in a hostile comic wince and admitted that Murdoch — whom he has compared in the past to Adolf Hitler — “is the only guy who gets my dander up … I like everybody else now that Hitler’s dead.
“(Murdoch) pretty well bought his way into Britain … He ruthlessly exploits his advantages. He works real hard to try to conquer the world and have a monopoly. This conquer the world thing, no one’s ever done it yet. And I think he’s gonna fail. He doesn’t have a real friend in the world … Anyway, I think he’s going to come a-cropper.”