Malone: Cable Operators Should Create Netflix Killer

Liberty Media chairman reiterates position that MSOs should merge to create scale in order to contain programming costs

Liberty Media chairman John Malone said cable operators should create a single, nationwide Internet video service to rival Netflix, saying the industry has been slow to respond to over-the-top competitors.

MSOs have the opportunity to contain rising programming costs by teaming up to license content for a subscription VOD service, Malone said at Liberty Media’s annual investor conference Thursday.

“As big as Comcast is… you can’t buy national programming when you have that size footprint, even if you are the biggest,” Malone said.

Back in the ’80s, cable operators teamed up to invest in networks such as Ted Turner’s CNN, he said. Most of the cable industry’s innovations, including digital set-tops, resulted from industry collaboration involving multiple MSOs, according to Malone.

SEE ALSO: John Malone: Time Warner Cable Should Be Rolling Up Cable Ops

It’s worth noting that the pay TV industry’s attempts to offer “TV Everywhere” services have been hampered by antitrust regulations prohibiting collusion among competitors.

Malone’s Liberty Media earlier this year acquired a 27% stake in Charter Communications, and he’s made it clear that he’s interested in using Charter as a vehicle to roll up additional operators. Charter has made overtures to Time Warner Cable about a potential merger, but the larger MSO has rejected the proposition.

In his presentation Thursday, Malone reiterated his call for consolidation among MSOs, to gain scale. “Fewer rational players generally work together better… than more,” he said.

In June, Malone laid out the case for Charter to become “a horizontal acquisition machine” to gain economies of scale by buying up other MSOs, speaking at the company’s shareholder meeting. “The whole name of the game in the cable business is scale,” Malone said. Charter will be “looking at other assets in the U.S. cable business that lack scale to have synergy.”

Earlier Thursday, Liberty Media announced that it was buying back 6.3 million Liberty shares held by Comcast — representing 5.2% of outstanding shares — in exchange for Liberty’s Leisure Arts, a publisher of lifestyle and craft how-to guides, as well as approximately $417 million in cash and Liberty’s right to share in CNBC’s revenue.

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