Why Liberty Media’s CEO Is a Buyer of So-Called Troubled Brands

Liberty Media CEO Greg Maffei sounds a little tetchy when asked about the sharp drop in his company’s stock price over the past six months.

Liberty, he says, has “performed as well, if not better, than anybody” — with shareholder returns up an average of 25% a year — in the 13 years since Maffei left his job as Oracle’s CFO to help John Malone run his burgeoning media empire.

He has a point. By gambling on fixer-uppers, instead of the trophy properties that most moguls covet, Maffei, 57, has emerged from Malone’s shadow to become an industry powerhouse.

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In addition to running holding company Liberty, Maffei is chairman of Sirius-XM, Pandora Media, Live Nation Entertainment (which owns Ticketmaster), Liberty TripAdvisor and Qurate Retail — the recently rebranded owner of QVC, HSN and Zulily. He’s a director of Charter Communications, the No. 2 cable operator (Liberty is the largest stockholder), and online real estate service Zillow.

He’s still dealing. Maffei could dominate music as he angles to control iHeartMedia, the No. 1 radio station owner, which is seeking to escape bankruptcy protection. Maffei’s also becoming a force in sports. Last year he bought Formula One auto racing, teaming it with the Atlanta Braves — which Liberty picked up in 2007.

Meanwhile, Maffei’s just one degree of separation away from Malone’s significant holdings in Lionsgate (which bought Liberty-controlled Starz in 2016), Discovery Communications and Liberty Global, the world’s largest TV and broadband company.

The CEO last year made $19.8 million — up 17% over 2016 and equal to 223 times the $88,786 that the average Liberty Media employee collected. Variety recently caught up with Maffei to find out what’s up with his company, and his world.

You believe the content business is challenged. Why?

The traditional content guys have a bunch of challenges. In five years we saw two to three times the number of [TV] series and two to three times the cost per hour. I don’t think that’s a sustainable rate of growth.

Rupert Murdoch is selling most of Fox to Disney; Jeff Bewkes is selling Time Warner to AT&T. Yet you are mostly a buyer. 

We’ve not been buying traditional linear players. Frankly we reduced our exposure by putting Starz inside of Lionsgate. I’m not in Discovery — Discovery doubled down [buying Scripps Networks Interactive]. But there is a space, and they kind of had to play. John may be more bullish on content than I am. He’d kind of have to be: He has that big Discovery position.

Do you think Lionsgate has to grow? 

They’ve done a good job. But those trends toward scale would probably be helpful to them just the way it’s helpful to most content players. I don’t think Lionsgate is unique.

What developments over the past few months have taken you by surprise?

I would not have guessed that [Comcast CEO] Brian Roberts would be trying to outbid Murdoch and Disney for [U.K. satellite company] Sky. It follows Fox and Disney. You wouldn’t have thought that Rupert would sell anything. That’s not been his history. All of those are fairly surprising.

Are you surprised that Disney wants to buy Fox?

Disney has come to the realization that it needs to play in a direct way. Hulu [co-owned by Disney, Fox and Comcast] is an important part of that strategy. There weren’t that many ways to get scale in an over-the-top player. It’s a lot of purchase to get to Hulu. But when you think it through, it’s not totally surprising.

You don’t believe Disney and Fox might give Hulu to Comcast if it agrees to back away from Sky?

Hulu is likely what they want, so I’d be surprised. I think Brian might like that, but I’d be surprised if they let it go.

Do you have a vision of how this turns out? 

It’s an interesting question. Will [Disney] have to dump some of their sports programming to get that deal done? It would seem possible, if not likely, to me. The fact that they’d have all of those [Fox-owned] regional sports networks, plus ESPN, seems unusual and would not be allowed.

The RSNs would stay with Murdoch?

I think Rupert’s a seller of them. He sold them once; I don’t think he wants them back. I think it’s a question of whether Disney will be allowed to close on that part. They have less regulatory problems than most.

Is Disney’s new ESPN+ streaming service a good idea?

They’re going to have to do that. But how do they maintain their ESPN carriage [on pay TV] and that over-the-top service? How many ways can you slice the baloney? There are only so many ways you can package it, window it, etc.

On the distribution side, will cord cutting accelerate, or will we see a slow, steady decline?

I think it’s probably slow and steady. There are wide varieties within there. The traditional satellite players are losing share relatively quickly. The cable guys are losing share slowly. Charter gained video subscribers in the fourth quarter, and they’re saying they could gain video subscribers in 2018.

In music, do you have a grand vision for integrating Sirius and Live Nation and potentially iHeart? 

Each of these businesses has attractive qualities. There could be some synergies around the cost side or around
technologies or around interaction between free and pay. I think all float on their own bottom and do well. But we may find ways to have them work together.

Why double down on a business that’s so troubled?

The music industry is restructuring. Sirius has done quite well. Live Nation has done very well. But also other players: Spotify, the record companies — there are a lot of people who seemingly, in the restructured business over the last few years, have done quite well.

Is a shakeout inevitable in music streaming?

I don’t know about that. Spotify has just gone public with a market cap of over $25 billion. Big players like Amazon and Google and Apple, even if they aren’t making a lot of money, can sustain if they find it strategic. I’m not sure I see a shakeout in the near term. In fact I’d be quite surprised.

You’re a minor shareholder in Viacom. Is a merger with CBS inevitable because they’re both owned by the Redstone family?

There are independent committees and shareholders that have to be dealt with. I think there’s probably good logic in having it happen. All of the things I talked about earlier are consistent with our belief that scale is a benefit.

You’re also a minor shareholder in Time Warner. How do you think the case is going with the Justice Department’s suit to block the sale to AT&T?

AT&T has the better argument, and my understanding is that they’ve been having better days in court. But we’ll see.

Do you think the Trump administration is going after them because of CNN?

I wouldn’t want to put a guess into that. But I would say that, in general, vertical mergers usually get approved and aren’t anticompetitive.

What’s your assessment of the Trump administration at this point? 

I’m not here to make political commentary. Tax reform made a lot of sense in terms of reducing corporate rates, and that’s a positive.

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