Malone’s skills sent TCI to top of cablers

Soft-spoken exec proves a savvy businessman

NEW YORK — For the past two decades, Tele-Communications Inc. has towered over the cable industry like a colossus, taking its cue from John Malone, the powerful TCI chairman. His skill at dealmaking has kept the company at the top in the number of subscribers it serves and in the number of cable networks of which it owns a piece.

When Malone, 57, joined the company in 1972, TCI consisted of a number of small, rural cable systems struggling to eke out a profit. Malone quickly discovered that he had a talent for hard-nosed negotiations as he began buying up cable systems, squeezing loans out of skeptical bankers and pushing franchise authorities in cities where TCI owned systems to allow it to jack up its rates to subscribers.

Within three years, Malone’s aggressiveness had propelled TCI from 10th-largest cable operator in the U.S. to second-largest, serving 651,690 customers on 149 cable systems in 32 states by 1975.

While Malone was buying up cable systems, he was also gobbling up stakes in cable networks, eventually sheltering them under a division TCI created in 1991 called Liberty Media.

And although Malone denies it, his antagonists insist that he unfairly purchased some of his cable networks at lower-than-market prices by threatening to pull that network off all of its cable systems if a potential rival came up with what looked like the winning bid.

Faced with losing access to the subscribers of the biggest cable operator in the United States, these bidders dropped out, leaving TCI to come in and scarf up the network, adding another prize to Liberty Media’s bulging portfolio. It now numbers more than 90 networks, both basic and pay.

In September 1993, Viacom chairman Sumner Redstone filed a lawsuit claiming that TCI’s monopoly power was allowing it to ride roughshod over the industry. He accused TCI of employing tactics such as demanding an equity stake in a cable network as the price for getting clearance on TCI’s cable systems.

TCI’s response is that its willingness, early on, to carve out channel space on TCI systems for such networks as Black Entertainment TV, CNN and the Discovery Channel was crucial to those nets’ survival in a harsh cable environment, so TCI deserved to get these ownership positions.

After months of charges and countercharges, Viacom and TCI settled their differences and the lawsuit was dropped.

Over the years, TCI has taken more hits in the press than most of its cable-operator brethren because it controlled a disproportionate number of small-market systems, many of which became notorious for poor service to subscribers. TCI was unwilling in many cases to pour resources into communities that were only marginally profitable because of their size.

Under Leo Hindery, the executive Malone brought in last year as president, TCI has traded off many of its small systems for larger ones, buying in to the cable industry’s strategy of clustering; instead of three or four or more different cable operators inefficiently sharing the subscribers of a large city, the trend is toward one operator taking over all the customers in that city.

But Malone has never managed to shake off his image as a ruthless Darth Vader (the name affixed to him a number of years ago by a then-senator named Al Gore) who’s always seeking financial advantage over his antagonists by constantly changing the terms of deals while negotiations are in progress.

But the style of the man belies that image. Malone goes home to his family for lunch every day when he’s at his Denver headquarters, wears off-the-rack suits and is surprisingly soft-spoken and diffident in social situations. One has to lean in to hear him even when he’s blasting the government to a knot of reporters outside some meeting room during one of the many conventions the cable industry holds each year.