Cable changes stun Liberty’s Malone

Topper surprised by Comcast's penetration rates

In expressing awe at the prospects for the cable business in the U.S., Liberty Media chairman John Malone said Friday he should never have sold his TCI cable operation to AT&T in 1999, systems that are now part of Comcast.

Malone, who got into the cable business in 1973, said he was blown away by Comcast’s penetration rates. It is the nation’s largest cabler with 23.4 million subscribers and nearly 17 million broadband subscribers.

But does that mean the cable cowboy is ready to get back on the horse? No, Malone said. “You need massive scale (in the cable biz) today. Otherwise it is a real uphill battle,” he said during a conference call announcing the first quarter results for Liberty’s various businesses.

He minimized the threat of over-the-top video to cable operators, saying “it cuts both ways,” because it will certainly help the high speed data side of their business. He said cable is clearly the winner in broadband versus satellite and telcos, adding they have a monopoly. “No, I didn’t use that word.”

He joked that Liberty’s attempt to buy Bresnan Communications was “pathetic” (Cablevision was the winning bidder) and said his CEO Greg Maffei would not let him even consider pursuing a deal to buy Time Warner Cable.

For the first quarter, Liberty’s Starz unit reported solid results on subscriber gains at both pay cablers Starz and Encore. Revenues in the period rose 28% to $391 million, with Starz and Encore boosting subs by 10% and 6% respectively. Operating profits rose 25% to $124 million.

Starz now counts 18.8 million subs and Encore 33.1 million, said Starz CEO Chris Albrecht. He reported that its original shows “Spartacus: Gods of the Arena” and “Camelot” drew big audiences, with “Camelot” setting an all-time record for Starz shows.

Liberty CEO Greg Maffei said the Liberty Starz Group, now a tracking stock of Liberty Media, is set to be spun off by mid-summer. The same is true for tracker Liberty Capital Group, which includes a $5.5 billion stake in SiriusXM satellite radio and ownership of baseball’s Atlanta Braves. Maffei said no decision has been made about whether to increase the SiriusXM stake but he said he remains impressed by CEO Mel Karmazin’s management of the company and the stock performance.

In its other business, Liberty Interactive Group was hurt by events in Japan in the quarter, with its QVC Japan channel being forced to go dark for 12 days. Still, Liberty Interactive’s revenues grew 7% in the quarter to $2.2 billion. Operating profits fell 2% to $213 million.