Greg Maffei‘s comment today at an investor meeting sponsored by Citi resonates because his company is the leading shareholder in Charter Communications, which is preparing to make a bid for Time Warner Cable. It would be a risk, the Liberty CEO says, because “we’re being asked to pay for assumed synergies” including the possibility that Charter could reduce content and marketing costs. “Can they happen fast enough will be the real key.” But Maffei notes that “there’s also an opportunity to run the reported asset [TWC] better” adding that it “has not performed as well as Comcast and what [Charter CEO Tom Rutledge] and his team have been able to do.” Consolidation makes sense because “15, 20 years ago we did not have scaled national competitors [including satellite companies] and you didn’t have over the top [Internet competition].” Cable now faces those threats, as well as “a new set of reinvigorated cable opportunities [that] come from working together and building scale…Some of that is from consolidation and some of it is from confederation.” He acknowledged that Liberty’s new proposal to buy the 47% of Sirius XM that it doesn’t already own would give it access to the satellite radio company’s cash flow, and that could help if Charter goes after the much-larger TWC. “It says in the future there’s a lot more flexibility.” Liberty also wants to adjust its own strategy. “Eight years ago, when I joined, Liberty Media was a complete mish mash…We didn’t have controlling stakes in pretty much anything except for QVC and we had enormous tax problems trying to unwind some of those stakes.” Now that those problems have been fixed “we needed a new game.” The problem is finding an investment that makes sense in the digital age, where it’s hard to find businesses that look like they can continue to grow for a decade or more. “That may work for Coca Cola” — but it’s “unlikely that everything that sits in [Liberty] is going to be sitting there in 5 or 6 years because there’ll be change.” Still, he isn’t worried about Google threatening cable with its Google Fiber initiatives in Kansas City, Austin, and Provo, Utah. “No overbuilder has made respectable profits yet…It’s a lab” that mostly threatens cable by causing investors to worry about whether its a good business on which to bet.
Liberty Media CEO Says That Time Warner Cable Has Not Been Run Well
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