John Malone: Donald Trump May Help Cable With Tax Cuts & End To Open Internet Rules

John Malone
Associated Press

Donald Trump’s victory on Tuesday could help cable companies — both because of his tax policies and regulatory ones — Liberty Media chairman John Malone told investors today.

“You’re going to see more fiscal stimulus” if he lowers tax rates, potentially encouraging companies that park cash overseas to bring it back to the U.S., he says. “That will create a higher interest rate environment and some inflation.”

But that can be good for cable: companies spread their spending over many years. “Reasonable inflation has always been beneficial to equity returns in our industry,” Malone says.

What’s more, he believes that Trump’s stated opposition to regulations that don’t have a clear economic payoff  “will be favorable.”

“It depends on the degree to which Trump and [House Majority Leader Paul Ryan] can reach agreement on an agenda and a rapid implementation of that agenda.” Malone said.

Net Neutrality sign

He also sees an end to what he believes is a broad effort, especially at the FCC, to penalize cable by supporting initiatives that tech companies like including net neutrality, competition for set top boxes, and consumer privacy rights for the usage data that Internet service providers collect.

The prospect of regulations that “support one industry’s goals over another is probably less risky today than it was two days ago,” Malone says.

Investors seem to share that view: Tech stocks are being hammered today with Twitter -5.0%, Netflix -4.6%, Amazon -4.6%, and Facebook -3.8%.

“That seems unintelligible to me,” Liberty CEO Greg Maffei says. “Big capital likely will be beneficiaries of repatriation. [Companies] likely will be beneficiaries of reduced tax rates. Google may lose the advantage of having a direct pipeline to the White House. But they’re going to bring back an awful lot of capital at low rates. We may be beneficiaries that they don’t have a direct pipeline to the White House anymore. Eric Schmidt may have to move out of the Lincoln bedroom.”


In response to other questions posed at the company’s Investor Day confab in New York, Malone says that AT&T’s plan to buy Time Warner will light a fire under cable operators to come up with a rival wireless service that mostly depends on WiFi.

Comcast, Charter, and Cox have agreements with Verizon for it to handle wireless calls or data transmissions to mobile devices when they’re out of range of WiFi.

Malone can see cable operators “collaborating and developing a commonly branded” service — “or acquiring an existing network branded provider.”

The ability to offer wireless in addition to TV, wired phone, and broadband has become “a necessary component in connectivity.”

Malone also sees TV consumption changing as the traditional, bloated pay TV bundle “slowly declines” and viewers face “a ton of a la carte and mini services.”

Bad news for cable and satellite companies? Not necessarily.

“The evolution will see distributors participating in video revenue,” Malone says. “It will all balance out.”

Indeed, he says that niche services will have to forge alliances with companies that already have a direct billing relationship with customers.

Services that target small audiences “are not normally economically viable propositions unless it’s what I call check-the-box” with an existing supplier. Stand-alone services “have to be marketed, have to be billed and collected. Ask Glenn Beck how that worked out for him….Churn, marketing costs and billing costs just make those kinds of ventures tough.”

Malone says that Amazon Prime has a “very powerful” platform to help existing customers add, or remove, services. Wireless phone providers, cable companies, and Liberty-controlled SiriusXM have “very attractive ways to introduce incremental services.”

The Liberty boss also says his company’s plan to buy Formula One racing could pay off because it won’t have to worry about escalating costs. Most sports channels, including ESPN, see costs rise every time they negotiate new licensing deals.

In the 1990s “Ted Turner built the TNT network on two years of eight games on Sunday night of the NFL. It was great. But after two years he couldn’t afford the escalation in cost….Sports is a little bit of cocaine. It’s very powerful and in the right markets the right sports can really move shares. But the risk with it is: Who ends up owning the money? Frequently it’s not even the team owners. It’s the players.”

Maffei quipped that with the Formula One deal Malone wants Liberty to “move from being a cocaine user to a cocaine dealer.”

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