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Liberty Media Corp

Overview

This profile considers Liberty Media Corporation, a cable tv, satellite and investment giant with holdings in North America and Europe.

Introduction

Liberty was described by Microsoft's Slate magazine in 2004 as

a strange hybrid—part venture capital fund, part mutual fund, part asset shuffler extraordinaire, and part long-term operator of businesses.

It originated as part of TCI, the US cable television group founded in the mid 1950s and acquired by AT&T ('Ma Bell', described in a detailed supplementary note) in 1999 for US$54 billion.

It was spun off from AT&T in the second half of 2001, subsequently spending US$5 billion on nine German regional cable networks. Apart from television distribution it holds major interests in other groups. For example in mid-2006 it had the largest economic interest in News Corporation and a 4% stake in AOL Time Warner. As of December 2003 it had never paid a dividend.

Control is exercised by engineer Dr John Malone (described by Al Gore as the "Darth Vader of cable"), with a majority of the voting shares.

David Elstein's crisp 2002 comment Stumbling Goliaths, dithering Davids: Unpicking the mythology of the media mogul (PDF) comments that

Leo Kirch likens Murdoch to a shark, always dangerous, always on the move. By contrast, Malone is a swamp alligator, content to lie secreted in the mud, to let the prey come to him.

In the second half of 2001 it aggressively acquired cable operators and content developers in the EU. During 2003 it bought the remaining 57% of QVC from Comcast for US$7.9 billion and absorbed Liberty Livewire Corporation (formed as a result of the 2000 and 2001 acquisitions of The Todd-AO Corporation, Four Media Company, Video Services Corporation, certain operations of SounDelux Entertainment Group and other businesses engaged in the provision of creative and technical services for the media and entertainment industries).

In 2004 it increased its voting stake in News to 9% (and its economic interest to 17%, later to 19%), becoming the largest shareholder in the Murdoch-controlled group. In March 2005 Liberty announced plans to spin off its stake in the Discovery cable and satellite business, with new publicly traded company (to be called Discovery Holdings and worth between US$10 and $15 billion) housing Liberty's 50% stake in Discovery - television networks such as the Discovery Channel, the Travel Channel, the Learning Channel and Animal Planet - and the Ascent media postproduction business.

In December 2006 News Corporation agreed to buy out Liberty's stake in that company in exchange for sale to Liberty of News' 39% stake in DirecTV, US$550 million cash and other assets (with an aggregate value of US$11 billion). That transaction will allow both sides to avoid paying taxes. News Corporation will retire Liberty's 19% voting stake in a major share buyback that will increase the Murdoch family's stake to around 36%.

Liberty's corporate site is here.

The group

QVC is the "preeminent electronic retail service" in the US, reaching over 85 million homes, and has international operations in the UK, Germany and Japan. In 2002 QVC reported revenue and operating cash flow of US$4.4 billion and US$858 million.

Liberty is the dominant investor in UnitedGlobalCom (92% voting interest), which claims to be "ithe largest international broadband communications provider of video, voice, and internet services" with operations in numerous countries. Its networks reached approximately 12.6 million homes in 2003, with around 7.4 million video subscribers, 717,900 voice subscribers and 868,000 high speed internet access subscribers. United's major subsidiaries are UGC Europe (a pan-European broadband communications company) and VTR GlobalCom (VTR), the largest broadband communications provider in Chile.

A chronology of the group is here.

Holdings

There is a separate map of Liberty Media holdings.

Studies

Stephen Keating's Cutthroat: High Stakes and Killer Moves on the Electronic Frontier (Boulder: Johnson 1999) is an account of restructuring the US cable and satellite television industry, with moves by Ma Bell, Rupert Murdoch and Charlie Ergen. There is less drama and more analysis in Vertical Integration in Cable Television (Cambridge: MIT Press 1997) by David Waterman & Andrew Weiss.

L J Davis' The Billionaire Shell Game: How Cable Baron John Malone and Assorted Corporate Titans Invented A Future Nobody Wanted (New York: Doubleday 1998) is better than its title. Davis provides an entertaining and at times perceptive account of the characters and corporate manoeuvring about interactive television and convergence. The portrait of guru Nicholas Negroponte (an "arrogant crackpot" with "a highly flexible notion of the truth") is decidedly unflattering.

Davis suggests that hype about video on demand and the 500 channel universe was bait to encourage a telco to take TCI's cable network off Malone's hands, freeing him from regulatory problems and allowing him to concentrate on programming - more fun and more profitable. If that view is correct Liberty's unlikely to bid for AT&T Broadband, which includes the former TCI and MediaOne cable networks.

For Liberty czar John Malone see Road Warriors - Dreams & Nightmares Along the Information Highway (New York: Dutton 1995) by Daniel Bursten & David Kline, Mark Robichaux's Cable Cowboy: John Malone and the Rise of the Modern Cable Business (New York: Wiley 2002), Gerald Brock's Telecommunication Policy for the Information Age: From Monopoly to Competition (Cambridge: Harvard Uni Press 1994), Reed Hundt's You Say You Want A Revolution: A Story of Information Age Politics (New Haven: Yale Uni Press 2000), and The Highwaymen - Warriors of the Information Superhighway (New York: Random House 1997) by Ken Auletta.