Billionaire John Malone, fresh from helping engineer a mammoth cable-TV merger, is examining ways to consolidate studios and smaller channels to better compete as the traditional TV bundle begins to unravel.
The 74-year-old mogul said Lions Gate Entertainment Corp., a studio where he is a director and owns roughly 3 percent, could play a significant role in any roll-up of companies that produce or distribute programming. Indeed, he believes a union between Lions Gate and Starz, the premium cable channel in which he has a big voting stake, could be in the mix, he said this week, speaking both during a private meeting with investors and in remarks to The Wall Street Journal.
“Lions Gate could buy Starz and potentially other free radicals in the industry,” Malone said in a brief conversation on the sidelines of the annual meeting in Englewood of his investment holding companies, including Liberty Media Corp. and Liberty Broadband Corp.
Liberty Broadband backs Charter Communications Inc., which recently struck a deal to acquire Time Warner Cable Inc. for $56.7 billion and buy the small cable operator Bright House Networks for $10.4 billion. After that deal closes, Liberty will have a voting stake of about 25 percent in the combined company.
Asked if TV channel owners such as Scripps Networks Interactive Inc. or AMC Networks Inc. could be among the potential targets for Lions Gate, Malone noted that they could but said coming to terms with the controlling shareholders in those companies could be difficult.
Scripps and AMC declined to comment.
Lions Gate repeatedly has approached Metro-Goldwyn-Mayer Inc., the 91-year-old studio that controls the James Bond series, about a merger. But the hedge funds that control MGM believe their company is more valuable than Lions Gate does, people with knowledge of the talks said.
Lions Gate also continues to be interested in buying overseas TV companies, the people said.
Lions Gate, Hollywood’s largest independent studio and maker of shows including AMC’s “Mad Men” and the “Hunger Games” film franchise, is still relatively small—with a $4.9 billion market value.
But senior media executives and analysts say that larger assets could be available to Lions Gate with the backing of Malone, who has a reputation as a master strategist and can raise money easily.
“If our thinking is correct that none of the big content companies is going to take out the smaller ones, then maybe the obvious course of action is for all the little companies to consolidate together,” Sanford C. Bernstein’s Todd Juenger said in a research note. “They just need someone to orchestrate it. Mr. Malone is one of the few that could conceivably do it.”
At the investor meeting, Malone was asked about a bigger fish: CBS Corp. He called the broadcaster a great asset and noted that its sister company, Viacom Inc., owner of Paramount Pictures and several cable channels, is also valuable despite some of its recent challenges, according to people who attended.
To be sure, no deals are imminent, and some media investors believe that Malone’s content roll-up ideas won’t materialize for some time.
For now, he is just a small minority stakeholder in Lions Gate.
Malone is best known as a baron of cable-TV distribution — the man who built Tele-Communications Inc. into a giant operator through hundreds of acquisitions in the 1970s and 1980s before selling it to AT&T.
But he has always seen the value of content. In the early days at TCI, he viewed the success of cable-TV channels as crucial for the fledgling industry and invested in companies such as BET, Discovery Communications and Turner Broadcasting.
Besides Starz and Lions Gate, Malone’s content holdings include a 29 percent voting stake in Discovery — another company that could be involved in content consolidation — and interests in U.K. broadcaster ITV and the studio All3Media through his international cable operator, Liberty Global.
Malone’s comments — and his interest in Lions Gate — mirror how he characterized Charter two years ago as a potential “horizontal acquisition machine.” Soon after, Charter began a campaign to snap up Time Warner Cable.
