John Malone: The Man Who Would Be KingmakerBy
If New York is the battlefield in the war for Paramount Communications Inc., then the war room has been somewhere on the Maine coast. That's where cable titan John C. Malone has his seaside vacation home. And during the early skirmishes, the 52-year-old CEO of Tele-Communications Inc. and chairman of Liberty Media Corp. was fielding phone calls there from Barry Diller, chairman of QVC Network Inc., and from Ted Turner. The reason: Malone, through his companies, owns 30% of QVC and 22% of Turner Broadcasting System Inc. and will play a pivotal role in their efforts to bag Paramount. "You may be reading about Barry Diller and Ted Turner," says one Hollywood dealmaker. "But John Malone is the kingmaker, and neither would even be in this game without him."
For years, Malone has worked to put himself at the center of an evolving digital media industry. Now, with his multiple roles in the scramble for Paramount, he is poised to realize his grandest ambitions. If Diller prevails in the bidding war, Malone could parlay his $530 million, 51% stake in Liberty into a 15% interest in Paramount QVC--making him the largest shareholder in one of the world's largest media companies.
HUNGRY FOR PROGRAMMING. For years, Malone has used TCI's base of 10.5 million cable subscribers--roughly one of every five cable hookups in the U.S.--to develop new programming for the coming 500-channel universe. In the mid-1980s, TCI helped rescue the Discovery Channel and gave seed money to Black Entertainment Television. Liberty, which TCI spun off in 1991 to quell government concerns about Malone's growing power, generated $135 million in revenues last year from its 9 cable networks and 15 sports channels.So far, Malone, who is an electrical engineer and PhD from Johns Hopkins University, has stopped short of actually owning a Hollywood studio. He looked over MGM/UA Communications in 1989 and again earlier this year but passed both times. And in April, TCI pledged $90 million to Carolco Pictures Inc. for a small stake and pay-per-view rights to four of its movies.
The Paramount deal would satisfy Malone's desire for the high-visibility programs--TV shows such as Cheers and movies such as The Firm--that will allow cable operators to push cable's penetration past its current 65% of the country and boost revenues. "With strong enough programming, we can charge a la carte," says Brendan Clouston, TCI's COO.
Malone's relentless quest for programming has helped make him a lightning rod in Washington, where the Federal Communications Commission is implementing rules that could force him to choose between running TCI's cable systems and Liberty's programming interests. That may be why Malone's name didn't even appear on the announcement of Diller's bid.
But Malone won't be able to lie low much longer. Viacom is already making him the focus of a public-relations campaign to discredit the QVC offer. Advisers to Viacom say that with a stake in Paramount, Malone would have undue control of both TV production and distribution.
"WHEREVER YOU GO." Malone began courting Diller two years ago, before Diller left Fox Broadcasting Co. In late November, Diller joined QVC as chairman after structuring a deal to share control with Malone and fellow QVC board member Brian L. Roberts, president of Comcast Corp.
Since then, Malone has been a quiet force behind the scenes. He and Roberts were quick to offer $500 million when Diller needed an extra $1 billion in equity to swing the Paramount bid. And Turner sought approval from him before he began scouting his own possible Paramount bid. Even though TCI owns a fifth of Turner, Malone, who led the 1987 rescue of Turner's then-debt-plagued company, abstained from voting. "Wherever you go, there's one name: John Malone," says a Viacom executive.
A Paramount deal, coupled with the likely federal restraints, would probably force Malone to leave TCI and devote his energies to Liberty, say several media experts. Already, Malone has established a four-person office of the CEO to run TCI. And while he still holds a small stake, most of his assets are tied up in Liberty. "Everyone's technology is going to look pretty much the same," Malone told a cable-industry audience in June. "It'll be the the programming that people are going to pay to see." From his off-stage perch, John Malone is getting set for that day.