(5/16 article) Malone Looks to Diller for Vivendi

[kechara420]

http://www.latimes.com/business/printedition/la-fi-vivendi16may16,1,5904347.story?coll=la%2Dheadlines %2Dpe%2Dbusiness


Malone Looks to Diller for Vivendi

Liberty Media chief says his relationship with the mogul gives him an edge in vying for Universal's entertainment assets.

By Richard Verrier
Times Staff Writer

May 16, 2003

Cable magnate John Malone said he has a secret weapon in the anticipated fight for control of Vivendi Universal's entertainment assets: Barry Diller.

Malone said Thursday that his longtime association with the media mogul would give Liberty Media Co. an edge over rivals in a bidding war, citing a number of controls Diller holds over the disposal of the Universal movie studio, theme parks and television holdings.

"That's why we're particularly interested in these assets and may be uniquely positioned to deal on it," Malone, Liberty's chairman, said in a conference call with investors and analysts in which he heaped praise on Diller's business acumen. "I have to confess, I'm in love with Diller."

Malone and Diller are long-standing business partners. Liberty owns a 20% stake in USA Interactive, where Diller is chairman.

But Malone indicated that Diller, who has been under pressure to focus on his electronic commerce businesses, wouldn't run a Universal operation. For that task, Malone said, he has considered tapping SKG DreamWorks co-principal Jeffrey Katzenberg, who worked with Diller at Paramount Pictures.

"Jeffrey is one of Barry's great proteges," Malone said. "Would I like to put money behind Jeffrey Katzenberg? You bet. Is that opportunity going to present itself? I don't knowIt has been thought of, yes."

As part of a possible bid, Malone has considered merging DreamWorks with Universal Studios.

DreamWorks executives, however, have repeatedly denied any interest in such a scenario. "While it is very flattering to be thought highly of by someone like John Malone, the reality is Mr. Malone has not had a single conversation with any of the DreamWorks principals in years," said DreamWorks marketing chief Terry Press.

The 9-year-old entertainment company, known for such hits as "Shrek" and "Catch Me if You Can," is financed by Microsoft Corp. co-founder Paul Allen and owned and run by filmmaker Steven Spielberg, Katzenberg and music industry icon David Geffen.

DreamWorks and Universal have had a long-standing relationship, with Universal distributing the smaller company's films and housing some of its executives in offices on its lot.

Although Malone didn't say whether Liberty actually had made a bid for the properties, his comments were the clearest indication yet of Liberty's interest in the Universal properties. Liberty would face competition from other bidders, including Viacom Inc. and an investment group headed by billionaire Marvin Davis.

"Vivendi is clearly at the top of the list of things he'd like to do," said New York money manager Dennis Leibowitz, an investor in USA Interactive and Liberty.

Flush with cash, Englewood, Colo.-based Liberty is contemplating several possible deals to transform itself into a full-fledged media giant and avoid being classified as a mutual fund. Liberty already has stakes in several media and communications concerns, including Discovery Communications, Sprint PCS and QVC.

Liberty's executives have expressed interest in combining its Starz Encore cable group with Universal's USA and SciFi channels and the Universal movie studio. Liberty is said to have little interest in the music group.

Vivendi recently confirmed that it was in serious talks with Liberty and accused the company of filing a lawsuit against Vivendi to gain leverage in negotiations. Liberty claims in the suit that Vivendi and two of its former officers fraudulently lured the company into a stock swap last year.

The swap helped create Vivendi Universal Entertainment by combining Universal's movie studio, theme parks and television holdings with the entertainment assets of USA Networks. As part of the deal, Liberty exchanged its stock in USA for a 3.6% equity stake in Vivendi Universal. Diller's USA Interactive took a 5.4% equity stake in the joint venture.

Liberty is one of few prospective buyers with deep enough pockets to buy the Universal group, which analysts value at $10 billion to $15 billion.

For his part, Diller has been exerting pressure on Vivendi. He, too, filed a lawsuit, accusing Vivendi of reneging on a deal to pay taxes. USA Interactive recently issued a filing warning other bidders of restrictions it holds on the disposal of the USA assets, including one that could cost Vivendi hundreds of millions in deferred taxes.

Diller abruptly resigned as chairman of the Universal group in March under pressure to focus on his electronic commerce businesses.

Also Thursday, Vivendi reported that its first-quarter revenue fell 4% to $7.15 billion from the same period a year earlier, reflecting a 19% drop in recorded music and a weaker dollar. Revenue at Vivendi Universal Entertainment rose 5%, with gains in television offsetting declines at the Universal movie studio and theme parks.

[kechara420]

Malone’s on the Prowl Again

Mike Farrell
Multichannel News
5/15/2003 5:22:00 PM

New York -- Liberty Media Corp. chairman John Malone made it official Thursday: He is on the acquisition trail.

Liberty has access to about $10 billion in capital -- not including $5.3 billion in cash and marketable securities -- to make acquisitions. At the company’s investor meeting here Thursday, Malone named at least two potential targets: cable shopping channel QVC Inc. and Vivendi Universal Entertainment.

"The issue for Liberty is: What do we do with all this firepower?" Malone said. "We are certainly hopeful that we can acquire QVC from Comcast [Corp.]. Despite all of the fisticuffs going on in the industry right now, we have the greatest respect for Comcast and its management team."

But Malone added that Liberty gains even if Comcast decides to buy its stake in the network. "Nothing would thrill me more than to end up with a large block of Comcast stock," Malone said.

As part of the QVC agreement, up to 4.9% of Comcast's outstanding shares -- roughly 115 million -- would go toward the purchase price. However, that stock would be nonvoting.

Analysts have estimated that the entire network is worth between $13 billion and $14 billion.

With VUE, Malone said Liberty has been in discussions with Vivendi Universal for months.

He added that one possible scenario could involve combining VUE -- which includes cable channels USA Network, Sci Fi Channel, Trio and NewsWorld International, as well as Universal Studios and theme parks -- with Liberty’s premium-cable-network unit, Starz Encore Group LLC.

Malone said having control of VUE would make other programming acquisitions more sensible, including perhaps acquiring the 50% of Courtroom Television Network it doesn’t already own.

"That’s the reason why we’re interested in Vivendi," he added. "It gives us not just the opportunity to buy Vivendi, but also to have a platform on which the programming business becomes more valuable consolidated than not."

Regarding general industry issues, Malone said the balance of power has shifted to cable operators rather than programmers. He added that with the recent high rate increases of sports-programming networks, something has got to give.

"There will be some compression on growth rates achieved through affiliate fees," Malone said. "It’s going to be different for different players. If [The Walt] Disney [Co.] needs 20%-per-year compound growth rates on its affiliate fees for ESPN, there is going to be a war."

That war could lead to government intervention, Malone said, adding that it would be good for cable operators but bad for programmers.

"The most likely outcome would be some provision that says if a channel costs more than 50 cents [per subscriber, per month], it’s got to be a la carte," Malone said. "End of story; end of Disney."

However, he added that he would prefer that the industry resolve the dispute privately.

"Getting government to resolve intercorporate disputes may have a tactical advantage, but it’s a strategic disaster," Malone said.

Malone added that Comcast president Brian Roberts would have to step up to force change, however. As the head of the largest MSO (with 22 million subscribers), Comcast has the muscle to force programmers’ hands.

Roberts could do that by selling QVC, Malone added.

"If Brian sends a big signal, if he sells the most profitable cable network in the world, QVC, rather than buying it, one of the strategic reasons for him to do that is to get rid of the horizontal/vertical rules that apply to him," Malone said.

"If he does that, you can also look for him to get out of E! [Entertainment Television]," he added. "Because then he’s clean. Then he can beat the crap out of everybody on rates and he won’t have any antitrust issues related to him."

Malone said retransmission consent was the biggest mistake to come out of the Telecommunications Act of 1996.

"It gives the broadcasters too much power, and they can use that to extract noneconomic prices from operators," Malone said. "The irony is that if they overuse it, ultimately, somebody big, with guts, says, ‘Fine, we can live without your TV station and your six cable networks.’ I’m waiting to see that happen."

Malone added that it almost happened with him, just before he sold Tele-Communications Inc. -- then the largest MSO in the country -- to AT&T Corp.

He said that prior to the AT&T deal, TCI’s contract with ESPN was set to expire. As part of that agreement, TCI had the right to place ESPN on a tier for five years following the termination of the carriage agreement.

"We rolled on that issue," Malone said. "We signed a new deal with ESPN, and the industry lost its only true defender."

Malone added that now, that mantle falls on Roberts.

"Somebody has to say no to the underlying sports machine," Malone said. "Unless something is done to break that chain, either by Congress or by a courageous Brian Roberts, you’re going to continue to see this happen ... We’ll be waiting and watching Brian defending the industry and being the champion here."

[kechara420]

Liberty Media declares Vivendi interest

By Peter Thal Larsen in New York
Published: May 15 2003 20:30 | Last Updated: May 15 2003 20:30

John Malone's Liberty Media is pursuing an acquisition of Vivendi Universal's entertainment assets as the veteran media investor attempts to take advantage of the French group's financial distress.

In a rare appearance in New York on Thursday, Mr Malone identified Vivendi's Hollywood studio and US cable interests as targets in his efforts to re-establish Liberty as owner and operator of media companies.

After months of speculation, Vivendi confirmed last month that it was planning to sell its US film, television and theme park businesses. Liberty appears to be the only potential buyer interested in acquiring all of the businesses.

A sale has also been complicated by guarantees that Vivendi gave to Barry Diller when it bought the US media entrepreneur's cable channels in 2001. The move has in effect given Mr Diller the power of veto. But Liberty has close links with Mr Diller through shareholding in his�USA Interactive�electronic commerce group.

Liberty said on Thursday that it has $5.3bn in cash and marketable securities on its balance sheet, with the opportunity to raise a further $10bn by selling non-core investments.

Speaking at Liberty's annual meeting, Mr Malone said Vivendi's US businesses could be combined with Liberty's Starz Encore movie channels.

This would create a new platform that could be expanded by adding other programming assets, he added.

[VBKatLou]

This is becoming so confusing! I don't know if it's the negociations or just the way the media portrays what is happening. Two weeks ago it sounded like Viacom was the most likely candidate. Now they are back with Liberty.

I don't know anything about Barry Diller, but I thought that when he stepped down as chairman, it seemed an odd thing to do at the time and there must have been more to that action than what was being reported. These articles make it sound as though he is in a position to strongly influence who ends up with VUE.

Also, I wonder if the fact that Speilberg (Dreamworks) has been doing projects for SciFi (Taken and some new ones next season) means anything - like a possible future partnership.

Goodness - and I thought Object Oriented Design got complicated!

[Dominar of Action]

Well, just remember the lesson of Henson -- the media frequently has no *clue* what is really going on behind closed office doors. :)

[akimbo]

Originally posted by VBKatLou
Goodness - and I thought Object Oriented Design got complicated!

:rollin: