John Malone on M&A Revving Up Under Trump Administration, the Future of Sports and Threats From Big Tech’s ‘Almost Monopolies’

John Malone sees M&A activity in media stepping up in a significant way now that regime change is coming in Washington, D.C.

The renowed investor and chairman of Liberty Media took part in a wide-ranging Q&A Tuesday morning to kick off the Paley Center for Media‘s annual International Council Summit held at Paley Center’s New York headquarters. The discussion with Mike Fries, CEO of Liberty Global, touched on everything from the impact of inflation and interest rates on market activity to the threats posed by Big Tech’s massive balance sheets and even bigger ambition.

The He discussed the future of sports on TV and once again he lamented that entertainment and cable business leaders did not work collaboratively enough to stave off the on-demand streaming challenges posed by Netflix. He noted that regulatory policy around internet access and speeds — defined under the heading of net neutrality — gives the digital giants a free ride through internet distribution that doesn’t cost them anything.

But for broadband providers — aka cable operators — the demands on the grid are becoming unsustainable. Malone cited a stat that a live U.S. sports broadcast on a streaming platform can take up 30% to 40% of a broadband provider’s available bandwidth. Cable operators have hard costs, not to mention other regulatory restrictions, that make it impossible to compete.

“Streaming is just a technology, and there’s no reason why the content that people were were consuming on a linear program basis couldn’t easily also be consumed on a random access [on-demand] basis,” Malone said. “So really, the technology is not what caused this shift. It was the combination of this regulatory network neutrality, where new entrants would have access to distribution at zero cost, which created this structure favoring the new entrant over the incumbent — the incumbent being sort of locked into traditional contractual relationships between program suppliers and distributors. Some of the program suppliers decided it was better to jump in and and go the direct-to- consumer route, as opposed to continue to evolve the traditional wholesale-retail distribution approach in order to take advantage of this network neutrality free ride and bypassing their traditional distributors.”

During the virtual session — Fries streamed in from London while Malone spoke from Colorado — Fries pressed his boss on M&A specifics now that the industry is abuzz with dealmaking possibilties. Donald Trump’s election as president promises to bring a sea change to the Federal Trade Commission and Federal Communications Commission, which have kept a tight lid on large-scale dealmaking for the past three years.

Could Comcast and Charter — the nation’s largest and second-largest cable operators — finally come together as one? Comcast tried to buy Time Warner Cable (which eventually sold to Charter) in 2014 but the deal was nixed by D.C. regulators.

“Why not?” Malone said. He drew a non-media analogy to express his frustration with government imposed limits on consolidation in a maturing business. “With discount airlines, they don’t make each airline built its own airport, and so there ought to be a lot of places where these competitors can can work together,” he said. He also pointed to cable’s satellite TV competitors, which are also struggling with the massive shift in consumer behavior and embrace of streaming platforms.

“I believe that Dish and DirecTV should have been allowed to merge five years ago. I believe that competing with each other versus having a cost -ffective platform to offer their services at lower cost and still compete with the other distributors was probably a better solution. Hopefully the government will allow that that combination to happen,” he said.

In his low-key way, Malone raised the concern about Big Tech’s financial firepower and ambition to disrupt various sectors. Wall Street has enabled them with roaring stock prices.

“I don’t want to call them monopolies — but they’re almost monopolies. They’re global in scale. They have enormous breadth of franchises and balance sheets, and they have been the principal beneficiaries in recent years of the equity rise. You could add the AI stimulus on top of it, which clearly the biggest debt companies are in the best position to benefit most from from AI, and so this concentration of economic value and power, you know, in the hands of relatively few global industries, I think, is quite, quite a phenomenon and an enormous challenge for regulars.”

More to come