Expect more collaboration between cable giants and Netflix, potentially using joint billing to reduce customer churn, the billionaire media mogul John Malone, chairman of Liberty Media and Liberty Global, among others, said Thursday.
Speaking to a Liberty Media investor day, Malone also forecast a stronger American dollar, accelerated growth, higher interest rates and some inflation under a Donald Trump administration. "I think the deregulatory aspects of a Republican administration will be favorable. I think the likelihood you will see government intervening to support one particular industry's goals, relative to another's, is probably less risky today that it would have been two days ago," he told investors.
On Netflix, Malone said industry cooperation on technologies and the sharing of video streaming revenue was a needed response to cable unbundling and cord-cutting. "When it comes to working together, the core of your question on bundling is really about unbundling," he told analysts when asked about Netflix showing up on more cable schedules after Liberty Global welcomed the video streaming giant onto its TV set-top boxes in more than 30 countries.
That's just the beginning of cross-industry collaboration to combat cord-cutting as bringing Netflix inside Liberty Global's walled garden involved revenue splits, joint marketing and potentially combined billing.
"I think the evidence is pretty good that that structure will dramatically reduce Netflix's churn, which is important to them, and enhance marketing," said Malone. He pointed to the cost benefits of cable and wireless giants signing up subscribers to new content services and offerings like Netflix as a better business model than starting up or acquiring new content businesses and running up development and marketing costs.
"That's the beginning of what will happen, as a ton of a la carte and mini services will be offered to the consumer as an adjunct to the broadband connection, as opposed to the large bundle," Malone explained. "The evolution will see the distributors participating in video revenue streams on the one side, as margins and penetration of the big bundle slowly declines, and it will all balance out," he added.
The exec argued industry collaboration will inevitably involve wireless providers as consumers embrace a so-called quad play. "And clearly what's evolving now with AT&T will push the industry to move in that direction more quickly," he added.
Asked about his company's recent acquisition of Formula One, which will involve team owners as stakeholders, Malone likened TV sports to an illicit drug. "Sports is a little bit of cocaine," he said. "It's very powerful. And if you're in the right markets, it can really move shares, it can really move a business. But the risk with it is who really ends up owning the money. Frequently, it's not even the team owners, it's the players."