John Malone: A cable pioneer back in the game
In a long-ago New Yorker profile by Ken Auletta, cable titan John Malone spoke of a tug of war in his youth between his working-class buddies and the private prep school he attended on scholarship.
Speaking of the middle ground he forged by excelling in sports, Malone told Auletta, "It was raw drive, not skill.''
But Malone, 74, has long demonstrated both tenacity and savvy during a storied career in which he has boosted cable upstarts such as CNN and BET and pushed for game-changing mergers, like the ultimately failed union of Tele-Communications with Bell Atlantic, and now, a $55.1 billion deal in which Charter Communications would acquire Time Warner Cable.
The proposed merger of Charter and Time Warner Cable is in keeping with Malone's long-held philosophy that a company that dominates the landscape is also more efficient.
"John Malone has always believed in the beauty and elegance of scale economics,'' says Mark Robichaux, author of Cable Cowboy, a biography of Malone that detailed the cable industry's infancy. "That was a big motivation for the consolidation of the industry when he owned TCI and I think it's a big motivation for him now as one of the largest investors in Charter.''
Malone is widely regarded as "one of the grandfathers of the cable industry," says David Heger, a senior equity analyst at Edward Jones. Currently chairman of Liberty Media Corp., Malone took a step back from the U.S. cable sector that he helped build when his company, TCI, was bought by AT&T in 1999. But Heger notes that "he's jumped back in with Liberty's investment in Charter, and now this new merger proposal."
Malone was born in Milford, Conn., and earned a bachelor of science in electrical engineering and economics at Yale University. He also holds both a master's in industrial management and a Ph.D. in operations research from Johns Hopkins.
Malone, who started out in research and development at Bell Telephone Laboratories/AT&T, eventually joined a struggling company, TCI, run by a cottonseed salesman named Bob Magness. And "largely through his business and investment acumen, (Malone) helped make that tiny little company into ... the largest cable operator in the United States,'' Robichaux says.
Malone was instrumental in the cable industry's early consolidation, expanding TCI's footprint by buying up dozens of small mom-and-pop enterprises. "At one point, they were as busy as a transaction a week,'' Robichaux says.
But Malone's tactics and growing dominance made him the face of an industry that was seen as becoming too big and too powerful. Al Gore, while in the Senate, dubbed Malone "Darth Vader.''
Still, the view from within the cable industry has been vastly different. Malone, for instance, was largely responsible for saving CNN when it was in danger of a takeover in 1986, bringing together more than a dozen cable companies who put up $560 million to help the embattled network.
Malone was a driving force in the proposed 1993 merger of his TCI and Bell Atlantic, a $33 million deal that ultimately fell apart. And he was also an early investor in Black Entertainment Television, the African-American-oriented network that was eventually purchased by Viacom for $3 billion.
The $180,000 Malone put into BET ultimately yielded him $700 million worth of stock after the Viacom acquisition, according to a 2012 interview with BET founder Bob Johnson that ran in Fortune magazine.
"Ultimately John is an investor,'' says Robichaux. In regard to the proposed Time Warner Cable merger, "I think he believes in this, and I think they will try to grow that company in every way, shape and form. He wants to be on the winning side.''
Contributing: Kevin McCoy