John Malone, a major investor at Warner Bros. Discovery, says the streaming world is hobbled by too many competitors, and that online video giants will do better after inevitable industry consolidation.“At the moment, there’s a lot of blood flowing down the gutters, of people who are streaming, and some can afford it and some cannot,” Malone said during a panel appearance at Liberty Media’s Investor Day. The billionaire investor expressed confidence in Warner Bros. Discovery CEO David Zaslav for earlier seeing value in merging Scripps Networks Interactive with Discovery, and then creating a scripted and unscripted content giant with the spinoff by AT&T of Warner Bros. to merge with Discovery.The difficulty for streaming giants like Netflix, Disney and now Warner Bros. Discovery is too much competition,” he argued. “Let’s face it. Everyone went for this mad Oklahoma land rush of streaming … That was a fool’s errand,” Malone told investors.He added AT&T got caught up in that industry stampede before completing its Warner Bros. spinoff with Discovery. “They threw everything but the kitchen sink at it, and they put the run-rate of the business in a little bit of stress,” Malone recounted.At the same time, he argued Warner Bros. Discovery was throwing off “meaningful cash flows” and the synergies expected from the combined businesses were “not trivial.” Malone also rejected a comment made by an Investor Day audience member that CEO David Zaslav was “overpaid and arrogant.”Malone, who is a member of the Warner Bros. Discovery boardroom and a major investor in the studio, said he is obligated to hold his stake for two years because of tax implications, “so I’m not wasting any energy on thinking about who Warner Bros. could merge with, or what corporate transaction can take place there.”He added that, on paper, Zaslav appeared to be overpaid. (The Warner Bros. Discovery CEO’s pay package in 2021 totaled $246.6 million.) “But remember almost all of his compensation is in the form of options that are priced as multiples of today’s stock price. So unless that stock really performs, he’s really not overpaid,” Malone insisted.The Liberty Media exec also praised Netflix CEO Reed Hastings for launching his company into video streaming before anyone else, and only now facing headwinds because of increased competition. But Malone warned Hastings to tread carefully while bidding on live sports for additional content offerings.In the U.S. market, Malone argued, “sports has gotten to be a tax on the public, and to be perhaps prohibitively expensive,” unlike Europe where expensive sport offerings have always been purchased a la carte by pay TV subscribers.“If you can buy a big sports event exclusively, you will always gain customers. And then you have to chalk that up to marketing expense,” he said. Malone added Netflix would recover its footing when there was less competition in the streaming world and reduced spending on expensive original content.“How profitable they are will depend on the discipline they exude in terms of controlling their costs and keeping their expected growth rationale and not throwing too many Hail Mary passes,” Malone argued about the streaming world as it evolves.
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