It takes a lot to make the richest man in the world burst into tears, but a “no” from John Malone was enough to do it to Bill Gates.
Barry Diller, the entertainment mogul and IAC chairman, recalled the moment over lunch Thursday, telling attendees at the Paley Center for Media that the only time he saw Gates cry “is when John told him, no, we are not going to let you control the cable industry.
“Bill had laid so much pipe and tried so hard to pull this off, and it was in the back of a car going somewhere, and when you finally said ‘it’s not gonna happen,’ he burst out into tears,” Diller said to Malone, sitting a few feet to his left.
Malone, the billionaire Liberty Media chairman and one of the defining media moguls of the 20th and 21st centuries, was the center of attention at the Paley Center Media Council lunch, joined onstage by three proteges-turned moguls themselves: Diller, Liberty Global CEO Mike Fries, and Warner Bros. Discovery CEO David Zaslav, in a conversation moderated by journalist and author Mark Robichaux.
The quartet swapped stories about Malone’s exploits and dealmaking, as audience members that included James Dolan, Robert Kraft, Ken Lowe, Jennifer Witz, Roger Lynch, Paul Gould and other boldface names listened intently.
But back to Gates: Malone had been talking to Microsoft about building the operating system that would enable broadband internet through cable at a time when the world was still using dial-up. But Malone pursued a deal with Kleiner Perkins instead, which he thinks may have brought out the emotion in Gates.
“It was a very tender thing, because I didn’t understand at the time the level of animosity between Silicon Valley and Seattle, that is like two worlds,” Malone recalled. “When we decided to go with Kleiner as our organizational partner, that was anathema, because that brought in Sun Microsystems, all those kind of guys.”
Over the course of nearly two hours, Malone and his colleagues talked about dealing with regulators (“the Justice Department had a conference room just for us, I asked one time, will they let me go see it to see if there’s anything I forgot about?” Malone quipped at one point) the big deals they made, and some that never happened, about the disruptive power of technology, and the meaning of loyalty.
“This term, “Cable Cowboy,” it implies sort of seat of the pants, entrepreneurialism, and all this stuff,” Fries said of Malone. “But cowboys are also authentic, humble and modest and loyal, and that’s the kind of cowboy this guy is.”
“To me, the most impressive thing that shines through is John’s humanity,” Diller added “It ain’t the complications of the deal, it’s the humanity that got me.”
Not that it has always been smooth sailing.
“My first personal meeting with Barry was a huge disappointment,” Malone said, causing Diller to smile. “Barry was running Paramount at the time. We had been skulking around trying to figure out how to build a competitor to HBO, and we had put together Paramount, Universal and Disney, and we were going to call it Hollywood Home Theater.
“These are early days, and Barry advised us to come out to his house, where we can meet with him and [Universal chief] Sid Sheinberg and talk more about this plan,” Malone continues. “Barry takes us aside, and he says, ‘well, we’ve decided that we’re not going to do Hollywood Home Theater. We’ve decided that we’re going to do exclusivity deals with our content, and we’re going to do an exclusivity deal with HBO.’ And so that was the end of that.”
And then there is Warner Bros. Discovery, which brought together Discovery, led by Zaslav and backed by Malone, and WarnerMedia, which had assets that Malone had a role in shaping, including CNN and TNT.
“I called John, and I said made this whole pitch to [AT&T CEO] John Stankey about why we should come together, that we were both stuck in the middle of a lake, and that Netflix was on the other side, and Disney was close, and there were a bunch of people behind us, but we’re not going to make it. Together, we can get to the other side,” Zaslav recalled. “And I called [Malone] afterward, and he said, ‘it’s a fantastic opportunity, to pick up HBO and Warner Brothers, but I just don’t see that it’s going to happen. We’re 25% of the size of them. It’s just tough.’ And I said it’s meant to be.
“And throughout that transaction, as it was falling apart and didn’t look like it was going to happen, I would be talking to John and Leslie and say, ‘Steve Ross is up there,’” he continued. “John was offered to run Time Warner and all those assets, coming in to save CNN, to launching TNT, to all of our assets that he funded. It was meant to be.’ And I do think I believe in karma. ”
“Discovery was just really a company that was renting BBC documentaries and distributing them, and was really created by the power, the distribution muscle on its own. And David came in and said, no, this is going to be a company that makes its own programming, and goes global and we’re going to build this company up,” Malone recalled of the moment. “And in the model that we were building, we had the wind at our back. We were one of the first guys to really go truly international. And it was working like gangbusters, we even had pretty good market valuations. So everything was working great. And then, of course, what happens is the streaming world arises. The game is changing rapidly. And David calls up and says, ‘what do you think, I’ve been approached by AT&T, do we want to buy Time Warner?’
“We knew that Discovery had a limited successful life expectancy as a linear service, so we were going to face the same issues at Discovery that we ultimately faced together,” Malone continues. “Once we acquired it, we probably could have done a better diligence job to understand what we were merging with, but we were precluded by antitrust law from having access to the actual information, and so in that year and a half, roughly between the deal and the close, we really watched an industry deteriorate rapidly. AT&T had taken a $2.5 billion dollar HBO positive cash flow and turned it into a $2 billion negative cash flow. I mean, that’s not easy to do, guys.”
“Most businesses, at least the ones I’m involved in, have a life cycle. And most of them don’t reinvent themselves, they disappear,” Malone said of the cable and media business. “The cable industry was like that. It was delivering linear broadcast channels, it got a new shot of life when content was created for cable.
“Cable got reinvented as an internet delivery mechanism, and now hopefully cable will reinvent itself yet again, as a combined service, the ability to deliver full connectivity seamlessly across wired and wireless and and content being a simple component of that delivery,” he added.
But Big Tech remains the thorn in Malone’s side, even as he has long embraced new technology to propel his investments forward.
“These companies are global now, and you’re trying to have national regulators regulate global businesses, it’s very hard,” Malone said of efforts to reign in tech giants. “The nations can’t agree anything. How are they going to agree on regulation? The most important thing is that innovation gets protected, so that a guy with enormous market power doesn’t stop or prevent competition from springing up. I mean that to me, is the issue, it’s protection of innovation and the progress.”
Tech companies, Malone argues, have leveraged their scale, reach and regulations like Net Neutrality to give themselves the keys to the media kingdom..
But the AI-driven disruption also gives him a sense of scale about the current moment.
“It’s just amazing to me that you now have the biggest companies spending enormous amounts of money defensively on AI, because if they don’t build the biggest data center on the planet, the other guy’s going to,” Malone said of the spending spree. “That’s karma. What goes around comes around.”