Entertainment Industry

Category: Liberty Media

Liberty boosts SiriusXM stake above 45%

Karmazin Malone

Having been stymied by the Federal Communications Commission last week in its gambit to take over Sirius XM Radio Inc., Liberty Media revealed its next move on Tuesday — bumping up its stake in the company to 45.2% from 40%. 

Liberty's chief executive, Greg Maffei, told analysts in a conference call that his company had a contract in place to buy 302 million shares of SiriusXM for $650 million at $2.15 a share from undisclosed sellers.

The price represents a discount to SiriusXM's $2.17 closing price on Monday, prior to Liberty's announcement. SiriusXM lost 3 cents to $2.14 Tuesday after Maffei unveiled his move.

The two companies have been locked in a struggle for control since March, when Liberty started the high-stakes corporate chess match with a request to the FCC for control of the operating licenses SiriusXM needed to broadcast its satellite radio service. Liberty argued that its 40% ownership, along with five out of 13 seats on the board, meant it had "de facto" control of SiriusXM. 

SiriusXM's chief executive, Mel Karmazin, strenuously objected, deriding Liberty's attempt as trying to convince regulators that "40 is the new 50." His point was that shareholders needed to have more than 50% of a company to call the shots.

It seems that Liberty's chairman, John Malone, heard the message loud and clear and is moving toward that magic 51% mark.

But why 45.2% as opposed to 51%? Would that change the commissioners' minds at the FCC, should Liberty choose to exercise its option to amend its request to regulators by June 4? 

Here's Maffei's answer to those questions, which were posed to him during the earnings call with analysts:

"We thought it was attractive financially and because we thought it increased some of our options.... As far as de facto control, my layman's understanding would be we have a certain series of rights by contract with SiriusXM. To be able to fully exercise those rights freely, we need to have de facto control approved by the FCC. And as far as changing our application, I think there are host of things, actions we might take including this action we have taken, which will have bearing on our application and we'll weigh those, as we said, over the next 30 days and decide how to amend."

In other words, if 45.2% is enough to persuade the FCC to hand over the licenses, why spend the extra money to get to 51%? 

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— Alex Pham 

Photo: SiriusXM Chief Executive Mel Karmazin, left; Liberty Media Chairman John Malone, right. Credits: SiriusXM and Liberty Media.

 

 

 

 

 

FCC dismisses Liberty Media request for control of SiriusXM

Karmazin Malone

Score one for Mel Karmazin, the chief executive of Sirius XM Radio Inc. 

The U.S. Federal Communications Commission on Friday dismissed Liberty Media Corp.'s request for the operating licenses that would have given the company control over SiriusXM.

Liberty's request, made in March, argued that because it had 40% of SiriusXM's shares, along with five out of 13 seats on the company's board, Liberty effectively controlled SiriusXM, a New York-based satellite radio service with 22.3 million paying subscribers. Sirius strenuously protested with the FCC, and Karmazin in a recent call with investors mocked Liberty's argument as "40 is the new 50."

The FCC, in a letter to Liberty's lawyers, rejected the application. Here's the relevant rationale: 

We find Liberty Media’s applications to be unacceptable for filing because they are defective with respect to “execution” and “other matters of a formal character.” Specifically, Liberty Media was unable to obtain the passwords, signatures, and other necessary information from Sirius to properly file an electronic transfer of control application. Furthermore, we conclude that a waiver of basic filing requirements is not warranted, as the facts disclosed in the referenced applications are not sufficient to establish that Liberty Media intends to take actions, such as conversion of preferred to common stock and installation of a board majority, that would constitute exercise of de facto or de jure control.

Translation: In order to get its hands on SiriusXM's operating licenses, Liberty Media would have to get the passwords and approval of executives and board members who run SiriusXM. Eddy Hartenstein, publisher of the Los Angeles Times, is a non-executive chairman of the SiriusXM board.

Calls to SiriusXM and Liberty Media were not immediately returned.

John Malone, the chairman of Liberty Media, isn't one to give up easily, however. The FCC option was simply the least expensive path to gaining control of SiriusXM.

Liberty now has other, albeit costlier, options including accumulating enough shares of SiriusXM to boost its stake above 50% and staging a boardroom coup by calling a meeting of Sirius stockholders and putting the matter to a vote. But doing so could trigger a big tax bill for Liberty Media if the transaction is deemed to be an acquisition.

Liberty's executives, including Chief Executive Greg Maffei, have suggested to Wall Street investors that it could also execute a complex, but tax-free, Reverse Morris Trust, which would require Liberty to increase its share of SiriusXM above 50%.

Your move, Mr. Malone.

RELATED:

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SiriusXM winning with niche playlists

SiriusXM lashes out against Liberty Media's takeover attempt

-- Alex Pham

Photos: SiriusXM Chief Executive Mel Karmazin, left, and Liberty Media Chairman John Malone appear to be duking it out over control of SiriusXM. Credits: Sirius XM Radio Inc. and Liberty Media Corp. 

 

 

 

SiriusXM fights Liberty Media takeover move

Mel Karmazin John Malone

Did Sirius XM Radio Inc. make a Faustian bargain when it decided to accept $530 million from Liberty Media Corp. to stave off bankruptcy in early 2009? 

The New York-based satellite radio company filed a petition late Friday afternoon with the Federal Communications Commission, urging that the agency deny a request by Liberty Media Corp. that sought to transfer several of SiriusXM's operating licenses to Liberty's control. Liberty owns 40% of SiriusXM and occupies five of its 13 board seats.

Liberty's request, filed March 20, include SiriusXM's earth station licenses and its terrestrial repeater license. The FCC requires SiriusXM to have all three licenses to operate. 

But SiriusXM fought back, arguing in a 24-page petition that Liberty failed to get proper signatures from the company’s board for its transfer request.

“This is the equivalent of trying to cash an unsigned check and explaining the lack of a signature by saying nothing more than the account holder refused to sign it,” SiriusXM's attorneys wrote.  

Liberty Media's intent, and the intent of Chairman John Malone, is unclear. The company did not state a reason for seeking control of those licenses and messages to Liberty Media's spokeswoman were not immediately returned.

At issue is whether Liberty's 40% stake in SiriusXM allows Malone to assume ownership of the satellite radio company, which last year earned a $427-million profit on more than $3 billion in revenue. 

What's clear is that SiriusXM's last-minute arrangement with Liberty averted financial disaster, allowing the New York satellite radio company to make a $172-million payment on its high-interest loans just days before it was due in February 2009. The transaction also gave Liberty Media five of 13 seats on the company's board.

The deal also barred Liberty Media from trying to take over SiriusXM by acquiring 39.9% or more of SiriusXM's stock. That provision expired March 6.

"The expiration of the Investment Agreement Provisions does no more than remove certain barriers to Liberty Media's ability to take additional steps to acquire control of SiriusXM," SiriusXM's lawyers argued. "The SiriusXM Board controls the company, and Liberty Media's current minority representation on the board does not give it the ability to control SiriusXM." 

(Eddy W. Hartenstein, publisher and chief executive of the Los Angeles Times and CEO of its parent, Tribune Co., is also a SiriusXM board member.)

Malone has a history of not-so-friendly takeovers. In 2004, he locked horns with Rupert Murdoch over control of News Corp. The lengthy battle ended in 2006 when Malone agreed to give up Liberty's 16.3% stake in News Corp. in exchange for 38.5% share in DirecTV, along with half a billion dollars in cash and three regional sports networks.

In the current clash of the media titans, it's now Malone's turn to make a move.

RELATED: 

Liberty Media deal staves of Sirius bankruptcy

By securing Howard Stern, SiriusXM avoids static

SiriusXM stock falls after disappointing subscriber report

-- Alex Pham

Photos: SiriusXM Chief Executive Mel Karmazin, left, and Liberty Media Chairman John Malone appear to be duking it out over control of SiriusXM. Credit: Sirius XM Radio Inc. and Liberty Media Corp.  

Judge denies Disney's request for injunction in fight against Dish Network

TOYSTORY3

Fear not, Dish subscribers, you'll still get to watch "Toy Story 3" for free this weekend.

A federal judge denied Walt Disney Co.'s request for an injunction to stop satellite broadcaster Dish Network from offering its more than 14 million subscribers the pay TV channel Starz for free. Typically, Starz costs Dish subscribers about $13 per month, according to the distributor's website. Customers that were already paying for Starz  received other channels for free.

Dish started giving away Liberty Media's Starz earlier this year. The company said it was doing so as part of its 30th anniversary celebration. Starz was none too happy about this, nor was Disney, which sells its movies to Starz.

Last month, both Starz and Disney filed suits against Dish over the giveaway. Starz claimed Dish was violating the terms of its contract, and Disney argued that giving the channel away for free was hurting the value of its movies. Disney had asked for an injunction requesting Dish to stop giving the channel away while their suits play out in court.

In its suit filed in a Colorado District Court, Starz said its deal with Dish "does not permit Dish to simply give away its channels and content to its entire subscriber base." Starz said Dish was giving away the channel to placate customers who might be upset with other rate increases the satellite broadcaster has imposed. No trial date has been set with the Starz suit.

Disney filed its suit in U.S. District Court in New York City and charged that not only is the value of its movies being damaged, but that Dish's actions are hurting the studio's relationships with other networks and outlets that buy its content. Trial could start as early as December.

Dish, which declined to comment on the judge's dismissal of the Disney injunction request, has said previously that it "pays hundreds of millions of dollars for the right to distribute STARZ content to our customers, which includes the rights to a number of Disney movies, and our current distribution of Disney content on STARZ is permitted under our contract with STARZ."

Some industry observers say Netflix is at the root of the feud between Starz and Dish. Starz offers its content, including Disney movies, to Netflix, which Dish sees as a competitor, and that is what led to the giveaway, these people said.

-- Joe Flint

RELATED:

Disney and Starz sue Dish over giveaway

Starz may be getting ratings boost from Dish giveaway

Photo: Toy Story 3. Credit: Disney/Pixar.

Irving Azoff consolidates power at Live Nation, assumes chairmanship

Concert behemoth Live Nation Entertainment on Monday said it purchased the remaining 25% of Front Line Management Group that it didn't already own for $116.2 million from Irving Azoff and Madison Square Garden. Founded in 2004, Front Line represents Christina Aguilera, Aerosmith, Jimmy Buffett and numerous other musicians.

Michael Rapino and Irving Azoff In addition, Azoff, chief executive of Front Line, becomes Live Nation's chairman, consolidating his power at the Beverly Hills entertainment giant, which last year merged with the country's largest ticket seller, Ticketmaster, in a deal worth $889 million.

With Front Line fully in the corporate fold, Live Nation is able to manage talent, book concerts, issue tickets and sell artist-related merchandise.

The announcement is the denouement of a corporate power struggle that played out last year between Azoff and Barry Diller, who stepped down as chairman of Live Nation on Jan. 28 after announcing his departure in September.

Diller's departure was largely seen as payback for having crossed John Malone, chairman of Liberty Media, which owns roughly 18% of Live Nation. The two, who were once close business partners, sued each other two years ago in a bitter dispute over control of IAC/InterActiveCorp., which once owned Ticketmaster, the Home Shopping Network and Match.com. Malone and Diller formally parted ways in December, with Diller resigning as CEO of IAC and Malone selling his remaining shares in the company for $360 million.

As part of Monday's announcement, Live Nation said Liberty Media CEO Greg Maffei has joined its board of directors, replacing Malone.

Azoff, 62, assumes control of Live Nation at a time of declining concert attendance as consumers dial down discretionary spending. It sold 10% fewer tickets during the first nine months of 2010 compared with a year earlier, according to the latest figures released by the company. The dip occurred even though Live Nation staged more concerts -- 15,049 events in the first nine months of 2010, compared with 14,933 a year earlier.

Live Nation shares rose 32 cents, or 3%, to $10.80 on Monday.

-- Alex Pham

Photo: Live Nation Chief Executive Michael Rapino, left, and Irving Azoff at a 2009 congressional hearing on the proposed merger between Live Nation and Ticketmaster. Credit: Kevin Wolf / Associated Press.

When NBC Universal deal is done, Comcast should go after Starz, analyst says

Comcast Corp. hasn't even officially closed on its deal to take control of NBC Universal yet, but a prominent media analyst says its time for the company to make its next move.

In a report released Friday morning, BTIG's Rich Greenfield said Comcast should buy the pay TV channel Starz from Liberty Media as a strike against Netflix and to compete against Time Warner's HBO and CBS's Showtime. He values Starz at $4.4 billion, but because $1.2 billion of that is cash on the company's books, the net cost to Comcast would be $3.2 billion.

Greenfield notes that the deal Universal Pictures has with HBO expires in a few years and he thinks that if Comcast owned Starz and shifted those movies there, it would build more value for the company. Starz currently has deals with Disney and Sony for their movies. Greenfield suggested that Comcast drop Sony and keep Disney because it has more family films.

While many industry observers think original content is a key component going forward because there are so many platforms for theatrical releases once they are done playing at the multiplex, Greenfield wrote that "we believe the value of movie content in the pay TV window will rise over the next few years" and added that while HBO gets acclaim for its original fare, movies "still represent the largest percentage of weekly viewership for the channel."

As for Netflix, Greenfield said Comcast could weaken them by buying Starz and then not renewing the deal that the pay channel has with Netflix when it expires next year. Comcast, he added, could use its new library of NBC Universal fare to try to create its own competitor to Netflix.

Comcast could, of course, try to start its own pay channel but Greenfield rightly points out that would take years to build, especially because no studio tie-in deals are opening up for a few years.

-- Joe Flint

 

Deluxe buys most of production services company Ascent Media

In a further sign of consolidation of Hollywood's post-production business, Deluxe Entertainment Services Group said Wednesday it has reached an agreement to acquire the bulk of Ascent Media Group, the Santa Monica-based postproduction company, for $68 million.

A subsidiary of billionaire investor Ron Perelman's MacAndrews & Forbes Holdings Inc., Hollywood-based Deluxe is the world's largest processor of film and Blu-ray authoring services. Ascent, which provides services that help studios and distributors store, manage and distribute content, is part of Englewood, Colo.-based Ascent Media Corp., and controlled by cable pioneer John Malone.

The acquisition includes Ascent's facilities in Burbank, Hollywoood and Santa Monica that employ 1,800, as well as operations in the U.K. Ascent%20Media%20Logo

Ascent said it would retain its content distribution business, which includes providing satellite transmission services to broadcasters and networks.

Deluxe, with operations in North America, Europe and Australia, wanted to buy Ascent in order to offer a wider range of services, people familiar with the deal said. Deluxe mostly caters to the feature film industry, and Ascent is known for its work in television and commercials. The company's services include providing color correction and editing and visual effects on a variety of television shows, such as "House" and "Big Love."

Ascent Media was formely part of Discovery Communications until it was spun off as a separate company in 2008. Its holding company posted a net loss of $6.2 million on revenue of $204 million for the six months ending June 30, narrowed from a net loss of $13.7 million on revenue of $230 million for the same period a year earlier.

Ascent Media Chief Executive William Fitzgerald attributed the losses in its most recent statement to "uncertainty about the timing and pace of economic recovery that has led to ongoing volatility in the media marketplace."

-- Richard Verrier 

Barry Diller is out, John Malone is in at Live Nation

John Malone John Malone, the chairman of Liberty Media, apparently doesn't get mad. He gets even.

Two years after losing a bitterly fought courtroom battle with his onetime business partner Barry Diller, Malone has succeeded in replacing Diller as chairman of the board of Live Nation Entertainment -- at least for now.

Diller's exit from the post was widely expected after he announced his intent to step down last month. Leslie Cafferty, Diller's spokeswoman, said he would remain on the Live Nation board but would not issue a statement on the matter.

Live Nation, the Beverly Hills concert promoter that in January merged with Diller's Ticketmaster to create a live music conglomerate, on Friday made the announcement that Diller has officially stepped down. Malone, who snagged a spot on the board when he purchased 14% of Live Nation's stock, has been named "interim" chairman.

Sixteen days ago when news of his planned departure from the Live Nation board broke, Diller said there was "no rush" to name a new chairman since, as he added during a tech conference that day in San Francisco, he planned to step down by the end of the year.

Barry Diller Malone is chairman of Liberty Media Corp., which owns or has investments in technology and entertainment companies including QVC, Starz Entertainment and Diller's IAC/InteractiveCorp.

Bad blood simmering between Malone and Diller stems from Diller's plan several years ago to spin off IAC/Interactive's businesses, including Ticketmaster. Malone objected to the breakup plan, arguing that it would dilute his controlling shares in the new companies. Each sued the other, and a judge in 2008 decided in Diller's favor.

An e-mail to Malone's spokeswoman was not immediately returned. 

-- Alex Pham

Top photo: John Malone, chairman of Liberty Media. Credit: Andrew Gombert / EPA. Bottom photo: Barry Diller, CEO of IAC/InterActiveCorp. Credit: Gregory Bull / Associated Press.

John Malone says Barry Diller quit Live Nation board because he was 'fed up'

Mogul Barry Diller wasn't pushed from the board of Live Nation; he jumped.

That's the word from Liberty Media Chairman John Malone, a onetime Diller adversary and fellow board member of Live Nation Entertainment Inc., the $4-billion music powerhouse formed in January with the merger of Ticketmaster and Live Nation.

DILLER Diller, who is also chairman of IAC/InterActiveCorp, earlier this week confirmed leaks to the media that he would be stepping down as Live Nation's chairman by the end of the year. A number of people familiar with the executives said Diller left after losing a power struggle against Live Nation's executive chairman and talent super-agent, Irving Azoff.

Diller and Azoff both issued statements Wednesday downplaying any boardroom strife and saying Diller had planned all along to exit the board by year's end.

Malone seemed to paint a different picture in comments he made during a Liberty Media shareholder meeting Friday.

"Barry got fed up dealing with the three sides," said Malone, according to Reuters, referring to board members with former allegiances to Ticketmaster, Live Nation and Front Line, Azoff's talent management business.

In particular, Diller chafed with several of the board members from Live Nation, who resented Diller's efforts to control the company's direction, according to sources close to the board.

-- Alex Pham and Meg James

Photo: Barry Diller. Credit: Susan Goldman/Bloomberg.

CBS teams up with India's Reliance Media

Broadcasting giant CBS Corp. is becoming the latest U.S. media company to enter the fast-growing Indian television market, teaming up with a company backed by one of India's wealthiest men.

CBS announced Wednesday that it had structured a 50-50 joint venture with Anil Dhirubhai Ambani's Reliance Broadcast Network that initially will launch three English-language channels in India. The pay television channels, which are expected to go on the air in October, will showcase programs that CBS owns, including "NCIS," "CSI: Crime Scene Investigation" and its eagerly awaited remake of "Hawaii Five-0."

AnilAmbani

The deal provides CBS with an opportunity to wring more money from its library of older shows, including "Melrose Place," "Star Trek: The Next Generation," "Dynasty" and "Frasier."

In addition, with the help of Reliance's television production unit, CBS should be able to create local adaptations of popular shows such as "Entertainment Tonight" and "America's Next Top Model," which would become "India's Next Top Model."  

The channels will target India's younger and more affluent audiences.

Until recently, CBS primarily focused on its domestic operations. It has been looking to expand internationally and last year formed a similar joint venture in Britain with Chellomedia, the European content arm of cable pioneer John Malone's Liberty Global Inc.

Other media companies, including Sony and News Corp., have been operating in India for more than a decade. Viacom Inc. two years ago entered into a joint venture with an Indian media company to distribute a popular Hindi entertainment channel called Colors. Time Warner Inc.'s Turner and Warner Bros. divisions launched an English-language Warner Bros. channel in India last year.

CBS announced the India joint venture, which will be called Big CBS Networks, during a news conference in Mumbai. The two companies said they would eventually look at forming Hindi channels, which would be more lucrative because they would appeal to a broader audience than English-language channels.

There are an estimated 134 million homes with televisions in India, with more than two-thirds having access to cable or satellite television. Total television revenue was about $5.7 billion last year.

-- Meg James

Photo: Anil Dhirubhai Ambani. Credit: Punit Paranjpe / AFP/Getty Images

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