AT&T, Malone quietly building tech empire
dailynews.yahoo.com
By Marc Graser
HOLLYWOOD (Variety) - Moving so quietly that hardly anyone has taken notice, telecommunications giant AT&T and cable magnate John Malone have gone on an unusual acquisitions binge in the past six months.
The result is an instant oligopoly in one of the most arcane, financially risky and competitive sectors of showbiz: post-production. AT&T and Malone's strategy will have broad impact across the horizon of the entertainment industry.
Shrouded behind its acquisition of Malone's Liberty Media Group last year, AT&T acquired three of the largest post-production houses in Hollywood -- Todd-AO, Four Media Co. and Soundelux.
The deals, announced last November and December, are expected to close within weeks.
Liberty has attempted to stay out of the spotlight while allowing the three rivals-cum-partners to take credit for acquisitions of smaller post houses from Los Angeles to London that service films, TV programs and commercials -- and soon the Internet.
Those mergers will, in turn, spread Liberty's reach into all areas of post-production: sound editing and mixing, film editing, film transfers, telecine, special effects, DVD authoring and theme park attraction design worldwide.
Largely due to the sale of Tele-Communications Inc. to AT&T and related transactions, Liberty has amassed a $5 billion warchest, and it has spent $420 million to climb into the post-production game in a big way.
``If it's post-production they're after, Liberty's got a good hand,' said one director of a major post-prod house competing with Todd-AO and 4MC.
Liberty's Empire
Although not yet a monopoly, the result is a staggering assemblage through consolidation, leaving only the Post Group, Post Logic and Laser Pacific among the remaining multipurpose post-production stalwarts.
Post-production is not exactly a glamorous field, and the risks are high. But the business features the most dedicated employees, and rewards do exist.
Liberty is convinced the consolidation will greatly boost the profit margin in the post sector. The buys will feed productions for Liberty's cable ventures, position the company as a major player in production for new technologies like DVD and digital TV, and plunge Liberty into Internet production.
Once its acquisitions of Todd-AO, 4MC and Soundelux close, the entire entity will be called Liberty Livewire.
``Having someone with Liberty's deep pockets on your side is great,' said one Hollywood-based post-production exec. ``It will keep a lot of these smaller cash-strapped companies alive in the long run.'
Other parts of the gameplan:
-- Liberty plans to turn around the post biz's stolid 6 percent profit margins, which means studios that farm out post work to Todd-AO, 4MC and Soundelux may be saddled with bigger bills. The studios may be shut out from going to anyone else and find their negotiating capabilities clipped.
-- Liberty plans to funnel all of its post needs for programming on its stable of cable channels -- BET, Discovery Channel, E!, Encore, QVC and USA Networks -- to its own facilities, signaling a growing competitive advantage for Todd-AO, 4MC and Soundelux.
-- The Internet is closing in fast, and new technologies are forcing post houses to upgrade and keep up. With Liberty's new post powers, the company should turn into a central player for video-based programming that needs to be edited and encoded for distribution over the Web, as well as wireless hand-held devices such as Palm Pilots and cell phones, and interactive TV services such as TiVo (in which Liberty has also invested).
Virtually all of the new Web-casted TV shows and films online could go through Liberty for post work, if it positions itself properly.
Eyeing Internet Buys
Liberty has said it plans to make major acquisitions in the coming months that will up its Internet ante. Through its Liberty Digital arm, it already has major stakes in online players that include incubator CMGI, iVillage and MTVi Group.
The company has a broad range of investments in cable, communication, technology and Internet businesses in the U.S., Europe, South America and Asia. Further plans for acquisitions will give Liberty a large piece of the pie in DVD authoring and, soon, interactive, digital television and HDTV production.
Liberty is developing digital distribution and digital projection services as well and plans to boost its holdings by acquiring fiber and wireless TV transmission businesses in coming months.
With more deals as part of its infrastructure-building expansion, Liberty could easily become a powerhouse on which Hollywood is dependent for its post needs. And that's what's turning heads and raising the proverbial eyebrow.
'Hoops To Jump Through'
``We have not talked about it a lot publicly because we have a series of acquisitions and it is difficult to do,' said David Beddow, vice president of Liberty Media. ``We've had a bunch of hoops to jump through before explaining what we're up to.
``We really like the post-production business; these companies have quality reputations in servicing the client business and can make improvements in those areas as well,' Beddow said.
Former rivals working under the same umbrella theoretically means more clients, less competition and higher revenues.
``When you put all of these companies together, you can get a much better utilization of personnel and facilities, enabling you to improve margins in that respect,' Beddow said.
The exec said that the higher margins of the Internet and transmission businesses, added to Liberty Livewire in the coming months, will feed each other and boost profits. ``We're very bullish on raising those numbers,' Beddow said.
Reuters/Variety |
