Thread by @trengriffin

John Malone rides again. reuters.com/article/busine…

John Malone: "Recently somebody said, ‘Hey, you lost weight,’ and I said, ‘Yeah, thirty-five pounds and three and a half billion dollars’.” “I’ve done lots of bad deals. When I stick to my knitting I do okay. It’s – it’s when I listen to some pied piper.” google.com/amp/s/25iq.com…

John Malone: "A lot of mergers fail for cultural reasons. Vertical acquisitions are much tougher than horizontal ones. You are essentially buying a business you don’t know and you don’t understand."

“You’ve got to play both offense and defense.”

4/ Were AT&T's acquisitions of Time Warner and DirecTV horizontal or vertical? bloomberg.com/news/articles/…

5/ "AT&T's massive bet on media with its 2018 acquisition of Time Warner Inc. for around $81 billion made it the world’s most indebted nonfinancial company."

google.com/amp/s/www.wsj.…

6/ If you read the articles today on the potential combination, everyone has a different take on AT&T's debt level.

AT&T debt currently totals nearly $180 billion. google.com/amp/s/www.holl…

AT&T has been grappling with the enormous $170 billion-plus debt google.com/amp/s/variety.…

7/ John Malone: "It’s all about scale. So players that are putting out platforms that have global footprints and are achieving full scale, their economics is going to be dominant." google.com/amp/s/www.holl…

8/ Discovery has 15 million total paying streaming subscribers.

"Monthly churn is trending toward low single digits. Overall ARPU for Discovery’s streaming business is around $7." fiercevideo.com/video/discover…

Churn rate acceptability depends on SAC and gross margin. LTV is what?

9/ All LTV variables are interconnected. For example, the higher your SAC, the more painful churn is in LTV terms. Every basis point of churn matters. Scale impacts churn in several important ways. And churn impacts the other factors. google.com/amp/s/www.holl…

10/ Charlie Munger: "In terms of which businesses succeed or fail, advantages of scale are ungodly important. The great defect of scale, of course, ... is that the big people don’t always win—is that as you get big, you get the bureaucracy." fs.blog/great-talks/a-…

11/ "There are now more than 100 streaming services to choose from, according to data company Ampere, with a dizzying number of niche products such as Shudder, which is dedicated to horror, or Horse & Country, which streams horse races." news.google.com/articles/CAIiE…

12/ "Six million more U.S. customers cut the cord in 2020 and 59% of all TV consumers use two or more of the top SVODs (Netflix, Amazon Prime, Hulu, Disney+, or HBO Max). eight in 10 consumers now use a streaming TV service in general."
news.google.com/articles/CBMiW…

13/ Suspicion confirmed:

"The company has found an overlap between sports fans and reality fans."

Of course:

"Unscripted television is so valuable to Hollywood because it is frequently among the most inexpensive genres to produce. As such, it offers an enticing return."

14/ "S curves gonna S."

"Netflix added fewer than 4 million global subscribers in the first quarter, disappointing investors, Disney announced it now has 103.6 million Disney+ subscribers, far less than the 109 million estimated by analysts." news.google.com/articles/CAIiE…

15/ "The structure of the deal remains unclear but AT&T, which has a market value of about $230bn, is expected to control most of the combined entity. Discovery has a market value of $24bn. The board of AT&T is meeting on Sunday to approve the deal." amp.ft.com/content/5aeba5…

15/ If you have worked with unit economics for a few decades you get a sense of the value of a customer intuitively. You know that these higher churn numbers are hard to make work economically. You must make up for it with the other factors like gross margin or acquisition cost.

17(I repeated 15)/ Modern data science allows you confirm your analog sense with tools and data, but unit economics remains in no small part a black art, since the future is always uncertain. Shit happens. One of the best modern data science tools is CBCV. hbr.org/2020/01/how-to…

18/ "Will there be three? Will there be four? There's not going to be seven," Discovery's Zaslav said. "There has to be some consolidation."

Bigger gross margins in unscripted content can only help so much with unit economics. Lower COGS helps a lot tho. google.com/amp/s/www.cnbc…

19/ "Discovery CEO David Zaslav would be atop the combined venture. WarnerMedia CEO Jason Kilar would be tasked with leading the company’s direct to consumer charge."

Sometimes the smaller company execs and up running the show. Sometimes not. It depends. news.google.com/articles/CAIiE…

20/ "McDonnell Douglas bought Boeing with Boeing’s money,” went the joke around Seattle. Boeing's Condit was still in charge, [but] Stonecipher from McDonnel Douglas was cutting a Dick Cheney–like figure, blasting the company’s engineers as “arrogant." google.com/amp/s/amp.thea…

21/ "AT&T would receive an aggregate amount of $43B in a combination of cash, debt and WarnerMedia’s retention of certain debt...

The deal reverses AT&T's years-long plan to combine content and distribution in a vertically integrated company." news.google.com/articles/CAIiE…

22/: "AT&T will have better flexibility to spend on 5G and fiber.” zdnet.com/article/at-t-r…

23/ "The venture will have a projected 2023 revenue of approximately $52 billion, adjusted EBITDA of approximately $14 billion, and a free cash flow conversion rate of approximately 60%, per a statement. It plans to spend around $20 billion for content." news.yahoo.com/news/t-spins-o…

24/ AT&T gets $43 billion. AT&T shareholders get Newco shares. Who is the largest shareholder in Newco (Discovery)?

25/ "With Discovery, Malone holds about 4% of the total shares outstanding including B stock and had 27.9% of the vote as of last year’s proxy statement. Malone held 93.6% of the 6.5 million class B Discovery shares outstanding." news.google.com/articles/CBMiZ…

26/ I can't find a second source to confirm the rumor that the new company name will be "Disco," the new logo a disco ball 🕺 or that the newest CNN anchor is:

27/ Morgan Stanley: "If we assume an $8 [billion] payout, this would be a nearly 50% reduction from current levels of some $15 [billion] and would put the stock on a low 4%” yield and that stock “buybacks could also be a possibility down the road.” google.com/amp/s/www.barr…

28/ Malone: "The technology of connectivity and digital technologies are one focus, and creating content that people get addicted to is another focus. You seldom would find both of those in the same management team.”

I've heard Craig McCaw say that manufacturing is also unique.

29/ A content/software company trying to be a connectivity provider example is Rakuten: fiercewireless.com/operators/raku… Being a facilities based over builder of entrenched incumbents who can drop prices to marginal cost makes the task even harder.

30/ Reverse Morris Trust tho. washingtonpost.com/business/why-a…

31/ "Our skills here, internally, are very much in financial engineering.” John Malone bizjournals.com/denver/stories…