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John Malone Buys More Discovery, Sheds Lions Gate

The chairman of the Liberty group of companies continues to buy the depressed shares of Discovery.


When we last checked in on John Malone in mid-December, the chairman of the Liberty group of companies was buying series A shares of Discovery Communications and selling nonvoting class B shares of Lions Gate Entertainment .

He has only continued in that vein. On Dec. 14, Malone paid $2 million for another 102,400 series A shares of Discovery (ticker: DISCA), which owns the eponymous channel in addition to TLC and Animal Planet. It’s agreed to acquire Scripps Networks Interactive (SNI), home of Food Network and HGTV.

The deal has gone over with Discovery investors about as well as elephants trampling through a garden. Although they’re off their lows, the series A shares of Discovery are still down 16% through Friday’s close since the deal was announced July 31. But could a new venture help the company tune into upside?

Both Discovery and Scripps are partners, along with Viacom (VIAb), A&E Networks (a joint venture of Hearst and Disney (DIS)) and AMC Networks (AMCX), in Philo, a new entertainment-focused skinny streaming bundle that launched last month.

Philo Chief Executive Andrew McCollum, a founding member of Facebook (FB), said it “relied on five years’ worth of data about what college students watch to shape the channel list for the new service.”

In our experience, college students are a demographic that tends not to pay for its entertainment. If Philo’s a hit with college students, it could mean one paying account per dorm floor. Can it be successful with young working people? At $16 a month, the lower-priced tier is more expensive than the top Netflix (NFLX) package at $13.99. Philo’s offerings, including “The Walking Dead,” ”Cake Boss” and “TRL” seem past their prime time--shows college students were watching a decade ago. Philo’s lineup lacks the oomph of Netflix’s original offerings, including “Stranger Things” and “Orange Is the New Black.” Philo also doesn’t offer any films while Netflix offers enough to populate a list of the top 100 of them.

Philo is just one of the “direct consumer platform[s]” that Malone envisioned for Discovery and Scripps, and such subscription services are factors for his bullishness, as he told CNBC last month. Malone said Discovery had to make sure it was in “every small bundle,” and hopefully other skinny bundles will offer more muscle than Philo to pull in subscribers.

Speaking of ”Orange Is the New Black,” Malone has also sold 345,500 class B shares of Lions Gate ( LGFb ) for a total of $10.6 million from Dec. 14 through 19. Lions Gate is the studio behind “Orange” and “The Hunger Games” films, and it has “an attractive Canadian tax domicile,” as our colleagues at The Wall Street Journal noted.

It’s not that he’s not bullish on Lions Gate. We’ve noted before that Malone doesn’t mind selling shares that don’t carry votes. He certainly doesn’t mind selling shares at higher prices. Class B shares ended 2017 with a 29% surge, up from a 24% gain in mid-December.


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