Let's face it. If you're an executive at a telco and you get the opportunity to rub shoulders with the Hollywood elite, your wife and kids will love you. I mean, come on. Backstage passes to concerts. (CHECK). VVIP treatment at theme parks (CHECK). The ability for your wife to tell her friends how she met Lady Gaga (CHECK). Oh and don't forget things like private dinners in the executive dining room where a famous actor and producer pitch their latest idea for your entertainment division to fund. (CHECK)
Back in the day when John Malone sold TCI Cable, notably the worst patchwork of systems on the cable market-it was like buying junk bonds vs. blue chip stocks. When Malone, a noted pitchman in his own right, approached them, he had the perfect patsy. AT&T thought they were going to rule telecom and cable. After a few years, AT&T got out of the business, selling off the assets of both TCI and Media One at a loss, to a company that understood cable and entertainment. Comcast.
Love Comcast or hate them (most hate them) they do understand the business and make strategic investments in companies that brings them more than just wires and servers and customers. The buy expertise and keep it around. AT&T on the other hand, and Verizon for that matter too, simply puts their own longtime cronies on top of the asset and tries to make it "fit" into their business. Reading in today's Wall Street Journal further underscores this cronie mentality, and shows why the Time Warner deal is even more doomed. It also explains why activist investors are rising up, and genuinely concerned. And they should be.
Over the past few years bright lights have left AT&T because of the cronie mentality. Last week it was announced that John Donovan their CTO is going to leave. Two years ago it was Glenn Lurie, the President of AT&T Mobility. These were rising stars who had their careers pole-axed by the "old boy" Randall Stephenson approach to rewarding the folks who supported him, not the folks who came up in the modern world of mobile or who spent time innovating.
On the other hand, Comcast has made a series of strategic moves over the past 20 years. First they bought Spectacor, and that gave them entree into professional sports and arenas. But they didn't take control of it, ceeding that to longtime founder, the late Ed Snider, and let his board of directors and staff, up until his passing, run the show. As each year passed, Comcast began to exert more influence, through people who they hired to learn the business, while still keeping the day to day operations of what they didn't know alone. They did the same thing with NBC/Universal, and surrounded the operations with veteran Turner executives and others from the networks side of things, who knew who, where and when to do things.
While I'm far from a Comcast fan, I am a fan of businesses who make the right strategic moves to ensure success surrounding the assets they acquire. So when it came to AT&T buying Time Warner, I saw the writing on the wall, just as I did with AOL and Yahoo by Verizon. Mergers that are doomed.
Time Warner's future success would have been with Disney, as Bob Iger knows how to run more than just a network. And just like Michael Eisner, and the late Walt Disney before him, applies vision backed by strategy, not an old boy, cronie mentality built on the past. Nor will buying into entertainment, or sports, because you and your family get to rub shoulders with the Hollywood high and mighty. That type of jock sniffer, groupie, super fan has no place in your management decision making structure, and the same applies for buying assets that don't fit in your business strategy decisions.
AT&T has yet to learn that. Nor has Verizon, and it's why those who can smell a deal with a "dumb buyer" sell companies to them because at their core, the sellers are dispassionate about who they sell to, versus being passionate about one thing. Making money. Hollywood has always known how to sell to a "dumb buyer." But it takes brains to be a smart buyer. In AT&T and Verizon's cases history has shown when it comes to entertainment property buying, just which category they fall into.