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BY IAN OLGEIRSON, KAGAN
The former AT&T Broadband head says more cable consolidation probably isn't in the cards. But for all the talk of multiple services, he argues, video remains the industry's best bet.
?Where can the cable industry hit it out of the park? VOD. That's where I would encourage the industry to spend more time.?
leo hindery
Leo Hindery spent years at the center of the cable universe, both as John Malone's right-hand man at Tele-Communications Inc. and ? after TCI was acquired ? as CEO of AT&T Broadband, the largest MSO ever created, and he's never shied away from voicing his opinions.
These days his involvement in the industry is primarily as an investor and director of a handful of cable-related firms in the programming and technology sectors. But whenever a company finds itself in a tough situation, someone will suggest calling in Hindery. Last month it was a shareholder in Liberty Media Group who suggested that Malone could again use Hindery's help managing cable-system investments in Europe.
In this interview with CableWorld Denver Bureau Chief K.C. Neel, Hindery says he has no plans to return to the cable business. But opinions? Those he's got.
CableWorld: So do you see the number of MSOs declining even more, and what might precipitate that?
Hindery: There are only three reasons why you want to have a lot of subs on a national level. You want to have enough subs to get programming discounts; you have to have enough subs to be credible in technology issues and related economies; and certainly if you have your own programming you want enough subs to foster such programmer.
Will there or should there be more consolidation? The answer is, I think, no. If ? pick a number ? say two million subs is enough to achieve the national economies of scale, why would I want four? No particular reason. The only exception to this is if the opportunity to acquire additional subs is regionally based, since I do think the equity markets want cable operators to be dominant in regions, a la Cablevision [Systems].
How will a sinking economy affect the cable industry?
I sadly believe that the economy is going to land fairly hard, and I think the bottom is in the near-term offing. Bottom doesn't necessarily imply a rebound back up. I think we're going to see the trough here for a year or so as some of the overheating that occurred in the equity markets and the debt markets and overcapacity in telecom gets absorbed.
As it relates to the cable industry, that's actually not as bad news as it might be for other sectors of the economy. The cable industry is still fundamentally a video opportunity. It seems to be and probably remains somewhat counter-cyclical. Cable is a tremendous home-entertainment value. It just gets better and better everyday. Where the cable industry could suffer is on some of the exotic services that it's contemplating. It's probable that consumers will be less eager to embrace those services as early as was suggested in a more robust economy.
Of all of the services that cable operators and telecom operators offer today, which one do you think has the longest legs and best potential?
I think the video product, which was the original core of the industry, will always be its core. Quite simply, the competitive environment in phone and some of the service issues in data would suggest they will never be, in a relative sense, as important or as successful as video.
Do you think that the industry is starting to lose some of its focus on its core business?
I don't think it's starting to, but I think that it is a risk. Never forget what you are and how you got there. And the core of the cable industry is high-quality, community-sensitive, service-sensitive video.
How does digital video fit into the picture?
I would suggest that the industry not take undue pride in adding digital subscribers. Eddy Hartenstein [chairman of DirecTV] and Charlie Ergen [chairman of EchoStar Communications] have very fine digital-video products. So don't take particular pride, and certainly not undue pride, in taking an old analog business and making it digital ? that's no victory, that's just catch-up.
And what do you consider victory?
A true victory is having a service or product that is uniquely yours, but I admit that's harder to do in this environment of technology.
Where can the cable industry hit it out of the park? VOD. The cable industry ? if [cable operators were] willing to cooperate with each other again ? could develop a VOD offering second to none. Because a very good VOD offering through the baseboard would have a lot of appeal, and you can structure it in a way that is very, very, very cost-efficient. That is where, if I were still an industry leader, I would be encouraging the industry as a collective entity to spend more of its time and resources.
Does that mean you're a believer in interactive TV?
There are a lot of people who've lumped VOD into interactive television, and I'm not so sure that they should necessarily be lumped together.
VOD is pretty simple stuff. If people would just listen to people like Ed Bleier [former president of Warner Bros. Worldwide Pay & PPV], who is one of the great, great visionaries in the cable industry and try to implement his strategy, I think we would all be better served.
Yet a lot of MSOs have completely centralized their operations, not giving the local guys very much power.
Not a lot. Just one or two, and they've made a mistake. Don't out-local the local. Don't take telecom-centralization practices and impose them on the cable industry. You'll fail. This is, if you give bad service at the local level because you're overconcentrated at the corporate level, you'll fail. And to be honest with you, I think you deserve to.
Do you ever foresee yourself getting back into the cable game?
No. I received an extraordinary gift in that I was able to be one of the industry's managers for a while, and at the time it meant everything to me personally. But I don't see myself going back.
Where do you see yourself? What are you going to do?
I'm very interested in public service and charity. I like sitting on boards with people who are friends. I'm not going to tell you that I'll never saddle up again. But I'd saddle up again only if I could replicate the successes, the energy and emotional reward that TCI represented for me. I won't do it just to do it.
Are you going to run for office?
No, no, I would never run for office. I am anxious to have good women and men in office. I think it's a difficult time societally for this country, and there are issues at a social level that I am very concerned about. So I will work for the rest of my life to see that good men and women are in office, but I don't think that I'll ever run for office.
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