If you are unfamiliar with John Malone, the two most important things to know about him for the purpose of this post are as follows. First, he is incredibly good at buying cable systems:
“Few people have made more money for investors over the past three decades than John Malone. The billionaire cable-TV investor and operator parlayed a small group of cable systems, originally assembled in the 1970s, into Tele-Communications Inc., before selling it to AT&T in 1999 for $48 billion.”
And second, he is excellent at avoiding taxes:
“No other executive in the U.S. has mastered the intricacies of the tax code to the same extent that Malone has,” says New York tax expert Robert Willens. “We are consistently in awe of the structures he and his advisors come up with to rearrange his extensive holdings, always without tax consequences, in the most advantageous way.”
Early in his career, as he began to consolidate cable systems in the 70s, Malone realized that scale provided a tremendous advantage in cable television. The larger the company, the more leverage that company had to negotiate lower programming costs per subscriber. Since programming costs were the largest single operating expense, the largest cable operator would always have a significant advantage over the rest of the market.