Liberty Global’s Fries: vertical integration with content makes sense

Liberty Global CEO, Mike Fries.

Vertical integration between cable operators and content providers “makes sense” in order to help ensure that infrastructure providers like Liberty Global have access to content, according to Mike Fries, president and CEO of Liberty Global.

Speaking on the opening panel session at ANGA COM this morning, Fries said cable had to “consider vertical integration”, responding to a question related to Liberty Global’s and Discovery Communications’ joint £550 million (€676 million) acquisition of production group All3Media.

In comments that seem to represent a change in emphasis from the view expressed by Fries of the relevance of owning content assets ahead of its disposal of channel provider Chellomedia, Fries said it was important for cable to ensure that it had some leverage in ensuring a pipeline of content to populate its networks.

“We believe over time there is value in vertically integrating. It doesn’t mean we will do it everywhere or do it in a transformational way, but we have to make sure our shelves are stacked with the right product. We have to have access.”

Consumption of web video “is going nowhere but up”, said Fries. He said that 90% of connections in Germany on cable were becoming 100Mbps and faster. He added that web video had showed a “functionality gap” between what is offered by traditional broadcast TV and what is available on the web. “The web has forced us to be better at innovating,” he said.

Fries said that he is “not the least bit frightened” by new web-based content providers. “It’s all the same content. The only thing that is changing is the flexibility and elegance with which it is provided,” he said.

Fries said that the cable industry in Germany is growing by attracting new broadband customers and by innovating across its activities, including the TV platform, giving the latter a form and functionality that could match the flexibility and ease of search associated with the internet.

He said cable had to make it easy to find content on multiple devices, which is a technical challenge rather than an industrial or structural challenge. “We will never be a dumb pipe because we are investing in that user interface and we are investing in a whole series of activities from broadband to video to mobile.”

Fries said that net neutrality is an important topic for the industry but one that is badly misunderstood. “We are concerned about consumers, who have to be able to go wherever they want to go. No-one here wants to stop them doing that. On the other hand, there is an issue between corporations – who pays the billions of dollars to build the highways? Do we pay ourselves or share the cost? The discussion about managed services means that ProSiebenSat.1 should be free to pay for a super fast lane if they want to. It is not going to stop everyone else [reaching consumers]. There is space for everyone.”

Referring to the need for further industry consolidation, Fries said that the cable industry “struggles because of the lack of scale” to compete with incumbent telcos, satellite and mobile and players. “It is a natural step to see this industry consolidate,” he said.