Outfoxed Comcast looks to the Sky

US telco conglomerate Comcast has decided it can’t be bothered with 21st Century Fox but is still really keen on Sky.

Apparently determined to complicate things for media rival Disney at every possible opportunity, Comcast seems to have decided that forcing Disney to come up with an extra $19 billion to get hold  of Fox is enough for now. The real fun will now consist of making sure Disney doesn’t get hold of Sky when the Fox deal goes through.

Disney bid $52.4 billion for Fox at the end of last year, but Comcast decided to throw a spanner in the works by offering $55 billion for it in June. This forced Disney to come back with a $71.3 billion offer soon after, which turned out to be enough to make Comcast throw in its cards. “Comcast does not intend to pursue further the acquisition of the Twenty-First Century Fox assets and, instead, will focus on our recommended offer for Sky,” said the Comcast announcement.

This seemed to be the likely outcome when Comcast quickly escalated the bidding war for Sky last week. An intriguing aspect of this bid is that, if it succeeds, Comcast and Disney will have to coexist in the running of Sky, since Fox already owns 40% of it. It’s hard to see how they could sustain that bizarre symbiosis, so something will have to give. On the other hand Disney could just decide to hold on for a bit just to annoy Comcast.

Digital TV Europe did a good analysis of the various plot twists back when the Comcast bid for Fox was just a rumour, which you can read here.

US DoJ throws $85 billion spanner in the works of AT&T-Time Warner

The US Department of Justice has decided to appeal the June 12 court ruling allowing AT&T’s $85 billion acquisition of Time Warner, it announced late on Thursday.

In a brief Notice of Appeal filed on July 12, the DoJ notified the District Court that it intends to bring the case to the Court of Appeals against the ruling that will allow AT&T’s planned acquisition of Time Warner to go ahead with no restrictions.

The US government, which had until August 12 to ponder an appeal, took a month to decide it would lodge an objection to the mega-acquisition. US entertainment industry news site Deadline sourced a copy of the Notice, signed by Craig Conrath, who was leading the government’s legal team during the trial. It doesn’t elaborate on the grounds upon which the appeal would be lodged, but the decision to appeal seems to have caught AT&T by surprise.

“The Court’s decision could hardly have been more thorough, fact-based, and well-reasoned,” David McAtee, the operator’s General Counsel, said in a statement. “While the losing party in litigation always has the right to appeal if it wishes, we are surprised that the DOJ has chosen to do so under these circumstances.  We are ready to defend the Court’s decision at the D.C. Circuit Court of Appeals,” he blustered.

The ramifications of the potential appeal could hardly be greater — not only regarding the future of a newly-created WarnerMedia business, and whether it might need to decouple from its parent company, but also for the whole telecom and media industries. The boardrooms of Comcast and Disney will be full of sweaty palms (yuk!), as the outcome of the appeal will set a precedent for future vertical integration deals, including their bidding war for 21st Century Fox.

If the DoJ was to win the appeal, the US Solicitor General could bring the case to the Supreme Court, where the judges generally siding with President Trump are in the majority. Since the days when he was a candidate, Mr. Trump has been a vocal opponent to the merger, citing the danger of “too much concentration of power in the hands of too few.” However, such a decision would not be without a twist: Eriq Gardner, the Senior Editor at The Hollywood Report, discovered in a disclosure paper that John Roberts Jr, one of the Supreme Court Chief Justices, still holds Time Warner shares.

AT&T has been moving very fast after the June 12 ruling to integrate the two companies, from appointing executives to stamping its authorities over HBO, although it has decided to leave Turner Broadcasting, the owner of CNN among other assets, independent until February 2019. However, it has already broken at least one promise related to the deal: instead of making the service more affordable, it just raised the monthly bill for its DirecTV Now service by $5.

Fox strikes back at Comcast in Sky bidding war

21st Century Fox has put in an increased offer to buy those bits of Sky it doesn’t already own, beating an earlier counter-offer from Comcast.

Fox bid £10.75 per share for Sky back at the end of 2016, but the bid was stalled by UK regulators taking a closer look at it to see what effect it would have on media plurality in the UK. They eventually concluded the potential acquisition could go ahead so long as Sky news is sold, to ensure its independence.

By that time, however, US cable and media giant Comcast had taken an interest and in April of this year counter-bid to the tune of £12.50 per share. After mulling this over for a few weeks Fox has decided Sky is worth fighting for and has raised its own bid to £14 per share – valuing Sky at around £24.5 billion.

“As the founding shareholder of Sky, we have remained deeply committed to bringing these two organizations together to create a world-class business positioned to deliver the very best entertainment experiences well into the future,” said a Fox statement. “We strongly believe that a combined 21CF and Sky will be a powerful driver for the continued growth and vibrancy of the UK and broader global creative industries.

“The enhanced scale and capabilities of the combination will enrich Sky’s ability to continue on its mission for years to come, especially at a time of dynamic change in our industry. This transformative transaction will position Sky so that it can continue to compete within an environment that now includes some of the largest companies in the world, but none of whom have demonstrated the same local depth of investment and commitment to the UK and to Europe.

“We said when we announced our proposed acquisition of Sky that we were firmly committed to UK’s creative industries and the contribution they make to the UK economy. We remain committed to the UK and believe that our offer for Sky will bring the best value for all the company’s stakeholders and are delighted that the Independent Board of Sky has recommended our offer to its shareholders.”

Apparently some UK politician still need to give such a deal their seal of approval, something that is expected to happen later this week. Fox is itself in the process of being acquired by Disney and maybe the imminent arrival of a wealthy parent that competes directly with Comcast probably contributes to its willingness to persist with a bidding war.

Disney hounds Murdoch into selling Fox for $66 billion

Media mogul Rupert Murdoch has decided the entertainment business is too much like hard work and has flogged most of 21st Century Fox to Disney.

Disney will shell out $52.4 billion for the acquisition and also take on $13.7 billion of its debt. In return it gets Fox’s movie and TV operations, except for the Fox broadcast network, which it’s not allowed on competition grounds because it already owns the ABC network. Among the highlights for Disney is the acquisition of some of the few major Marvel properties they don’t already own: X-Men, Fantastic Four and Deadpool.

“The acquisition of this stellar collection of businesses from 21st Century Fox reflects the increasing consumer demand for a rich diversity of entertainment experiences that are more compelling, accessible and convenient than ever before,” said Bob Iger, CEO of Disney.

“We’re honored and grateful that Rupert Murdoch has entrusted us with the future of businesses he spent a lifetime building, and we’re excited about this extraordinary opportunity to significantly increase our portfolio of well-loved franchises and branded content to greatly enhance our growing direct-to-consumer offerings. The deal will also substantially expand our international reach, allowing us to offer world-class storytelling and innovative distribution platforms to more consumers in key markets around the world.”

“We are extremely proud of all that we have built at 21st Century Fox, and I firmly believe that this combination with Disney will unlock even more value for shareholders as the new Disney continues to set the pace in what is an exciting and dynamic industry,” said Murdoch. “Furthermore, I’m convinced that this combination, under Bob Iger’s leadership, will be one of the greatest companies in the world. I’m grateful and encouraged that Bob has agreed to stay on, and is committed to succeeding with a combined team that is second to none.”

Here they both are, shaking on the deal in London. Don’t they look pleased?

Happy Iger and Murdoch

The announcement went on at great length about what a great idea this is for all concerned, but that sentiment may not be shared by anyone who currently works at Fox. One of the reasons this is such a great deal, we’re told, is that ‘the acquisition is expected to yield at least $2 billion in cost savings from efficiencies realized through the combination of businesses.’ That’s a lot of redundancies and, according to TBI Vision, there is already considerable disquiet.

M&A of this size is usually about economies of scale, efficiencies, etc and with the entire media world threatened by the likes of Google, Facebook and Amazon, it’s not at all surprising to see considerable consolidation among the incumbents.

Paolo Pescatore, Analyst at CCS Insight, seems to concur. “This deal is all about Disney taking greater control of its destiny throughout the entire value chain, from content production to distribution,” he said. “Even a giant like Disney has not been immune to changing behavioural patterns as consumers have embraced new ways of watching TV shows and movies.

“The move will firmly establish Disney as one of the leading media companies in the world and puts it in a great position to compete head on with the threat posed by the Web providers such as Amazon and Facebook. Further disruption lies ahead and we believe that this acquisition will force others to react.”

All this media M&A has increasing relevance to the telecoms sector, especially in the US where we’ve seen Comcast and Verizon spend big on media and AT&T hoping to trump the lot of them by acquiring Time Warner. The consolidation will probably continue but acquisition opportunities are running low. Surely someone has to buy Netflix one of these days.

Disney sneaks in with content aggregator move

A couple of weeks ago on the podcast we discussed an idea where telcos could add worth to the content value chain, and now Disney has snuck in there ahead of the telcos.

The idea of the super-aggregator of content is an interesting one, because there is just so much content out there. Ericsson released a survey recently which stated 70% of consumers would want a super search engine which would collect all the content in one place. The time it takes to find something you want to watch is increasing, which will probably lead to frustration, or at least it does for your correspondent.

Disney has decided to launch Movies Anywhere, a free app and website that enables consumers to manage and watch their personal digital movie collections across studios, retailers and platforms. Right now it brings together the Disney studios (Disney, Pixar, Marvel, and Lucasfilm) but also third-parties including Sony Pictures Entertainment, Twentieth Century Fox, Universal Pictures, and Warner Bros. Entertainment. It’s still a small list of participants, but the idea of being a content aggregator which sits on top of all the squabbling is a good one.

“Movies Anywhere means that consumers never have to remember where they purchased a film or which device they can watch it on, because all of their eligible movies will be centralized within their Movies Anywhere library and available across platforms through the Movies Anywhere app and website and also available at their connected digital retailers,” said Karin Gilford, General Manager of the Movies Anywhere team.

We’re wondering whether this is a missed opportunity for the telcos. The telcos have a very unique relationship with their customers, as it is very singular. The content providers are all fighting for your attention, but the telcos don’t have to; most people only have one personal smartphone.

And considering trends are moving more towards watching content on mobile devices, the singular relationship between the telco and the customer becomes more of a coup. There is a challenge for the consumer, and there is an opportunity to create an offering which addresses this challenge, why should the telcos take on the traditional content players at their game, when they can just help them play better with the consumer?

People and companies generally aren’t very good at doing things they’ve never done before. This should be a statement which most would except without any issues, but this is essentially what the telcos are doing in the content space. Throwing a bit of money around, but not as much as the traditional content players, and believing they will be able to recapture dwindling profits.

And generally, there hasn’t been a notable amount of success. You could argue BT is doing an alright job in the sport content space, albeit for a big price tag, but this isn’t really doing content. It is buying the right to broadcast something which is happening. This isn’t really creating anything, its relaying it to the customer, which is something the telcos could be very good at. This is essentially what Disney is doing here.

The idea of the super-aggregator doesn’t have to include your own content. In this case it does, Disney’s own productions are included in the deal, but it is simply a place for the consumer to collect content so he/she doesn’t have to navigate several gateways before finding the right title.

All is not lost for the telcos in this space, as the focus of Disney’s aggregator is pretty limited; it’s just movies at the moment. There are other content areas which consumers subscribe to and find the same frustration, so there is an opportunity to create an interesting offering, but it will come down to speed and relationships.

Another area which might be worth bearing in mind is Netflix. It is widely regarded as the most popular OTT content provider out there, and it is unlikely to feature in any future Disney proposition (assuming they move outside of the movie circle), considering the bitter battle which is raging on between the two. Disney has recently pulled all of its content from the Netflix platform, so a reunion between the two is unlikely. Bagging Netflix as a partner could be a winning move.

Once again, it comes down to the ambition of the telcos. Are they willing to do something different to survive the utilization slide?