Comcast, an American company, is now majority owner of Sky, the pan-European entertainment, media and sports company headquartered in London.
To put the above sale in context, a deal worth $39 billion, Sky is Europe’s biggest, leading media company and largest pay-TV broadcaster. By comparison, Comcast is the second-largest broadcasting and cable television company in the world by revenue and the second-largest pay-TV company (after AT&T), which just purchased for $85 billion, but is currently arguing on appeal with the United States Justice Department to keep its new hopeful purchasee, Time Warner. The Comcast company includes the brand Xfinity (e.g. the NASCAR Series title sponsor) and subsidiary NBCUniversal. Comcast has millions of subscribers and viewers globally in the United States, India, China and Europe, and is easily one of the most recognizable companies in the word.
Comcast beat out Disney (via its new purchasee 21st Century Fox (or “Fox”) in the bid for Sky following negotiations and a United Kingdom-state-run bidding process. Interestingly, 21st Century Fox was purchased by Disney including Fox’s 39% minority stake in Sky for $71.3 billion, beating out Comcast, but Comcast drove the price up nearly $20 billion by entering the negotiations. One also has to wonder whether Fox’s failed bid for complete control of Sky has any bearing on its deal with Disney. In all, this means while Disney beat out Comcast in its purchase for Fox, Comcast beat out Disney and Fox for its purchase of Sky.
Complicating matters, Comcast controls a 30% stake in steamer Hulu, while Disney now controls 60% through its original 30% stake and its purchase of 21st Century Fox’s 30% stake. The battle for majority control of Fox and Sky is over, but the war for supremacy in entertainment, media and sports continues, specifically for majority control of Hulu and the remaining minority stake in Sky. The above raises three questions for consideration.
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Who will make a move to purchase all of Hulu?
Disney has signaled its content will be distributed via its newly-developed platform Disney Streaming Services, LLC using BAMTech, LLC technology (on a product likely to be named), while its purchased-Fox content will be streamed on the Hulu platform. If Disney sells its 60% stake to Comcast or another buyer(s), it would need to find a new distribution partner or develop another new platform. That is unlikely, but maybe Netflix, Apple or Amazon Prime will play a role in distributing content as a result of the above possible deals. One thing is for sure, Disney is unlikely to distribute family-friendly and non-family friendly content on the same platform.
Comcast is well positioned here to sell high on Hulu if Disney would like to control nearly of all of Hulu and distribute content through an existing streaming platform. Either way, one company involved here is likely going to pay multi-millions for Hulu and will be able to use that money to pay off recent purchase debt. The Bottom line is, Disney needs Hulu if it wants to distribute Fox content now.
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What will Disney-Fox do with its ownership stake in Sky?
Disney might be inclined to hold out and sell high on its minority stake in Sky to Comcast. If Disney does not control all of Sky, it has little to no use for it as a distribution partner. Sky was likely to become ESPN-Europe or ESPN-World if the bidding process was successful for Disney-Fox. Comcast would do well to turn Sky into NBC Sports-Europe or NBC Sports-World with its successful and complete purchase and control of Sky. Disney should sell Sky to Comcast and use the proceeds towards purchasing Hulu and/or paying of Fox debt.
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What does all of this mean for Comcast?
Four words: Fox Regional Sports Networks. Disney needs to sell them as part of its deal with Fox and Comcast needs them to dominate the sports broadcasting space through NBC Sports.
In deal-making terms, Comcast and Disney would be wise to exchange ownership in several companies to get what they want. Comcast needs all of Sky to make a run at being a worldwide leader in sports and entertainment broadcasting. Disney needs all of Hulu to distribute its Fox content. Disney also needs to sell-off the Fox Regional Sports Networks as part of its purchase agreement with the Justice Department. Those regional networks will likely find a good home at Comcast/NBC Sports.
In the end, Disney likely comes out on top financially from the sale of its control in Sky and the Fox Regional Sports Networks, despite having to pay for 90% control of Hulu and paying an extra $20 billion for Fox because of Comcast. Comcast will have to spend a significant sum to get both Sky and the Fox Regional Sports Networks, while making a good sum from its Hulu sale.
One thing to watch is whether Comcast and Disney work together as partners in distribution or as agitators to each other through Hulu and Sky, which is both unlikely and likely based on recent history. A second thing to watch is if the negotiations for Fox and Sky spill over into further deals for a majority control of Hulu, the twenty-two Fox Regional Sports Networks, and the remaining control of Sky. Maybe no deal is done between them, but the implications for each company and the consumers are significant.
