Comcast intervene in Fox’s reach for Sky

Deputy Business Editor discusses Comcast rivalling Fox’s bid for Sky

Image: Hudson Institute

RUPERT MURDOCH’S long-standing desire to acquire the 61 per cent of Sky, not already under his control has just hit another bump in the road. In a surprise move, Comcast, a US telecommunications conglomerate, made a bid to take control of Sky. Comcast improved on Murdoch’s 21 Century Fox’ existing offer for Sky by 16 per cent; the US company offering £12.50 per share compared to Fox’s £10.75.

Unlike Murdoch, a well known figure among Britain’s media elite, Comcast is a relatively unknown entity in the United Kingdom. In fact, outside the US, Comcast has a relatively feeble presence; international businesses account for a mere nine per cent of its total revenues. In the States, the company’s assets include NBC, a major cable network, film studio Universal Pictures and the cable TV business Xfinity. Brian Roberts, CEO of Comcast, stated that the purchase of Sky would lead to a 16 per cent increase in the percentage of revenues from outside the US. If the offer were to be successful, Comcast would have put its name on the map not only in the UK, but across Europe. Sky is Europe’s largest media company, with operations across six European nations, and around 21 million subscribers.  The deal sent Sky’s share price surging, with shares valued as of Thursday, at £13.72 per share, far more than the bids from either Fox or Comcast.

So where does this all leave Murdoch and 21 Century Fox? Murdoch’s bid in December 2016 to take over Sky faced has severe challenges. Fears over the editorial independence of Sky News, Murdoch’s ever-expanding UK media empire, as well as uneasiness over the phone hacking debacle have sparked fierce opposition to the takeover. A preliminary report by the Competition and Markets Authority forced Fox to reassure wary regulators by way of committing to an independent editorial board as well as committing to ten years of funding for Sky News. Further complicating things, is the fact that the majority of Fox is due to merge with a fellow me dia giant Disney in massive $52.4 billion deal, pending a review by US Antitrust authorities. Fox’s potential acquisition of Sky would therefore pass over to Disney if both deals were to eventually go through.

The offer comes amid massive change in the way media is consumed and traditional media companies are having to contend with the rapid rise of online streaming services such as Netflix and Amazon. It was estimated by research firm eMarketer that 22.2 million American adults had “cut the cord” on traditional TV services in 2017, an increase from 16.7 million in 2016. Given this current trend towards streaming companies, Comcast’s purchase of Sky, a traditional TV service provider, seems counterintuitive.

Other media giants have also sought to consolidate their businesses in the face of this challenge. Time Warner, owner of TV networks and film studios such as Warner Bros. and HBO, has made a $109bn offer for the world’s largest telecommunications company AT&T. But US authorities are wary of a single company wielding such a monopoly and having so much control over both online access and content, and the merger is being blocked by the Department of Justice.

Comcast’s bid may be a shrewd business move to unsettle two of its major rivals in the entertainment industry, but there may yet be more still to come. Several analysts see this development as an extension of the trend towards consolidation in the sector while opening the path for a bigger bid by Comcast for 21 Century Fox, rivalling Disney and throwing the Mouse House’s and Murdoch’s plan to the wind.

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