Comcast’s Sky takeover: the winner pays for it all

Beating Disney-backed Fox in an auction for the Murdoch jewel has not come cheap

Comcast’s Philadelphia headquarters: the US media giant has won an auction to formally bid for Sky. Photograph: Matt Rourke/AP

Comcast’s Philadelphia headquarters: the US media giant has won an auction to formally bid for Sky. Photograph: Matt Rourke/AP

 

They could make a movie out of it. They could make a whole series. After years of chasing full ownership of a “crown jewel” long associated with his name, the octogenarian media mogul’s pursuit is foiled at the eleventh hour by an ambitious rival after three rounds of sealed bids, the winner taking all.

The narrative in reality is more complicated, but still a gawp-inducing corporate drama. On Saturday night, Rupert Murdoch’s 21st Century Fox comprehensively lost the battle for Sky to US telecoms conglomerate Comcast after a rare auction staged by the UK’s Takeover Panel.

The outcome, barring twists, is set to give Comcast majority ownership of the Murdoch-founded company that employs about 1,000 people in Ireland, where it is the leading pay-TV provider, estimated by Nielsen to provide satellite television to 640,000 households.

But Murdoch was selling up anyway: 21st Century Fox’s stake in Sky was, and still is, among the assets on track to be acquired by the third player in this game, the Walt Disney Company. It’s just that now Disney can only inherit, at most, the 39 per cent of Sky that 21st Century Fox currently owns – and given the generous nature of Comcast’s offer for Sky shares, Fox/Disney may decide to part company with some or all of this stake too.

In the auction for Sky plc, Comcast’s £17.28 a share bid handsomely beat the £15.67 a share bid from Disney-backed Fox, prompting Sky’s independent directors to swiftly recommend that shareholders accept the ker-ching deal. The gloriously high offer sent Sky’s shares surging 9 per cent on the London stock market on Monday.

Comcast’s triumph is perhaps not the one it really wanted. It had its acquisitive eye on all of the businesses that Fox had already agreed to sell to Disney – not just its Sky stake, but also the film studio 20th Century Fox and cable networks FX and National Geographic – and only backed away from this bigger fight in July.

‘Crown jewel’

Its victory here, which values Sky at £30.6 billion (€24 billion) could be interpreted as pleasing revenge for being thwarted by Disney for the larger target. After all, it was Disney boss Bob Iger who described Sky as the “crown jewel” of Fox assets. A £4 billion (€4.5 billion) gap in the two final bids, however, has made it seem like Comcast paid more than was strictly necessary for this particular prize. Its shares fell 8 per cent in early trading in New York on Monday as shareholders fretted over the price tag.

There is little doubt that Sky is a strategically attractive business, not merely a profitable one. For starters, it has some 23 million paying customers across Europe – a very nice addition to Comcast’s 29 million US customers.

These television and broadband subscriptions, with some help from Sky’s advertising sales, delivered revenues of £13.6 billion (€15 billion) in the year to the end of June 2018, up 5 per cent. And Sky’s profits are on the up, in part because its most recent broadcast rights agreement for English Premier League matches saw it pay 16 per cent less per game than it had under the previous, inflationary deal.

Sky not only makes original content, it has the rights in this part of the world to premium content made by US networks HBO and Showtime, such as Game of Thrones, Billions and Succession, the boardroom dynasty drama that’s not a million miles away from the Murdoch family’s own saga. For a US media giant, this makes the company a helpful bulwark against the threatened global domination of Netflix and Amazon.

Sky is also a technologically advanced company that has had the foresight to partner with Netflix in an intriguing arrangement that will see Netflix content integrated with Sky’s catalogue in Sky’s on-demand package from November. For now, this doesn’t exactly hurt.

Kardashian channel

So to Comcast, the company that a substantial chunk of Irish households will likely soon be giving hundreds of euro every year. How has it enriched any of our lives then?

The short answer is that Comcast, as the owner of NBCUniversal, is the ultimate parent of NBC television shows like The Good Place, This is Us and the forthcoming Julian Fellowes period drama The Gilded Age. Over the decades, NBC’s biggest contributions to television have included Friends, Cheers, Frasier, Seinfeld, ER, The West Wing and Hill Street Blues.

Through Hollywood studio subsidiary Universal Pictures, meanwhile, NBCUniversal is also responsible for the Jurassic Park, Fast & Furious and Despicable Me film franchises.

Oh, and as it also owns the channel E!, broadcaster of Keeping Up with the Kardashians, Comcast is the media entity that first brought us the Kardashian-Jenners.

A media marriage between Sky and Comcast could form an entertainment power-player strong enough to build a Netflix-esque subscription brand across Europe, perhaps through Sky’s existing streaming sideline Now TV. However it goes about it, Comcast is poised to become a heavy-hitter in the European media market. At the price it paid, nothing less will do.