Comcast has made a $65billion bid for Fox’s entertainment businesses, setting up a battle with Disney to become the next mega-media company.
The bid comes just a day after a federal judge cleared AT&T’s takeover of Time Warner and rejected the government’s argument that it would hurt competition in the cable and satellite TV industry and jack up costs to consumers for streaming shows and movies.
That ruling signaled that Comcast could win regulatory approval too, as its bid for Fox shares many similarities with the AT&T-Time Warner deal.
Disney made an offer of $52.5billion for Fox in December, though the final value will depend on the stock price at the closing.
Comcast says its cash bid is 19 per cent higher than that deal. The Wall Street Journal and others reported earlier that Comcast had lined up $60billion in cash to challenge Disney for media mogul Rupert Murdoch’s company.
In a call with investors, CEO Brian Roberts said the marriage of Fox and Comcast would create the ‘entertainment company of the future.’
Fox has been readying to sell off most of its properties to Disney, however Comcast has swooped in and outbid Disney
The battle for Twenty-First Century Fox comes as traditional entertainment companies try to amass more content to compete better with technology companies such as Amazon and Netflix for viewers’ attention – and dollars.
If the Comcast bid succeeds, a major cable distributor would control even more channels on its lineup and those of its rivals.
‘This is a golden offer that will put considerable pressure on (Disney CEO Bob) Iger and Disney to step up their game on another bid,’ GBH Insights analyst Dan Ives said. ‘This is even higher than the Street thought, which speaks to Comcast really wanting these key assets.’
That could lead to higher cable bills or make it more difficult for online alternatives to emerge, though there is not yet evidence of either happening following other mergers. For Disney, a successful Comcast bid could make Disney’s planned streaming service less attractive, without the Fox video.
As of now Comcast is offering Fox 19 per cent above Disney’s bid- which could force Disney to go higher if they really want to clinch Fox to become a mega-media conglomerate
Content is becoming more important as ways to deliver content proliferate. Cable companies like Comcast are no longer competing only with satellite alternatives such as DirecTV, but also stand-alone services such as Netflix and cable-like online bundles through Sony, AT&T and others.
Disney already started its own sports streaming service and plans an entertainment-focused one late next year featuring movies and shows from its own studios, which include Marvel, Pixar and ‘Star Wars’ creator Lucasfilm.
With the Fox deal, Disney would get more content for those services – through the studios behind the Avatar movies, ‘The Simpsons’ and ‘Modern Family,’ along with National Geographic. Marvel would get back the characters previously licensed to Fox, reuniting X-Men with the Avengers.
Comcast, meanwhile, has been leading the way in marrying pipes with the entertainment that flows through them. It bought NBCUniversal’s cable channels and movie studio in 2013 and added Dreamworks Animation in 2016.
The Philadelphia company has been tinkering with the traditional cable bundle, offering stand-alone subscriptions for some types of video along with smaller bundles of cable channels delivered over the internet. Comcast has said it will add Netflix to some cable bundles.
With Fox, Comcast would expand a portfolio that already includes U.S. television rights to the Olympics and comedy offerings such as ‘Saturday Night Live.’ Comcast already owns such cable channels as CNBC, Bravo and SyFy.
Whichever company prevails would also control Fox’s cable and international TV businesses. That’s key for Comcast, which currently doesn’t have an international presence.
The Fox television network and some cable channels including Fox News and Fox Business Network would stay with Murdoch’s family under either deal, as with the newspaper and book businesses under a separate company, News Corp.
Fox shareholders are set to vote on the Disney bid on July 10.
Despite Comcast’s higher offer, it’s not immediately clear whether Fox’s board would entertain it. According to regulatory filings, an unnamed company, widely thought to be Comcast, previously made an offer for Fox. But Fox went with Disney because of concerns it would face more regulatory scrutiny with the other company.
That was before U.S. District Judge Richard Leon ruled in AT&T’s favor and rejected the government’s argument that its takeover of Time Warner would hurt competition in pay TV and cost consumers hundreds of millions of dollars more to stream TV and movies.
The government worried that AT&T, as DirecTV’s owner, could charge Comcast and other rival distributors higher prices for Time Warner channels like CNN or HBO. In turn, that could drive up what consumers pay. AT&T and Time Warner argue they’re simply trying to stay afloat in the new streaming environment.
Disney wouldn’t face the same issues because it isn’t a television distributor as the way Comcast and AT&T are.
But if Disney gets Fox, the combined movie studios would account for 45 per cent of worldwide box office revenue, according to BTIG analyst Richard Greenfield. That could raise regulatory objections.
A larger studio could use its power to keep its movies in more theaters longer, dampening competition from rival studios.
Disney and Comcast had already been at battle in the U.K. over Sky TV.
Fox has a 39 per cent stake in that company and has been trying to buy outright, with the intention of selling the full company to Disney as part of that deal. U.K. regulators have given the OK to that offer if Fox sells Sky News.
Regulators there also have cleared Comcast’s $30.7billion offer for the 61 per Comcast bids $65billion for most of 21st Century Fox to undercut Disney’s existing dealcent of Sky that Murdoch doesn’t own.
In addition to the $35-per-share cash offer, Comcast agreed to pay a $2.5billion termination fee if the deal doesn’t pass regulatory muster. It also agreed to reimburse Fox for the $1.5billion-plus break-up fee it agreed to pay to Disney if their deal doesn’t go through.
Disney and Fox did not immediately respond to a request for comment.
How the rival Comcast and Disney bids for Fox shape up
Competing bids from Comcast and Disney for the bulk of Twenty-First Century Fox come as the media landscape changes and companies get more involved in both creating and distributing content.
Here’s how the companies would match up:
Fox’s film studios, with ‘Avatar,’ X-Men, the Fantastic Four and Deadpool, would pair well with Disney’s studios.
This includes reuniting the Marvel franchises X-Men and the Avengers, as some of those characters were already in Fox’s hands when Disney bought Marvel in 2009.
Disney also has the Muppets, Pixar and Star Wars.
In fact, Fox and Disney might pair too well, as far as regulatory concerns go.
Comcast’s Universal movie business controls the Jurassic Park franchise
BTIG analyst Richard Greenfield estimates the combined studios make up 45 percent of worldwide box office revenue. A larger studio could use its power to keep its movies in more theaters longer and squeeze out rival movies.
Comcast’s Universal movie business has such franchises as ‘Jurassic Park’.
The Fox properties would expand Comcast’s reach, though the company would have just 25 percent of the box office with Fox added, according to figures from Box Office Mojo.
Fox’s TV productions include ‘The Americans,’ ‘This Is Us,’ ‘Modern Family,’ and ‘The Simpsons.’ Its networks include FX Networks and National Geographic.
The Fox businesses would pair well with Disney channels like ABC, the Disney Channel and Freeform. ‘Modern Family’ already airs on ABC.
Comcast owns NBCUniversal, including the NBC broadcast network, CNBC and USA. Comcast’s studios produce ‘Chicago Fire’ and ‘Will & Grace,’ both airing on NBC.
Fox’s productions include The Simpsons as well as This is Us and Modern Family
Comcast might run into regulatory problems because the cable operator would control a larger portfolio of content along with its distribution.
Regardless of which company prevails in buying Fox, the Fox television network and some cable channels including Fox News will stay with media mogul Rupert Murdoch.
Disney’s deal includes getting Fox’s regional sports network, which shows hometown sports in several cities including New York, Los Angeles, Dallas, Cleveland, Detroit and Kansas City.
Those networks would complement Disney’s nationally focused ESPN.
Disney recently launched ESPN Plus, a separate streaming service with more local offerings. That service could benefit from Fox’s regional offerings.
Comcast already has similar regional networks through NBC Sports, including ones in Boston, Chicago and the San Francisco Bay area. Getting the Fox networks would expand Comcast’s territorial reach.
Whichever company prevails will control streaming service Hulu.
Currently, Comcast, Disney and Fox each has a 30 percent stake, with Time Warner owning the other 10 percent. With Fox’s share, either Comcast or Disney would end up with a controlling 60 percent stake.
Disney already plans an entertainment-focused streaming service in 2019.
The Star Wars films are produced by Disney, which is bidding for the bulk of 20th Century Fox
If Disney prevails, it could combine that with Hulu or keep them as separate services.
If Comcast prevails, Disney’s service could be less appealing, as it wouldn’t have Fox video. Comcast doesn’t currently have similar streaming ambitions and wouldn’t benefit as much from the Fox video.
Internationally, Fox’s cable and international TV businesses are part of the offerings. That’s key for Comcast, which has a limited overseas presence.
Disney and Comcast had already been at battle in the U.K. over Sky, an operator of television channels. Fox has a 39 percent stake in Sky and has been trying to buy outright, with the intention of selling the full company to Disney as part of that deal.
U.K. regulators have given the OK to that offer if Fox sells Sky News. Regulators there also have cleared Comcast’s $30.7 billion offer for the 61 percent of Sky that Murdoch doesn’t own.
Other international networks include Fox Networks Group International, Star India, Tata Sky and Endemol Shine Group.
Comcast and Disney have made extensive use of their portfolios at their theme parks in California, Florida and overseas.
Disney, for instance, is expanding its attractions related to ‘Star Wars.’ On the flip side, Disney turned its Pirates of the Caribbean ride into a major movie franchise.
Disney turned its Pirates of the Caribbean ride into a major movie franchise starring Johnny Depp and Orlando Bloom
Comcast’s Universal Studios has attractions based on Universal’s Fast and the Furious franchise.
Either company would be able to expand its opportunities with Fox, though the theme parks have historically been able to reach licensing deals with rival studios.
Universal, for instance, has rides based on Fox’s ‘The Simpsons’ and Warner Bros.’ ‘Harry Potter.’ Disney has licensed Fox’s ‘Avatar’ for its ‘Pandora’ park within Walt Disney World.