Media Moves

Coverage: Comcast offers $65 billion for most of 21st Century Fox

June 14, 2018

Posted by Chris Roush

Comcast announced an offer worth $65 billion for the bulk of 21st Century Fox’s businesses on Wednesday, setting up a showdown with the Walt Disney Company for Rupert Murdoch’s media empire.

Edmund Lee and Brooks Barnes of The New York Times had the news:

The all-cash bid by Comcast, the largest cable company and broadband provider in the United States, came a day after a federal judge approved a merger between AT&T and Time Warner. Comcast executives had awaited the decision in that case before mounting their bid for 21st Century Fox.

The one-upmanship reflects an industry under threat from Silicon Valley, where deep-pocketed technology companies like Netflix and Amazon are stealing audiences, ad dollars and big name creative talents.

In December, Disney struck an all-stock deal, worth $52.4 billion at the time, for Fox’s assets, shortly after Fox rebuffed an offer from Comcast that was worth roughly $60 billion, all in stock.

Now Comcast is back — creating a likely bidding war for a conglomerate that Mr. Murdoch has spent a lifetime building, and setting up a showdown between the Comcast chief executive Brian L. Roberts and his counterpart at Disney, Robert A. Iger, who has staked his legacy on this deal.

Steven Zeitchik of The Washington Post reported that there’s an impetus for Comcast to own content:

The impetus to own content has become even more urgent as technology has disrupted the traditional ways consumers get shows and movies. Americans increasingly are consuming entertainment on their smartphones or over high-speed internet connections, rather than on living room television plugged into cable outlets. And the coming advent of a new ultra-fast wireless technology called 5G is expected to accelerate the trend.

That has left cable, telecoms and tech giants urgently searching for premier content they can control, which would make them more immune to shifting technologies. Beyond AT&T and Comcast, Apple, Google and Amazon have all moved into producing or buying original programming. Meanwhile, Disney is planning to launch a streaming app next that will enable it to reach consumers directly and compete with companies such as Netflix.

“We’re dealing with huge companies that have the financial value greater than some countries,” said Mary Ann Halford, a global media strategist at OC&C Strategy Consulting, said of tech giants moving into entertainment. “If [legacy entertainment] companies don’t step up now this could be a death-knell for them the way digital media was for parts of the newspaper industry.”

Chris Welch of The Verge reported that the Fox news, sports and broadcast operations would be spun off:

Comcast’s bid is for the movie studio 20th Century Fox, 20th Century Fox Television, Fox-owned cable networks (including FX and National Geographic), several regional sports TV networks, and the company’s stakes in international networks Sky and Star TV. It also includes a 30 percent stake in the Hulu streaming service. Just like the Disney deal, Comcast would become a majority owner of Hulu if its proposed acquisition is approved. There will undoubtedly be concerns about one of America’s leading ISPs owning — and potentially prioritizing — services built around that vast collection of content.

Fox Broadcasting, Fox News, and Fox Sports are not part of the agreement, and the plan under the Disney deal is for them to be spun off into a company called New Fox. That will also occur if Comcast wins over Fox’s board and becomes the leading suitor. To get in that favorable spot, Comcast is offering the same $2.5 billion reverse breakup fee as Disney in the event that the deal is scuttled by regulators. But it’s going a step further and offering to cover the $1.525 billion that Fox would owe Disney if it decides to abandon their deal.

Roberts and Rupert Murdoch held discussions during the same period that Disney negotiated its offer with 21st Century Fox; Fox’s board chose the Disney path in part because it seemed like a safer bet versus a Comcast bid that could run into hurdles with regulators. AT&T’s victory might lessen that risk in the eyes of Murdoch. Comcast, which already made a colossal deal to acquire NBCUniversal in 2011, would leverage 21st Century Fox’s media businesses and vault of content in a similar manner: they’re hugely valuable resources in Comcast’s competition with Netflix, Amazon Video, and other streaming services that have invested heavily in originally programming.

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