Coverage: Comcast outbids 21st Century Fox for Sky

Comcast has won an auction to acquire UK telecommunications company Sky, bidding $38.8 billion to overtake Rupert Murdoch’s 21st Century Fox after a lengthy bidding war this summer.

Andrew Liptak of The Verge had the news:

Comcast’s win paves the way for it to acquire Sky and its 23 million European subscribers and entertainment assets. Sky’s shareholders will now need to approve the deal.

Over the course of this year, Comcast and Fox have been locked in a titanic battle over their futures, one that will define the nature of the industry as a whole. Last summer, Disney CEO Bob Iger spoke with Murdoch about an acquisition of Fox and made its first offer in December, and while Comcast made its own overtures this spring. The two made several bids this spring, but after Disney later upped its offer, Comcast dropped its plans to acquire Murdoch’s company.

Simmering in the background of this was Murdoch’s ambitions to completely acquire Sky — Fox already owns a 39 percent stake in Sky, and Murdoch has been working to fully acquire it since 2016 — to better position the new version of Fox in the larger telecommunications world. He wasn’t the only one: Comcast was also interested in acquiring Sky, and another bidding war ensued this summer. In August, government regulators set up an auction for the company, which pitted Fox (and by proxy, Disney, which would swallow up Sky during its Fox acquisition) against Comcast.

Alex Sherman of CNBC.com reported that Hulu hangs in the balance as part of the deal:

Comcast is also willing to discuss selling its 30 percent stake in Hulu to Disney, according to a person familiar with the matter.

The streaming service is currently split between four owners: Comcast, Disney and Fox each own 30 percent, while AT&T owns 10 percent through its acquisition of Time Warner. Fox is selling Disney its 30 percent stake in Hulu as part of the larger $71.3 billion deal, giving Disney’s Iger a 60 percent ownership stake in the online streaming service.

Comcast sees only limited value in owning a non-controlling stake in Hulu if Disney will control the service’s fate, the person said. Disney is starting its own streaming service, to debut in 2019, and will have to decide how to marry Hulu with its own nascent product. Iger has already said he’ll keep Hulu operating separately, though he may offer a bundled discount to those that subscribe to multiple Disney over-the-top products.

Paul Sandle and Ken Li of Reuters report that the deal shows the looming threat of streaming services:

Some analysts, however, said that Comcast’s bid of 17.28 pounds per share in the rare blind auction was driven by an urgent need to build scale to defend against the threat posed by streaming services Netflix and Amazon.

“The price being paid for Sky is shocking, but it is a clear sign that legacy media companies are desperate for scale in a world dominated by tech platform giants,” said Richard Greenfield, technology and media analyst at research firm BTIG.

Explaining the basis of big media’s rush to merge, Greenfield likened it to the opening scene in the documentary “March of the Penguins.”

“The penguins huddle to survive winter. With Disney/Fox and Comcast/Sky, it’s penguins huddling. Winter is still coming,” he said, referring to the advance of tech players such as Amazon.