After a few polite brush-offs, Comcast finally got the message from 21st Century Fox: We’re just not that into you.
Comcast’s decision, confirmed July 19, to abandon its pursuit of major Fox assets, came as the cable giant realized the untenable cost of participating in a bidding war when Rupert Murdoch was already more than halfway down the aisle with Disney.
Comcast has turned its focus to competing for control of Sky, the European satellite provider that has been caught up in the larger Disney-Comcast battle for Fox. Both Comcast and Disney want Sky because they hope it can be a vital link in a global streaming distribution platform; it offers ready-made subscriber relationships in the U.K., Ireland, Germany, Italy and other Euro markets.
But closer to home, the question swirling around Comcast is whether the company has simply become Too Big to Merge, due to its status as the nation’s largest cable operator and broadband provider as well as being the parent company of NBCUniversal. The failure on the Fox hunt marks the second time in three years that regulatory concerns have presented a roadblock to Comcast’s ambition.
In 2015, Comcast had to pull its $45 billion offer for Time Warner Cable in the face of opposition from regulators, the industry and a fierce campaign from media and tech advocacy groups. When the courtship of 21st Century Fox heated up last fall, Fox board members were concerned from the start that a tie-up with Comcast would be a hard sell in Washington.
On paper, Comcast should have had no more difficulty than Disney in securing approval for the 21st Century Fox assets, antitrust experts say. But the political reality is that the company is a Big Media lightning rod in Washington. Comcast’s heft makes lawmakers and media watchdogs jittery as broadband increasingly becomes akin to a public utility.
“The issue is whether Comcast controls so many end subscribers and whether, as they add more content, it increases their power in both those markets,” said Ketan Jhaveri, CEO of New York-based legal data firm Bodhala and a former antitrust attorney with the Justice Department.
Comcast would have an impossible time trying to acquire another cable operator in this environment. But Jhaveri argues that the conglom should move quickly to target other content assets to buy, because the judge’s ruling in the AT&T-Time Warner antitrust trial creates a friendly regulatory climate for such acquisitions. Antitrust experts were surprised that the lengthy decision issued June 12 by U.S. District Court Judge Richard Leon came with no conditions on AT&T’s operations.
“This is the best dealmaking environment for media we’ve seen in 30 years because the AT&T decision was so broad.”
Bodhala CEO Ketan Jhaveri
The Justice Department is appealing Leon’s decision, but Jhaveri believes the marketplace is wide open until then, and the chances of a reversal of AT&T-Time Warner are slim. Moreover, Comcast never got to present its case to regulators because Disney beat it to the altar.
“If I’m Comcast, I’d be trying to buy as much content as possible right now,” Jhaveri said. “This is the best dealmaking environment for media we’ve seen in 30 years because the AT&T decision was so broad.”
Testing that theory will surely be easier said than done for Comcast and others. But market-watchers believe Comcast will stay in the dating game to expand its reach because of the same pressures that fueled its interest in Fox.
On the content side, Comcast is big, but perhaps not big enough to remain a contender in a world of massive global streaming platforms — such as the ones Disney hopes to build out with help from the horsepower it’s acquiring from Fox.
Sony Pictures Entertainment, Lionsgate, Discovery or MGM — all of those content-rich companies could easily be targets for Comcast once it recovers from the bruises of losing Fox to Disney.
There’s speculation that Comcast may opt to spin off NBCUniversal into a separate entity from its cable operations to facilitate dealmaking down the road. Research analyst Craig Moffett sees the company focusing on deals that will stoke its content pipelines, particularly if it’s successful in buying out Sky.
“There are no global economies of scale in distribution, only in content. With that in mind, we believe that investors really can safely dismiss arguments that Comcast’s ambitions with respect to Sky (and Fox) are a commentary on Comcast’s view of cable,” Moffett wrote. “Instead, they are a commentary on Comcast’s view of NBCU. Comcast rightly believes that being a player in media will require enormous scale. Now that they own NBCU, they’ve got to feed the beast.”