With its takeover of highly successful pay-TV service Sky now almost assured, Comcast is not expected to do anything to upset its new golden goose. But a change in culture seems inevitable, and possibly in management.
Comcast sees enough to like in Sky to shell out $40 billion and is expected to retain much of the team that has built the business. It would also be a PR misstep to make wholesale changes. “It wouldn’t be a good look if they have taken over one of the biggest TV companies in Europe and take out the European management,” said Tim Westcott, director of research and analysis at IHS Markit.
A key question, however, is whether CEO Jeremy Darroch will stay on. A longtime Sky exec, Darroch is credited with keeping the company profitable and cutting-edge in a fast-changing media landscape, and with shepherding it through its protracted sale, which culminated in an auction last Saturday. “Darroch has said he has been overseeing this process for the last few years, and that maybe indicates questions about his replacement have begun as well,” said Guy Bisson of Ampere Analysis. “It wouldn’t be unexpected if he moved on.”
Whether he stays or goes, Darroch is set to pocket tens of millions of pounds when the deal closes.
As for other execs and staff, analysts agree that some job losses at Sky are likely, to eliminate duplication within Comcast, but that the overlap is limited. In terms of program sales, there is some overlap between Sky Vision, which is growing under Jane Millichip, and NBCUniversal’s international distribution arm, which Belinda Menendez oversees. Both Sky and Comcast also operate a swath of pay-TV channels.
As part of the Comcast family, Sky is expected to capitalize on programming and tech cooperation with its new parent, which will seek to keep it on its current course.
Sky has accelerated its push into original drama and inked a $250 million co-production pact with HBO. (Premium HBO shows such as “Game of Thrones” and “Westworld” go out on the Sky Atlantic channel.) Post-takeover, Sky will also have NBCUniversal as a stablemate, which should open the door to new content partnerships.
Content deals were already possible with 21st Century Fox as Sky’s main shareholder (a 39% stake), but with competition growing from Netflix and other digital behemoths, there is increased impetus to scale up and join forces on content. “NBCUniversal could come in and pre-buy U.S. rights, or deficit-finance high-end Sky productions,’” Westcott said.
“There’s a pretty big content overlap that presumably they will want to make work harder for them,” added Ed Barton, chief entertainment analyst at Ovum. “They could look at licensing content on a combined basis, which would lower the cost on a per-subscriber basis, if you have something you can show to a European and U.S. audience.”
Besides providing content-hungry networks with programming, combining production firepower could serve a greater purpose. “It would mean Sky and Comcast have a bigger library of original content. If they were going to roll out direct-to-consumer services in other countries, that would certainly help,” Westcott said.
Sky currently boasts 23 million subscribers in the U.K., Ireland, Germany, Austria and Italy. The U.K. pay-TV market is mature, and while Germany and Italy offer room to grow, Sky is expected to expand geographically, which would further boost Comcast’s international footprint.
Sky has already launched over-the-top services in Spain and Switzerland using the same model as it employed with its Now TV streaming service in the U.K. “Where Sky has moved into new territories, it doesn’t have a lot of local content,” Westcott said. “NBCUniversal doesn’t have a lot of local content, but it does have an enormous amount of content and channels. You can see that’s another way Sky could develop with support from Comcast.”
The Comcast-Sky dynamic also differs from Fox-Sky in that the new partners are both ostensibly pay-TV platforms offering broadband, telephony and other services. There is a cultural affinity and they speak the same language in terms of tech, and that could usher in cooperation across areas such as addressable ad services and advanced set tops.