June 27, 2018
NEWS ANALYSIS — Apparently, 21st Century Fox and The Walt Disney Co. really don’t want Comcast to buy the former’s 20th Century Film and British satellite TV operator Sky businesses no matter how many billions the cabler puts on the table.
Fox, which is run by Rupert Murdoch and his son Lachlan — in a regulatory filing — said Comcast’s $65 billion all-cash offer faces too many regulatory hurdles. Instead, it believes Disney’s competing $71 billion cash/stock bid poses fewer risks.
“While a potential Disney transaction was likely to receive required regulatory approvals and ultimately be consummated, a strategic transaction with Comcast continued to carry higher regulatory risk leading to the possibility of significant delay in the receipt of merger consideration as well as the risk of an inability to consummate the transactions,” the company said in the filing.
However, Comcast made its offer for Fox the day after a federal judge rejected similar antitrust issues and ruled in favor of AT&T’s $85 billion merger with Time Warner.
Included in the competing Disney/Comcast offers is controlling interest in Hulu, the money-losing SVOD service and adjunct online TV platform. Both Disney and Comcast would have 60% control of Hulu should either consummate the deal. Currently each company (along with Fox) has a 30% stake, with AT&T’s WarnerMedia owning 10%.
Hulu was a key issue to regulators when Comcast acquired NBC Universal in 2011. The DOJ at the time worried so much that Comcast could thwart rollout of over-the-top video that it mandated the company “relinquish its management rights in Hulu,” among other provisions. It also ordered Comcast make NBC Universal content available to Hulu “that is comparable” to the programming Hulu obtains from Disney and News Corp. (now 21st Century Fox).
Indeed, in a June 20 investor call, Disney CEO Bob Iger reiterated those concerns.
“What is also clear to us is that in the vertical concentration issues that I’ve talked about, this is a great concern to the DOJ,” said Iger.
With the OTT video ecosystem no longer in its infancy (hello, Netflix and Amazon Prime Video!), and Disney planning to roll out its own branded SVOD service in 2019, Fox contends regulators would have fewer issues with Disney controlling Hulu.
Which is precisely why the issue is moot, according to Rich Greenfield, media analyst with BTIG Research.
“Given that Hulu has been dwarfed by Netflix and Amazon on the SVOD front and trails well-behind other virtual MVPDs such as Sling and DirecTV Now, we find it difficult to imagine why greater Hulu ownership by Comcast would concern the DOJ in 2018,” Greenfield wrote in a June 26 note.
The analyst believes Comcast not only has the financial resources to top Disney’s offer, but smoother regulatory path as well.
“We continue to believe that if the DOJ is worried about reduced competition and higher consumer prices, with less choice in bundles, Disney/Fox is far more concerning than Comcast/Fox,” Greenfield wrote.