Fox Ups Q1 Hulu Equity Loss 84%

Twenty-First Century Fox Nov. 7 disclosed a first-quarter (ended Sept. 30) equity loss of $114 million regarding its 30% ownership stake in Hulu. The loss represented an 84% increase from an equity loss of $62 million during the previous-year period.

Hulu, which is co-owned by Disney, Comcast and WarnerMedia, continues to generate significant losses on paper to its corporate owners, who license hundreds of millions of dollars in content to the 20+ million subscriber over-the-top video service.

While Hulu is nominally losing several billion dollars per year, its “losses” essentially amount to the excess it pays to its four sponsors over the revenues it generates, according to Wedbush Securities media analyst Michael Pachter.

“If the four [corporate] sponsors find a way to grow Hulu’s subscriber base, it should be able to achieve breakeven, and it should manage to gain market share from Netflix,” Pachter wrote in a recent note.

The analyst expects content from Disney, Fox, Universal, and Warner to be largely unavailable to Netflix going forward, leaving the SVOD pioneer trying to buy content from Sony, Paramount, Lionsgate, MGM, and smaller studios.

“Ultimately, we expect Hulu to become a formidable competitor to Netflix, particularly should Disney and Warner Bros. layer their own streaming offerings as premium additions to a basic Hulu subscription,” Pachter wrote.

Meanwhile, 20thCentury Fox Film (which includes 20thCentury Fox Home Entertainment) reported operating income of $277 million, an 8% increase from the $256 million reported in the prior-year quarter. The increase reflected higher contributions from the television production studio led by higher SVOD licensing of animated product.

Quarterly revenue decreased 7% to $1.82 billion, primarily reflecting lower theatrical revenue from a lower volume and mix of films released in the current quarter partially offset by higher SVOD revenue at the television production studio.

“We continue to deliver against our growth plan even as we make important strides toward completing our Disney transaction and launching Fox in the first half of 2019,” executive chairmen Rupert Murdoch and his son Lachlan said in a statement.

Separately, Fox posted a $147 million equity gain from its 39% stake in British satellite TV operator Sky – up 34% from an equity gain of $110 million last year. Fox recently sold much of its Sky stake to Comcast.

Finally, the European Commission approved Disney’s acquisition of 20thCentury Fox provided it sells its stake in A&E channels (History, H2, Blaze, Lifetime, Crime + Investigation) distributed overseas.

“The commission’s decision is conditional upon full compliance with the commitments,” the EC said in a statement.

 

Sky Boss Jeremy Darroch Says He’s ‘Sticking Around’ Euro Pay-TV Operator Following Comcast’s Acquisition

Jeremy Darroch, chief executive of Comcast Corp.’s newly-owned Sky subsidiary, said he plans on remaining at the U.K. satellite TV operator following Comcast’s $40 billion acquisition.

Speaking Oct. 25 on Comcast’s fiscal call, Darroch said he looked forward to leading Sky, which has more than 15 million subscribers, including subsidiaries Sky Deutschland and Sky Italia.

“We’re all energized by the next phase of growth and the additional opportunities that being part of Comcast will bring, on top of delivering our existing plans,” he said.

The news seemed to please Comcast chairman/CEO Brian Roberts, who introduced Darroch on the fiscal call. Indeed, for Darroch – who received a $47.4 million golden parachute following the close of the acquisition – not remaining at Sky could have proved a challenge to Comcast’s nascent international strategies.

“We’re really excited and pleased with the [Sky] management team” said Roberts. “We are delighted that Jeremy and many of the team, the senior team, we hope and believe are going to stay with the company.”

With Roberts agreeing to pay more than twice what 21stCentury Fox offered for outstanding interest in Sky, media analysts in the United States have questioned how the deal will be accretive for Comcast shareholders going forward.

“It seems as though they would like investors to forget that Sky is also a satellite TV provider, and satellite video distribution is increasingly becoming obsolete,” Craig Moffett, with MoffettNathanson Research, wrote in a note last month.

 

 

DOJ Upping Comcast Scrutiny Over Hulu

When Comcast acquired NBC Universal in 2011, federal regulators required the Philadelphia-based media conglomerate to step away from management issues regarding Hulu — the subscription streaming video service it co-owns with the Walt Disney Co., 21st Century Fox and AT&T’s WarnerMedia.

With those and other regulatory restrictions lifted this year, Comcast, which owns 30% of Hulu, now has more of input into how Hulu — and online TV service Hulu Live — operate. The cable operator announced last month the appointment of three members to Hulu’s board of directors, who include NBC Universal executives Jeff Shell, Linda Yaccarino and Matt Bond.

Now the U.S. Depart of Justice’s antitrust unit plans to up its oversight into how Comcast its renewed leverage on how Hulu operates in the pay-TV ecosystem, according to Assistant Attorney General Makan Delrahim.

Speaking Oct. 3 to Senators in Washington, D.C., Delrahim was asked if Comcast increased oversight of Hulu posed a threat to consumers.

“Certainly, Hulu could be a competitor to the cable business,” Delrahim told Senator Richard Blumenthal (D-Conn.), according to Bloomberg. “And it’s one that we will examine carefully to see if they might take any conduct that would harm its ability to compete.”

Indeed, in a letter to Comcast prior to restrictions being lifted, Delrahim reminded the company that government oversight was not in the past tense.

“The department retains jurisdiction to enforce the antitrust laws and takes its obligations seriously,” he wrote on Aug. 14.“We would appreciate your cooperation in keeping us informed by providing the department with any plans you may have to change your policies or practices involving video programming and distribution.”

Interestingly, the DOJ could forward the letter to Disney, which will own 60% Hulu following its $71 billion acquisition of select Fox assets, including Hulu. That deal, whose price tag was significantly reduced following Comcast’s separate purchase of British satellite TV operator Sky, is still under regulatory approval.

Disney plans to launch a branded OTT video service next year – as it did this year with ESPN+.

 

Comcast Acquires 30% of Sky Stock Following Weekend Auction Win

Comcast Corp. Sept. 25 disclosed it has acquired 30% of British satellite TV operator Sky Plc., shares following a weekend takeover auction win over 21st Century Fox.

Fox, which owns 39% of Sky, is selling its stake, in addition to 20thCentury Fox Film, to The Walt Disney Co.

Comcast said it would continue to acquire Sky shares from investors for the £17.28 ($22.60) per share price hammered out in the special auction for controlling interest in the pay-TV operator. The share price values Sky at more than $40 billion. Fox had offered £15.67 per share.

“Comcast Bidco will continue to acquire Sky Shares in the market from eligible shareholders outside the United States at up to and including £17.28 in cash for each Sky Share,” Comcast said in a statement first reported by CNBC, which is owned by Comcast’s NBC Universal subsidiary.

Indeed, Comcast needs to acquire 50% of Sky’s stock plus one additional share to complete the takeover. Sky’s board approved Comcast’s offer, calling it “materially superior” to Fox’s bid and called on Sky investors to “immediately” accept it.

Notably, when Fox first bid on Sky’s remaining stock in late 2016, its offer totaled £10.75 per share.

Meanwhile, Comcast shares continue to decline following the auction, with some analysts contending the media giant overpaid for a waning distribution model (satellite TV).

Not so for Liberty Global CEO Michael Fries, who called Comcast’s purchase price a “great outcome” for Sky shareholders. The executive said it values the European pay-TV market, an ecosystem he claims is often overlooked.

Fries called on Comcast CEO Brian Roberts to remain “rationale” on the deal and to give it time to playout.

“I think the purchase price is terrific,” he told Bloomberg.

 

Comcast Tops Fox in Sky Satellite TV Auction

Comcast Sept. 22 disclosed it has prevailed over 21st Century Fox with an offer price of £17.28 per Sky share to acquire majority control of the U.K. satellite TV operator in an auction mandated by British regulators. This offer implies a value of $40 billion (£30.6 billion) for the fully diluted share capital of Sky. The announcement ends the competitive bidding process for Sky.

Fox, which controls 39% of Sky, had sought to acquire outstanding Sky shares it did not own for £14 per share. Comcast had offered £14.75 per share. When Sky investors failed to adopt either offer, an auction was ordered by The Panel on Takeovers and Mergers.

Sky shareholders must now ratify the Comcast offer.

“This is a great day for Comcast, chairman/CEO Brian Roberts said in a statement. “Sky is a wonderful company with a great platform, tremendous brand, and accomplished management team. This acquisition will allow us to quickly, efficiently and meaningfully increase our customer base and expand internationally. We couldn’t be more excited by the opportunities in front of us. We now encourage Sky shareholders to accept our offer, which we look forward to completing before the end of October 2018.”

 

Fox, Comcast Extend Offer for Sky to Oct. 6

As expected, 21stCentury Fox has extended its offer for remaining shares of U.K. satellite TV distributor Sky to Oct. 6 – the same date Comcast extended its competing offer.

Comcast currently holds the higher bid: $34 billion (£14.75 per share) compared to Fox’s £14 per share. Yet neither offer has resonated with Sky shareholders, with less 30% of shareholders tendering Comcast’s offer compared to 0.07% for Fox’s offer.

Fox, which is controlled by Rupert Murdoch, currently owns 39% of Sky. The Walt Disney Co. outbid Comcast for select Fox assets, which include 20thCentury Fox Film and Sky.

With Sky’ stock closing down Sept. 17 at £15.78 per share in London, it’s clear investors are hoping for a superior bid from either Comcast, Fox or even Disney.

Following the deadline, corporate takeover rules in the United Kingdom mandate a five-day sealed auction overseen by regulators with Comcast, Fox and Sky agreeing on the terms.

 

 

 

Fox Doubles Fiscal-Year Hulu Equity Loss

Hulu, the SVOD service co-owned by The Walt Disney Co., Comcast, 21st Century Fox and WarnerMedia, may have 20 million subscribers, an Emmy-winning series (“The Handmaid’s Tale”) and an online TV component. It also has burgeoning costs for its corporate owners.

Fox on Aug. 8 disclosed it generated a $127 million fourth-quarter (ended June 30) equity loss for its 30% stake in Hulu. That was up 135% from an equity loss of $54 million during the previous-year period.

For its fiscal year, Fox posted a Hulu equity loss of $445 million – more than double the $215 million equity loss last year.

With Disney assuming Fox’s Hulu stake (for 60% controlling stake) as part of its $71 billion acquisition of 20thCentury Fox Film and other Fox assets, expect the Mickey Mouse company’s equity loss to increase.

Disney CFO Christine McCarthy alluded as much on the company’s Aug. 7 fiscal call.

“The higher losses at Hulu were primarily driven by higher programming and labor costs, partially offset by higher subscription and advertising revenue,” McCarthy said

Indeed, Disney attributed a $49 million second-quarter equity loss to Hulu, which mushroomed to a $193 million through the first six months of the year.

Hulu lost $920 million in 2017 compared to a loss of $531 million in 2016. The fiscal loss is reportedly projected to reach $1.7 billion this year as the service ups original content spending on “The Handmaid’s Tale,” “Marvel’s Runaways,” “Future Man,” and “The Doozers,” among others.

 

Disney, Fox Shareholders Approve Historic Deal

The big deal is on.

As expected, shareholders of The Walt Disney Co. and 21st Century Fox  on July 27 approved Disney’s acquisition of Fox’s entertainment assets, in one of the biggest media mergers of all time.

Investors approved the $71.3 billion deal – first proposed last December – in separate meetings at the New York Hilton. Both meetings were brief, less than 15 minutes. Fox shareholders were told the union would be completed in the first half of 2019.

Indeed, 21st Century Fox, which is selling select Fox assets, including 20th Century Fox Film, and Disney July 26 filed for regulatory approval in Brazil, claiming the merger does not hinder competition.

The shareholder vote came a month, to the day, after Disney won U.S. antitrust approval to buy Fox’s entertainment assets on the condition it divest 22 Regional Sports Networks (RSNs).

Disney had initially offered $52.4 billion to buy the Fox movie and TV assets, but after Comcast Corporation in early June countered with a $65 billion all-cash deal, Disney upped its cash-and-stock offer to $71.3 billion.

A little more than a week ago, Comcast dropped its bid and shifted its focus to buying European pay-TV operator Sky.

Fox Tops Comcast’s Sky Merger Offer

The “Sky” is apparently the limit for 21st Century Fox, which on July 11 upped its offer more than 30% for the British satellite TV operator to £14 per share — valuing the company at $32.5 billion. Fox, in late 2016, offered £10.75 per share of Sky stock (61%) it did not already own.

The bid represents an 82% premium on Sky’s £7.69 per share closing price the day before Fox’s initial bid. It also tops Comcast’s rival offer of £12.50 per share.

“As a founding member of Sky, we have remained deeply committed to bringing these two organizations together to create a world-class business positioned to deliver the very best entertainment experiences well into the future,” Fox said in a statement.

It’s a sentiment shared by The Walt Disney Co. and Comcast, which both have competing takeover bids for select Fox assets, including 2oth Century Fox Film and Sky.

Consolidation in the media world is in full swing following AT&T’s $85 billion acquisition of Time Warner as companies grapple with over-the-top video and subscription streaming video behemoths Netflix and Amazon Prime Video.

Disney last month upped its offer for Fox to $71.3 billion after Comcast bid $65 billion — topping Disney’s initial $52.4 billion acquisition amount.

Federal regulators last month approved Disney’s bid after the Mickey Mouse company agreed to divest 22 regional Fox Sports networks. Across the pond, the U.K. Secretary of State is expected rule on the Fox/Sky deal by July 12.

Regardless, Sky shares closed July 10 at £15.01 per share suggesting the sky is indeed the limit for shareholders convinced the bidding war will continue.

FuboTV Hires New Chief Technology Officer

FuboTV, the upstart online TV service co-funded by 21st Century Fox, has hired Geir Magnusson Jr. as its new chief technology officer.

Magnusson, who is the co-founder and former CTO of Sourcepoint Technologies, replaces Jason Solinsky, the ex-Google engineer FuboTV hired two years ago to its sports-centric platform.

“Geir has a strong track record of scaling complex global platforms and a proven ability to guide transformation at leading tech companies,” David Gandler, co-founder and CEO of FuboTV said in a statement. “We believe Geir’s expertise and passion for innovation will ensure we maintain our leadership position as we deliver to consumers a next-generation live OTT experience.”

The platform earlier this month launched 4K HDR10 support in beta, claiming to be the first virtual multichannel video programming distributor to offer content in ultra-high-definition and high dynamic range.

Starting July 2, broadcasts of Russia 2018 World Cup soccer on Fox and FS1 were available in 4K HDR10 with FuboTV on all Chromecast and Fire TV devices that support the format. FuboTV will also launch 4K HDR10 on Roku and Apple TV in the coming weeks.