As Europe’s biggest pay TV operator, SKY is at the center of a power struggle between Disney and Comcast.
There was irony in Sky’s announcement that it is bundling Netflix with its pay TV services. As Europe’s largest pay TV group with 23 million subscribers spanning five countries, Sky is subject to an intense takeover battle between Disney and Comcast, which itself is motivated by Netflix’ rapid international growth.
Disney fears that Netflix along with other major sVoD or OTT providers such as Amazon will threaten its position as a major content producer and distributor. Comcast on the other hand is desperate to fight back against churn to these OTT rivals, while also itself being a big content house through its NBC Universal.
This a complex three way triangle because Disney’s $52 billion bid made in December 2017 was for most of 21st Century Fox, including the 39% of Sky that Fox owned. Comcast’s bid on the other hand is for the whole of Sky, but not anything else owned by Fox. Meanwhile Fox has been trying to acquire the remaining 61% of Sky it does not own.
On the one hand that clears the regulatory path for Comcast in the UK, where the objection to the Fox bid for the rest of Sky was that its owner Rupert Murdoch also holds other primary media outlets including the Times and Sun newspapers. The regulator feared that also owning the whole of Sky would give Murdoch too much power over the country’s news production.
On the other hand, Comcast’s bid for Sky naturally disrupts Disney’s plan to buy most of Fox because the latter includes that 39% stake in Sky. Given that Disney chief Bob Iger has described Sky as Europe’s crown jewel it is clear the operator-cum-broadcaster is seen as a primary motive for its bid to acquire Fox. With its dominant presence in the major markets of the UK, Germany and Italy, ownership of sky would at a stroke give either Comcast or Disney significant multinational presence in content distribution.
Netflix is an elephant in the room of the great battle for Sky.
In Disney’s case it would help with the strategy to become one of the world’s major providers of streaming services vying with Amazon, Netflix and Google. In fact, Disney plans to go further than Netflix and become a top subscription linear (SLIN) provider by exploiting its 80% ownership of the ESPN sports and entertainment network. Disney is planning to launch a branded direct-to-consumer streaming service in 2019 starting in the US and then moving on globally. It prepared the way for this development by acquiring a majority stake in streaming technology developer BAM Tech for $1.58 billion, and significantly by pulling its movies from Netflix. The irony would come therefore if Disney ends up owning part or all of Sky, which has just completed a deal with Netflix to be bundled in both its main satellite packages and the Now TV OTT service. This reflects Sky’s role as a distributor or content aggregator prevailing over its ambitions as a content producer, where it has seen Netflix and other sVoD providers as threats rather than opportunities.
Comcast had done a similar deal with Netflix earlier in the US with the mid 2016 announcement that the latter could be accessed via its X1 platform just like any cable channel. But Comcast has a similar internal conflict of interest to Sky as a major provider of TV shows and movies through NBC Universal. Fundamentally though Comcast has also been threatened by the major sVoD providers and OTT streamers so its move to acquire scale and leverage through acquisition of Sky is a response to that. Both Comcast and Disney want to be in the global mix for content production, distribution and service provision with the battle centering on ownership of customers and their data.
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