Robert Iger, chairman and chief executive officer of Walt Disney Co. and Brian Roberts, Comcast chairman and CEO. Getty Images The irony of the Comcast-Disney battle to buy the majority of 21st Century Fox is that CEOs Brian Roberts and Bob Iger could both walk away happy. All they'd have to do is split up Fox. And yet, it doesn't look like that's going to happen. Disney wants Fox's movie studio and owned content properties to boost a digital streaming service that Iger plans to launch in 2019. "The aim of this combined company is to create even more high-quality content and then to distribute it in ways that consumers prefer and consumers demand in today's world," Iger told CNBC in December. Comcast, on the other hand, is most interested in acquiring Fox's international assets — European telecommunications company Sky and Indian media conglomerate Star India. Here's what Roberts said on a call with Comcast investors on June 13: "We firmly believe that that the truly great media companies of the next century will be large, integrated entities with multiple growth engines across a wide swath of the global entertainment industry. And we believe our proposed acquisition of Fox would not only enhance our domestic positions in distribution and content, but would take us to global reach and additional growth in these businesses." It doesn't take a fission scientist to come up with a solution — Comcast takes the international assets and Disney takes the domestic ones. And if both Comcast and Disney want Hulu, they can halve Fox's 30 percent ownership. But it may be too late. There are no talks between the two companies about splitting Fox, according to people familiar with the matter. That's because Disney had no need to invite Comcast to split the assets when it reached a deal with Fox last year. But Judge Richard Leon's ruling on Wednesday that AT&T could buy Time Warner without conditions changed the calculus. Now Comcast has overbid Disney by about $9 billion (based on today's movement in Disney shares) for the same Fox assets. If Iger wants to avoid a bidding war and split the assets now, Fox would need to release him from the companies' signed deal agreement. That's unlikely to happen, because it could prevent Fox from getting the highest price for the assets it wants to sale — a bidding war is just fine for Fox shareholders. Rupert Murdoch, Chief Executive Officer of News Corp. Getty Images<doc-sep>Philadelphia cable giant Comcast on Wednesday offered $65 billion for the bulk of 21st Century Fox’s TV and studio assets, topping a previous $52.4 billion bid for the properties by Walt Disney Company and likely setting off a bidding war between two media giants. The aggressive maneuver, if successful, would marry Comcast’s NBC broadcast network and the Universal movie studio with the FX cable network, 20th Century Fox, a lucrative group of regional sports networks and a stake in British satellite broadcaster Sky. Comcast said its offer was valued at $35.00 per share in cash, representing a premium of approximately 19% to the value of Disney’s all-stock offer. Fox late Wednesday afternoon confirmed it had received the offer, but made no additional comment. “We have long admired what the Murdoch family has built at Twenty-First Century Fox,” Comcast CEO Brian Roberts wrote in a letter to Fox’s controlling Murdoch family, telling 21st Century Fox Executive Chairman Rupert Murdoch and his sons Lachlan and James that Comcast “would be the right strategic home” for the parts of the company that are for sale. To move the bid from disruption to a fait accompli, Comcast, will first have to outmaneuver Disney. The Burbank. California, entertainment titan has a chance to match or even top Comcast’s offer. Fox had already planned to convene a July 10 investor meeting to address the sale of its properties, but could postpone the event if its executives believe shareholders need to review additional materials. Fox’s board is likely to meet soon to consider the officer, according to a person familiar with the matter, and Disney would have a few days’ time to respond once the board’s thining becomes known. Fox intends to keep Fox Broadcasting, Fox Sports and Fox News under its own corporate umbrella. Comcast’s bid sets up a showdown for a once-in-a-generation opportunity that could cement Disney CEO Bob Iger’s legacy. Sealing a deal for Fox would cap off a spate of massive acquisitions under his aegis at Disney, which include a $4 billion buy of Marvel Entertainment in 2009; a $4 billion purchase of Lucasfilm in 2009; and $2.58 billion over three years for BAMTech, the streaming-video unit that is meant to power Disney’s various subscription-based video outlets. But a deal would bolster Comcast in similar fashion, adding new heft to its Universal movie production operations, its NBC Sports unit, and its cable programming operations, among other properties. And a win would lend Comcast new momentum in its quest to grow after AT&T was granted permission Tuesday to complete its $85.4 billion purchase of Time Warner. The race for Fox spotlights the growing pressure placed on traditional media companies, who have long depended on their ability to assemble mass audiences to watch content distributed in linear fashion. The rise of streaming video and mobile devices, however, has made one-to-one broadcasting easy to put into place. Consumers can now watch their favorite movies and TV series on demand. And a new cohort of tech-savvy content providers has thrived even as traditional media companies have grappled with reworking their operations to accommodate viewers who can binge-watch a video favorite at a time and date of their own choosing. Disney, Comcast and others now vie with new giants like Netflix and Amazon, as well as other digital hulks eager to get into video, like Facebook, Twitter and Apple. Under the terms of Disney’s proposed deal for Fox, the Murdoch family-controlled company would be on the hook to pay a breakup fee of $1.52 billion if Fox pulls out of the pact for any reason not related to a regulatory block of the transaction. – a fee Comcast said it would reimburse if Fox took it up on its offer. Fox has said its board of directors recommends stockholders vote in favor of the proposal to sell to Disney During a call with investors, Comcast executives noted that a Fox acquisition would boost significantly the amount of revenue the company gets from foreign markets, increasing it to 27% from 9%. And they noted with interest the opportunity to gain more control of Hulu, which they said they believed would grow into one of the nation’s best video-on-demand businesses. Comcast might face a higher degree of scrutiny. Disney does not own a cable-distribution operation, while Comcast runs one of the nation’s largest. But because Comcast snapped up the large NBCUniversal conglomerate in 2011, regulators have placed its subsequent efforts to grow under a powerful microscope. In 2015, when Comcast tried to expand its influence with a purchase of Time Warner Cable, the Department of Justice balked, and the Philadelphia cable giant backed down. Comcast’s Roberts addressed that very matter in his letter, telling the Murdochs the company was “highly confident that our proposed transaction will obtain all necessary regulatory approvals in a timely manner and that our transaction is as or more likely to receive regulatory approval than the Disney transaction.” Comcast said it would agree to pay a $2.5 billion reverse termination fee, the same amount agreed to by Disney. In all, Comcast would pay $4.025 billion – the reverse termination fee and the reimbursement to Disney -if it failed to close the transaction. Both companies are also interested in nabbing Fox’s 39% stake in British satellite broadcaster Sky PLC. The European media outlet would give Comcast or Disney needed reach into foreign markets, and could also potentially fuel new business for NBC News or ABC News. Fox is in the midst of a years-long process to acquire the 61% of Sky it does not own for about $16 billion, and has tried to move past skeptical British regulators. Comcast in April injected some chaos into that process by offering $30.7 billion for the whole company. Comcast said it intended to pursue its bid for Sky ” in parallel”with its quest for the Fox assets.<doc-sep>While Comcast had floated the deal for some time, it was waiting to see the outcome of an antitrust case brought by the Trump administration that was seeking to block America's largest pay-TV provider, AT&T, from buying Time Warner - the home of franchises like Game of Thrones, Wonder Woman and CNN.<doc-sep>
The more Comcast’s Brian Roberts and Disney’s Bob Iger duel over Rupert Murdoch’s Fox media empire, the better it could be for Netflix’s Reed Hastings. Disney is launching a family-friendly Netflix rival next year with its own content. It also had been planning to use the content it was going to buy from 21st Century Fox, like its movies and TV shows, to fortify another streaming competitor, Hulu, which it partly owns. Combined with Disney’s sports streaming service, ESPN Plus, the Disney-Fox deal had the potential to set Disney up as a real force in the streaming world. Now, that’s in doubt because Comcast has bid to steal Fox out from under Disney. Comcast offered $65 billion in cash for the company yesterday, topping Disney’s earlier $52 billion stock offer. Disney will likely counter, which could start a bidding war. “Comcast’s bid for Fox seems more like an opening salvo in a bidding war than it does a best and final bid,” MoffettNathanson analyst Craig Moffett wrote in a report (login required) today, June 14. Fox is considering canceling or postponing its July 10 shareholder vote on the Disney-Fox merger while this plays out. The best outcome for Netflix would be some sort of split of Fox’s assets that sees its TV and film businesses, along with its 30% stake in Hulu, and its 39% share of European TV provider Sky fall into different hands. ”A bidding war and potentially a breakup up of some key assets to multiple bidders to navigate any regulatory hurdles would be a major win for Hastings & Co. not to have all these assets under one hood,” Daniel Ives at GBH Insights, wrote in a note today. If Disney wins all, it would control about 40% of the box office, more than a dozen of the top US TV networks, and one of Netflix’s top US rivals, Hulu. (Disney and Comcast each own 30% of Hulu. Turner, soon to be in the hands of AT&T, owns the remaining 10%.) That’s a lot of content it could withhold from Netflix and use to prop up its competitors. Disney is ending its deal to send its new movies to Netflix in 2019, in preparation for its streaming service’s launch. And Netflix has been poaching creators from Disney, Fox, and elsewhere, signing them to long-term deals to shore up its own content pipeline. Meanwhile, Comcast’s entertainment arm, NBCUniversal, had been in early talks to start a streaming service with Warner Bros.—also soon to be owned by AT&T—CNBC reported June 13. That may not happen if Comcast buys Fox, CNBC said. Comcast, which would then gain the majority stake in Hulu, could also become a major streaming player down the line; it already sells a live-TV streaming service, Xfinity Stream, to broadband customers in some markets. But Disney’s standalone services are more immediate threats to Netflix because of the company’s breadth of TV and movies, and collection of popular franchises, like Star Wars, Marvel, and Pixar’s titles. Some analysts are skeptical that either Disney or Comcast would be willing to budge on their proposals. Rich Greenfield at BTIG Research argued the winner will ultimately take all (login required). And Comcast’s chief financial officer Michael Cavanagh suggested as much on a call with investors yesterday. “We’re in this,” he said. “We like everything about this transaction. And that is our focus, to do everything that we… discussed.” Either way, Netflix’s Hastings will certainly be watching from the stands to see which media giant loses first blood.