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Now more than ever, content is king, and the only way for the traditional studio world to compete with new streaming platforms such as Netflix or Amazon Prime is to bulk it up. For this reason, Comcast and Disney might be about to enter a bidding war over 21st Century Fox. Back in December, Disney announced to acquire most of Fox in order to broaden the content for their upcoming streaming service. By absorbing most of Fox’s assets, Disney would get its hands on franchises like Avatar, The Simpsons, Modern Family, and Ice Age. Also, Marvel would be reunited with characters previously licensed to Fox, such as X-Men.
Vertical mergers of cable companies and content providers have recently drawn concerns about the potential threat of higher prices for consumers and less innovation. The Department of Justice has therefore blocked AT&T's $85 billion merger with Time Warner. The cable giant Comcast is currently preparing to top Disney’s $52 billion bid for much of 21st Century Fox with an all-cash offer of at least $60 billion. This offer is, however, conditional. Comcast is apparently waiting to see whether judges will rule in favor of the AT&T-Time Warner deal, before going ahead with its acquisition offer.
The decision regarding the antitrust lawsuit of AT&T and Time Warner is expected on Tuesday, June 12th. If this vertical merger of distribution and content goes through, Comcast will have a good bargaining position for its $60 billion offer to pass antitrust regulations. If the AT&T-Time Warner deal is blocked, Disney will likely acquire the Fox assets for $52 billion. Comcast may then limit what it seeks to buy from Fox, and focus on its $29 billion bid for Sky.
The winner of the Fox assets will be better positioned to compete with Netflix or Amazon Prime. The loser will be at risk of falling behind in the video streaming race. If the Fox deal falls through for Disney, their vast portfolio of film franchises should still provide enough backing for a successful streaming platform. The stakes appear much higher for Comcast. If the cable giant were to lose, it would be left to buy much smaller content properties to broaden their offering. Lionsgate, a small studio, might then become a potential acquisition target.
Owning 21st Century Fox provides access to another pivotal asset: its 30% stake in Hulu. It would give either Disney or Comcast, each of which already owns 30% of Hulu, a total of 60%, and thus control over the prestigious streaming platform. Hulu is often referred to as the “number three” streaming company behind Netflix and Amazon Prime and has more than 20 million subscribers in the U.S. Hulu offers its new owner a turnkey streaming platform with a strong brand, attractive user-experience and the ability to hit the ground running and not have to spend months, if not years, getting a new streaming service off the ground.
The Murdoch family, who has the largest stake in shares of 21st Century Fox, prefers a deal with Disney, saying it would be the better fit. They turned down a previous Comcast offer last fall. However, Disney is preparing its own cash bid to counter Comcast’s offer, should it become necessary. Most analysts believe that Disney in the end will raise its bid by as much as it takes to get 21st Century Fox. Comcast’s bid could rise to close to $100 million. June 12th will be an interesting day to observe the ongoing consolidation in the film and television industry. The decisions made about the AT&T-Time Warner deal will have significant implications for who will be and who will not be among the major streaming players.
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