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Comcast, in 2nd Try, Offers $65B Cash for 21st Century Fox (nytimes.com)
206 points by peterlk 6 months ago | hide | past | web | favorite | 84 comments

This is going to be a huge mess. The bid was rejected last year due to doubts that the deal would go through, and also that the Murdoch family was much more comfortable with Disney, which has a solid reputation of dealing with acquisitions (Marvel, Lucasfilm, Pixar) as opposed to Comcast. This deal now being all stock is designed to cause a revolt from the rest of the ownership interest in Fox from the Murdochs, who want the Disney deal.

Hulu is one of the crown jewels here. Because of the way the contracts are structured, whoever buys Fox, gets total control of Hulu. There were some court orders that recently expired on Hulu which is part of the behind the scenes reason this war is going on now.

The breakup fee is a lot of cash here - Disney had made a similar guaranteed (2.5 billion), but Fox itself will be on the hook for 1.52 billion if they break off for Disney in favor of Comcast.

There's been a lot of speculation that part of the deal with Fox was that James Murdoch would eventually be the heir apparent to Bob Iger. That speculation faded a bit, but still something to keep a eye on.

What what happens with Hulu and with the Murdoch controlling interest in Fox. It may take a shareholder revolt to go with Fox over Disney.

I don't see this deal as a must-win for Disney. They have the possibility to go over the top with their new Disney streaming service, and they have all the content in the world right now. Disney lawyers will probably find some event to use to justify yanking the Marvel rights from Comcast if this deal goes through.

>Hulu is one of the crown jewels here.

Maybe for Comcast, but I doubt it is for Disney. Disney already purchased BAMTech which handles streaming for MLB, HBO, ESPN, League Of Legends, and many others. They have been working towards using that technology for a Disney streaming service that will debut sometime in 2019. That company is already closing in on Hulu in terms of value and would make integrating Hulu's tech and employees difficult. The only real value Hulu gives Disney is contracts for content, but those contract are only temporary and good content is still the core competency of Disney. It wouldn't surprise me if Disney proposed the original deal with the expectation that they would need to sell off Hulu to a competitor in order to get the political capital for approval for the rest of the deal.

Hearsay, but...

I’ve heard that last year Disney blocked an attempt from Apple to buy Hulu, which suggests that it is still pretty important to them

Which would still fit in with my theory that they plan to sacrifice it to secure the rest of the sale. They won't get any political capital for selling Hulu until it comes up in negotiations with regulators.

Even further hearsay, but rumors also exist that Disney still hasn't announced the name/brand of their streaming service yet, despite supposed to launch early next year, in the off chance that they have the opportunity (controlled Hulu) to just use the existing Hulu brand and leverage existing brand awareness/loyalty.

Hulu’s major selling point is it’s distribution of network shows - but that’s mostly in the US. For a global company like Apple, it’s not as valuable.

I’m curious, how would they go about blocking it?

Disney Owns 30% of Hulu today, Fox owns 30% and Comcast owns 30%

If either Disney or Comcast buys Fox will become 60% owner, however being a 30% owner is likely enough power to have enough influence to block a sale to Apple..

FWIW: "... 60% of peak download traffic on fixed access networks in North America was accounted for by four VOD services: Netflix, YouTube, Amazon Video and Hulu."

from https://medium.com/netflix-techblog/the-end-of-video-coding-...

That's misleading Netflix has more than 10x the traffic Hulu gets. Hulu's under 3% of peak viewing traffic and relatively small by comparison to the others.

> Disney lawyers will probably find some event to use to justify yanking the Marvel rights from Comcast if this deal goes through.

Probably not that hard; licensing deals very often have change of ownership clauses exactly to prevent someone purchasing the licenses to get the license without the licensor having a say.

The Marvel contract has proven remarkably difficult to deal with, and there are empires that have been funded in Florida as disney tries to find a way to undo it.

Quite possibly the most interesting comment in this thread but no details. I'd much rather hear about the incredible hoops Disney may be jumping through to make all this work. I've always been fascinated by Disney's vast array of businesses spawned in Florida to take care of their interests. Really wish you'd have shared more insight if you have any.

Universal Studios owns a contract to Marvel that basically disallows Disney to do any Marvel COMIC shows or rides because their parks are just close enough (within 100 miles or something) to Universals parks to be part of the clause. Disney cannot cancel the contract in order for Disney to buy it out it has to be negotiated under Universals terms as well. I have a relative that works at Universal Studios who explained this to me. The only thing Disney can do is new marvel characters probably and stuff based off Marvel movies.

I don't think the contract has an expiration date either... Marvel wasn't doing too good back in the day you could say.

It's actually worse then that.

So, there is not only a master contract in place. there are subcontracts for every single character and IP that is in Orlando, with different scopes associated with each. One of the reasons Disney went so heavily with Guardians of the Galaxy, is because they believed that Orlando could use these characters, as they were new characters. Disney also thought they could get away with doing some advertisements on the monorails. Universal objected, in court.

At this point, Disney is looking to figure out what they can and can not do. The fact that they are going to be building a guardians coaster at Epcot means they think they are fairly sure of that particular thing, no matter what universal (comcast) may threaten them with.

On the other hand, the rumored Wakanda stuff makes everything much more dicey.

I'm told that Disney was very comfortable that they had the ability to get all of the rights when they bought marvel. I'm told that they are much less sure of that now.

My guess is that Fox may eventually get sold for pieces. Disney's 30% stake of hulu, plus the marvel rights and Avatar are just too important for Disney not utilize their most powerful death start - their lobbyists.

Just when I thought I knew a good chunk of it, I find out I knew even less. That is crazy.

Excuses my ignorance.... Why Florida?

Disney wants to open up Marvel themed parks (gates)both at Disney Land and at Disney World. Disney Land (in California) is severely space restricted, so it may end up only being a "land" (or subsection) of the existing California adventures park. In orlando they have plenty of space, but the contract for Universal (who is owned by Comcast) keeps disney from using a ton of marvel IP.

I'm always amazed when a person has the knowledge to make these types of comments. Kudos

Comcast just wants to be hated more by consumers... I mean Disney owns Marvel and as fan they need to control/movie rights to X-men, Deadpool, etc. I’d love to see a Wolverine vs. Hulk type of movie.

It's entirely possible that we're at peak superhero and/or Marvel superhero. But, sadly, probably not given that it's the sort of thing that works well in international markets.

There's an overabundance of super hero movies, but I'm not sure they'll ever go away, unlike Westerns. There's waaay too much source material, and waaaay too varied for it to not become a constant genre. And since now we actually have the special effects to present things properly, the draw will always be there.

Have westerns gone away? I recently started Netflix, and there seems to be an enormous number of TV series and second-tier new movies that are western-themed available there.

This is no doubt Netflix in the US? Internationally, I've not picked up such a trend.

Westworld (HBO) isn't a Western per se but it is a Western setting (exclusively so in S1). Godless. Longmire. It's definitely not the staple that it was at one time in the US but it's certainly not extinct.

Which is what I meant by my upthread comment. I don't expect or wish superhero movies to go extinct. I'm sure they won't as they have antecedents that are literally ancient. (Greek, at least, mythology.) I just wish there wan't such a glut of them and that they didn't tend to incorporate so many of the annoying features of typical modern action movies.

I read that, as part of this latest bid, Comcast would be covering the breakup fee owed to Disney.

The "Big Three" television networks will become the "Big Two". The "Big 6" film becomes the "Big 5". You can mark this as another major event in the consolation and monopolization of news and entertainment under a rapidly growing singular corporate umbrella.

The Fox cable/broadcast networks aren't part of this deal. They aren't being sold.

To be more precise, Fox is keeping the FOX broadcast network and the affiliates it already owns, Fox News, Fox Business, and Fox Sports. The Disney sale includes FX, the National Geographic channel, and regional sports cable channels.

> The "Big Three" television networks will become the "Big Two". The "Big 6" film becomes the "Big 5".

Just as worrisome is the merging of delivery/distribution ( ISPs ) with content.

> You can mark this as another major event in the consolation and monopolization of news and entertainment under a rapidly growing singular corporate umbrella.

Not just news and entertainment ( and ISPs ). The past decade has seen tremendous consolidation in banking, pharma, agriculture/seed, food and even the tech industry. It's funny how a decade after "too big to fail" banks and promises to break up banks to prevent systematic issues in the future, those banks are much bigger today. They pose an even greater systematic problem.

We know with monopolistic industry, it only leads to corruption and then price fixing as there is no room to expand. When it's a handful of companies control an entire market, then the next logic step is price fixing because there is no more room to maneuver. Look at the lysine price fixing scandal of the 90s.

It is strange how both political parties are so supportive of the monopolization of the nation. All the while saying they are for competition, diversity and workers.

As more and more wealth and power is concentrated on fewer and fewer companies/institutions, politicians will be even more beholden to the interests of the wealthy.

Competition is for the workers not the .00001%.

On the other hand, Netflix is making more content than the "Big Three" ever did.

The Economist had a good piece on how this consolidation is impacting prices and fueling corporate profits.

It's ok. The big 3 legacy networks are consolidating because they're coming under increasing competition from FAANG. Honestly FAANG is scarier than the media companies ever were.

I’d feel a lot better about acquisitions if it ever resulted in anything better. Oh, they all say “now we’ll be able to do $WONDERFUL_THING” to ensure the deal is approved. After that, it’s either: something that people really like is killed off to save 4 cents a year, or service becomes crappier, or monthly bills mysteriously go up, or all of the above.

Although it's tempting to consider this a purely domestic USA matter, it has huge ramifications worldwide for IPR and entertainment product, presented to the consumer. I don't watch TV very much any more, and am not a subscriber to netflix or any like service (I watch news on PBS and a small number of things free to air, on a PVR on time delay) But I believe the significance of this deal will be the effect on content production and over-the-internet content delivery worldwide: The material coming out of Disney is going to a lot of eyeballs...

At $80B market cap, why would 21st Centure Fox be sold at either $65B or $52.4B?


From last year's merger notes:

"As part of the Disney-Fox merger, 21st Century Fox will spin off Fox News, Fox Business, and the Fox broadcasting network into a new, separately traded company...

The new company under which Fox News will operate has yet to be named, but it will be a lot leaner, which may ultimately work in the network’s favor. Right now, it’s just being referred to as New Fox. (The company will also include FS1, FS2, and Fox Television Stations Group, Big Ten Network.)"

I'm guessing Fox News is worth the other $15 billion to the Murdochs.

We're headed for two giant entertainment conglomerates. It's never been this centralized before. RCA's Sarnoff once dreamed of such centralization, but never achieved it.

You may need a Comcast connection and an AT&T connection to get content from both.


According to Statista these are the rankings† of US media companies by revenue in 2017 (in € billion)

   72.64 Comcast
   50.26 The Walt Disney Company
   32.94 AT&T Entertainment Group
   31.18 News Corp. Ltd. / 21st Century Fox
   26.49 Time Warner Inc.
   23.18 Viacom Inc. / CBS Corp.
For comparison Netflix's 2017 revenue in € was 9.9

You'll notice that I left out internet media companies like Alphabet, social media companies like Facebook, telecommunication companies like Charter Comm., and tech giants like Amazon.com and Apple. I did this to purely focus on conglomerates with significant traditional media holdings.

Given that these six companies allegedly controlled 90% of the media landscape‡ in 2012 it is worrying that either Comcast or Disney would be allowed to swallow Fox. (I am unsure what the percentage figure is now.)

I think it is especially worrying that content creation and media distribution is allowed in the same company. I guess we have AOL Time Warner to thank for that precedent?

Finally, it is unclear to me how separate News Corp is from 21st Century Fox. Wikipedia says, “On 28 June 2012, after concerns from shareholders in response to its recent scandals and to "unlock even greater long-term shareholder value", founder Rupert Murdoch announced that News Corporation's assets would be split into two publicly traded companies, one oriented towards media, and the other towards publishing. The corporate spin-off formally took place on 28 June 2013; where the present News Corp. was renamed 21st Century Fox and consists primarily of media outlets, while a new News Corp was formed to take on the publishing and Australian broadcasting assets.”

This would suggest that the revenues of 21st Century Fox are a lot less than the combined revenues of News Corp. Ltd. / 21st Century Fox combined.



> I think it is especially worrying that content creation and media distribution is allowed in the same company. I guess we have AOL Time Warner to thank for that precedent?

Anti-Trust law has never figured out how to handle vertical monopolies. Before AOL Time Warner were RCA, Westinghouse, Sony, etc.

> I think it is especially worrying that content creation and media distribution is allowed in the same company. I guess we have AOL Time Warner to thank for that precedent?

It's the more common precedent that if you make a thing, it's not illegal to sell the thing you made.

Four. New entrants Netflix and Amazon will rise to the top soon.

Unless Verizon buys Netflix, or Amazon buys Sprint, or any other similiar combination of content and carrier, how is that comparable?

Edit: if you’re talking just about owning exclusive content I would say Disney is above Netflix or Amazon.

Verizon buys Netflix? That would be the largest acquisition in history...

Or Netflix buys Verizon if you find it more likely, or they combine anyhow in a TimeWarner/AOL kind of peak-insanity deal. The point is that Netflix or Amazon are not cable/internet companies that could use their content to sell connections.

> "...had rejected Comcast’s earlier offer partly on concerns the government would block the deal."

> "we are pleased to present a new, all-cash proposal that fully addresses the Board’s stated concerns with our prior proposal."

Anyone know why else the Comcast's offer last year was rejected? The article hints at cash vs stock as possibly being another reason.

Fear of the merger being blocked by the Feds.

After of the approval AT&T got to buy TW yesterday, Fox shares jumped 7%.

If they think it'll be approved now because of the switch to cash (from stock), then that seems to suggest the advertised reason (government blocking it) was not really a real reason. Unless they thought the gov. would block it because it was stock and not cash?

They could have more confidence now since the AT&T merger with Time Warner.

True, since there's an overall government trend towards anti anti-trust.

One relevant factor the article doesn't mention: some deals of this type include a breakup fee to hedge against the possible rejection of the deal by the government. (Or, for that matter, a party to the deal backing out at a late stage.)

The Verge article called the fee out. It's $4.025B, and Comcast offered to pay all of it (Disney & Fox's portions) in addition to the premium cash offer.


I'm curious how Comcast has access to $65B in cash? Do they actually have this they can pull on, or does some investment firm find a deal like this?

In M&A cash means loans, not equity. If successful they'll probably issue a lot of bonds, but in the immediate term it would be loans.

They saved a lot on customer support over the years :)

This is scary. Are there any orgs we can support that are against big merges like these?

Certainly not the democratic or republican parties. And certainly not the government watchdog institutions which are all run by former execs of major corporations.

It's hard to imagine any organization that can stand up to such concentrated wealth and power now.

I am more for Comcast - Fox merger than Disney - Fox merger personally.

It's scary, but hey, this is America.

Comcast shouldn't be getting anything. Media and the tubes that carry it should remain separate.

Except that Fox channels on the TV are not part of the Fox being sold.

No, in this case there's no TV part of it. But I'd still consider the film division as the "media" and the streaming services that can show the films as the "tubes", both of which Comcast would have ownership over. Comcast currently has a 30% ownership stake in Hulu, and would pick up another 30% from 21st Century Fox.

Fox Sports regional networks are part of the Disney deal, and aren't in the exclusion list here, either. Comcast has dabbled in regional sports before, this would be a big move against Disney to consolidate all the FSN regional stuff too.

Could you explain your reasoning? Just curious.

Fox and Disney do the same thing and will become a near monopoly.

Comcast and Fox do different things.

I am pretty sure this acquisition would just make Comcast a bigger "near monopoly" in both industries of "things," but I see where you're coming from.

Open Markets Institute? It seems like a really long term play with three senators off the top of my head going to be automatic supporters - Warren, Harris and Sanders


The Trump DOJ actually tried to stop the AT&T- Time Warner merger but lost in court. This administration is probably a lot more opposed to tech mergers than the last one.

To be fair, I think they only threw a wrench into the merger because Time Warner owns CNN, rather than out of any "too big of a company"-type concerns.

Let's just have one media / telecommunications company and get it over with. We could call it the big brother.

Could it be that Comcast is just trying to increase the price of Fox to stop Disney from buying it or at least make them pay a lot more for it?

How did the previous court decision go through for AT&T? I really don't get what's wrong with that judge (besides may be possible corruption). Comcast now will be using all that as an excuse.

The argument is that it's because there wasn't a large amount of overlap in regards to concentration of a given market position.

Time Warner is a content owner/producer/broadcast networks/etc. primarily. AT&T is mostly a telecom company.

You can usually get away with extraordinarily large mergers under US anti-trust law, so long as you're not overly concentrating the ownership of a given market. AT&T wouldn't be allowed to buy Verizon or T-Mobile for example.

If Apple wants to buy Fox they'd likely be allowed to. If Apple wanted to buy Google, they'd likely be blocked. Microsoft could buy John Deere or 3M or GM, they couldn't buy Amazon or Facebook (disregarding market caps for a moment).

>If Apple wanted to buy Google, they'd likely be blocked.

Apple makes almost all of their money from things that Google doesn't make much money from - if you spun off all of Google's distant second fiddles off, along with Apple's software wanderings, you'd end up with a central core of AdWords and the iPhone. They don't compete.

The reason Apple wouldn't be allowed to buy Google, is because it would concetrate Android + Iphone + Google search. So the entire US smartphone OS market and the search market would all be under control of one company.

Adwords unto itself isn't what would cause the problem. The principle delivery mechanism for Adwords is: search and Android.

Google doesn't make nearly as much money from Android as it does AdWords and Search. Apple isn't in the search market. So, if Alphabet sells Search+AdWords to Apple, Apple will end up with 99% of Alphabet revenue without merging any competition at all.

That completely ignores their conflict of interests between being last mile ISP and content provider. By accumulating media weight, they are likely to start using their last mile grip to choke Internet video competition (for example using usage caps with their own stuff excluded). So why does the judge think it's OK?

Because potential for conflict of interest isn't a strong anti-trust consideration. There is very little legal consideration for the concept of conflict of interest as it pertains to market competition: potential conflicts of interest are everywhere, almost no large mergers or acquisitions could ever be allowed under that premise. What doesn't constitute a potential conflict of interest (what interest is in question? by whose definition is it a conflict?) if you extrapolate out a bit.

Stopping something by arguing that an anti-consumer action may be taken by a company at some point in the future, is difficult. The more abstract, multi-step, loose, or distant the premise is, the less likely you're going to sway a judge.

Over consolidation of a specific market is thought of as a sort of obvious, first level concept of risk of consumer harm. The potential that you're describing would be a second or third level concept: do this, then do that, maybe this happens.

Culturally and legally, narrow market consolidation is an established concern. It's widely believed that that has a strong, proven foundation of evidence which links over concentration of market share to negative harm to consumers.

The FCC also has immense power to regulate that market. Frequently judges will leave such discretion to the appropriate Federal agencies, for better or worse. While this FCC and Congress may not do anything about it, the next one might (it's guaranteed the Democrats will pursue net neutrality when they regain a majority position and the Presidency again).

> Because potential for conflict of interest isn't a strong anti-trust consideration.

On its own may be not, but together with their de facto ISP monopolization it should be a very major consideration.

> Stopping something by arguing that an anti-consumer action may be taken by a company at some point in the future, is difficult.

It's not an abstract concern, because current day monopolistic ISPs are already doing it (zero rating). So there is no need to theorize, it's happening now.

See https://www.cnet.com/news/fcc-att-verizon-zero-rating-direct...

With corrupt FCC now removing any last protections of net neutrality, we absolutely should expect these monopolists to make it even worse than it is now, and such media purchases amplify it many fold. So this judge's decision is bizarre and demonstrates how messed up and toothless current anti-trust regulation is.

>AT&T wouldn't be allowed to buy Verizon or T-Mobile for example.

Interesting that you say that, because there was a period of time where AT&T nearly merged with T-Mobile. Now T-Mobile and Sprint are merging.

You could read the judge's close to 200 page opinion on why he ruled the way he did, based on law and the evidence presented in front of him. It's publicly available: http://www.dcd.uscourts.gov/sites/dcd/files/17-2511opinion.p...

So how does he justify zero rating and anti-competitive violation of net neutrality by AT&T there?

How about you read it

I didn't see him addressing the monopolistic abuse of zero rating.

I hope this will be appealed, and this monstrosity prevented. And someone should also split Comcast, i.e. separate their ISP business from the media one.

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