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Blogg | Mediavision | Affärsutveckling och strategi för medieindustrin

Sveriges bästa företagsbloggar 2017
2018-06-08

Enter the age of consolidation – highlighting mergers on the global media market

In this blog post, Mediavision describes the eventful times of consolidation on the global media market, by disentangling the conundrum that is Fox and Sky’s future ownership.

In December 2016, 21st Century Fox made a bid on Europe’s largest pay TV operator Sky to acquire the remaining 61% shares it does not already own of the company. This was the start of what media is referring to as the “bidding war” in which Fox, Comcast and Disney are involved.

Since Fox’ bid on Sky, Disney and Comcast have gotten involved as well. Disney made a $52 bn bid for Fox’ movie and TV sections (including its 39% stake in Sky). Comcast did not only make a bid for Sky (which is 16% higher than Fox’ bid), but also revealed intentions to compete with Disney on acquiring Fox. The proposed mergers are illustrated below.

Figure 1: Current market situation.

Fox’ bid on Sky (in 2016) has been scrutinized by UK:s Ofcom and the Competition and Markets Authority (CMA). The potential merger has aroused lots of discussion, mainly around the greater influence and power that the Murdoch family would gain in British media if the bid is approved. Also, Sky News’ editorial independence under the Fox umbrella has been discussed. The Murdoch family owns 39% in both 21st Century Fox and News Corp, the latter which consists of e.g. the newspapers The Times, The Sun and The Sunday Times. However, earlier this week, the British government announced that if Fox were to sell Sky News to Disney, as proposed by Fox, with an agreement to ensure that Sky News is funded for at least 10 years (also offered by Fox earlier on), it would be an effective remedy for the public interest concerns that have been called attention to. The British Secretary of Culture also allowed the Comcast bid to proceed, meaning that there is a set-up for a bidding war between the American giants. Regardless if Fox/Disney or Comcast acquires Sky, the buying company would reach 23 million new Sky customers in Europe. This would of course make any buyer better prepared to compete with challengers like Netflix and Amazon.

But consolidation and mergers is apparently the name of the current game, also in other media/tech related companies. In the US, discussions between CBS and Viacom are on-going and AT&T and Time Warner are waiting for a green light from the US District Court. Locally, Telia and Bonnier Broadcasting have confirmed discussions of a merger and Tele2 and Com Hem are awaiting approval of their merger – a decision is expected in the second half of 2018. Depending on the outcome of these potential mergers, media companies bigger than Netflix, in terms of market capitalization, could be created.

 

Figure 2: Potential market formation.

The illustration above points at a possible outcome of the mergers as well as the size of these media giants – in market cap with today’s* value. Acquiring Fox would add highly rated assets to Disney – such as the X-Men franchise and The Simpsons – which of course also would strengthen its planned streaming service. Moreover, Disney would also become the majority owner of Hulu. Disney has earlier announced that it is pulling its content from Netflix, and with these new resources it would be better prepared to compete with Netflix.

For Comcast, an acquisition of Sky means that it would be able to grow, while avoiding government scrutiny associated with expanding its US cable business, as it is the largest American cable provider. Also, Sky’s streaming service Now TV with its 2 million subscribers, would grow Comcast’s OTT footprint. Next week, AT&T and Time Warner will receive a decision on their merger plans – an outcome that is likely to influence if Comcast will make an official bid on Fox or not.

Moreover, with the mentioned potential local mergers, the international trend is seemingly spreading to the Nordic countries as well. Yet, as the illustrations show, there remains a major difference in scale between the local and US/UK-based actors.

*Market cap as of June 1st, in some cases of June 4th.

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