Comcast formalized its $31 billion bid for U.K. satellite TV operator Sky today, signaling to European regulators that it will keep the company’s news operations independent and maintain the company’s headquarters in England.
“We didn’t choose to put Sky in play—that was done for us,” Comcast CEO Brian Roberts said somewhat defensively, speaking during Comcast’s first-quarter earnings call this morning. “I don’t think we have to do this. And I don’t think of international broadly as a strategy. The fact is, Sky is a unique asset that fits the list of assets we already have.”
The American cable company is coming in with a bid that is significantly higher than a prior bid put forth by News Corp. Comcast is also reassuring regulators that it won’t seek to influence Sky News—a concern hindering Fox, which operates the polarizing Fox News in the U.S.
Comcast agreed to maintain Sky News’ annual expenditures at the level of the 2017 fiscal year, or higher, for the next 10 years. The company said it would establish an editorial board for Sky News to ensure editorial independence.
Comcast pledged to keep Sky headquartered in Osterly for five years, and it pledged not to buy a majority stake in a UK newspaper during that span, either.
Comcast also pledged to invest in the U.K. film and TV production industries, support the Sky technology hub in Leeds, and to continue to support Sky’s local community sports programs.
Fox said it will remain in the bidding for Sky as well, releasing a statement this morning declaring itself "committed to its recommended cash offer for Sky announced on 15th December 2016 and is currently considering its options. A further announcement will be made in due course."
For his part, Roberts’ defensiveness is understandable, given that Comcast’s market valuation has lost roughly the equivalent of a Sky since the deal was announced in February, just to borrow an apology put forth by MoffettNathanson analysts Craig Moffett this morning.
Looking past what he and other analysts see as head-scratching fundamentals about the deal, Moffett described the bid as one step in an overall transformation for Comcast, in which the “tail” of the media business is about to wag the “dog” of cable.
With the cable business in the doghouse with investors, who fear OTT competition in video and 5G competition in broadband, Moffett sees Sky as an essential shift in strategy.
“NBCU used to be the tail,” Moffett explained. ”Investors are afraid it is about to become the dog. Today, NBCU is only about 20% of Comcast (by revenues). Comcast is signaling that the required scale for next-gen media will be enormous. It is their intent to make Media the main event.”
Moffett speculates that Comcast sees Sky as a “necessary-but-not-sufficient puzzle piece in their quest to create a direct-to-consumer media platform to rival Netflix.
“Will they (can they?) succeed? What will it cost? What else will they have to buy?” Moffett asked.