Comcast-Sky Merger: What it Means For Telecoms

Written by: Renell Harding

In September 2018, American telecommunications giant Comcast outbid 21st Century Fox to acquire Sky for £30 billion. This puts an end to months of bids and counter bids to acquiring Europe’s top Television broadcasting company. Furthermore, the acquisition of Sky also sees the American cable TV leader to buy out 39% of 21st Century Fox’s stake in Sky. This comes after how Comcast, which owns NBC network and local TV stations; cable channels including CNBC, MSNBC, E!, USA, Telemundo; Universal Pictures and Focus Features movie studios attempted to buy 21st Century Fox earlier this year, only for Disney to buy 21st Century Fox with a $71.3 billion cash and stock bid. Disney was then able to acquire Fox TV and film studios, Fox’s stake in American entertainment company Hulu as well as Sky’s stake in Europe.

Implications for Comcast, Sky and the telecommunications industry?

The acquisition of Sky will allow Comcast to expand its international presence in the broadcasting industry. While Comcast is a powerhouse in North America, they have little presence in European markets. This acquisition grants Comcast access to Sky’s 27 million customers, increasing its status to a truly international media giant.

Comcast will also gain broadcasting rights of football matches including; the Barclays Premier League and German football league; the Bundesliga. It also gains control of Sky News, which is Britain first 24-hour news channel. Had 21st Century Fox won the auction for Sky, it would have had to sell Sky news. Fox’s acquisition did raise serious concerns over media plurality, given Rupert Murdoch’s dominant position in English media. Comcast however, faced no such restrictions.

The acquisition of Sky gives Comcast the ammunition to fight back against the increasing levels of competition that streaming services such as Netflix and Amazon are providing. This is because, both Netflix and Amazon don’t rely on viewership like how cable TV companies like Comcast would, but generate revenue through monthly subscriptions. Recently, in the last financial quarter Netflix added 7 million new subscribers to a total of 137 million subscribers; 135 million of them pay a monthly subscription. Consequently, Netflix’s revenue increased by 34% to $4 billion and their share price rose by 14%. Therefore, Comcast’s acquisition of Sky would help the American cable TV giant fend off competition from the likes of Netflix and Amazon, as Comcast will be able to enhance Sky’s ability produce new content, to match the continuous new content that Netflix and Amazon release.

As for Sky, chief executive Jeremy Darroch, has said that the deal will “achieve further growth and development of Sky’s business”.  Although, Sky is   expected to make job cuts, but will have the opportunity to form to new content partnerships with the likes of NBCUniversal.

What does Comcast’s acquisition mean for Rupert Murdoch?

First and foremost, the acquisition of Sky ultimately ends Rupert Murdoch’s 30-plus year association with the company he originally founded in the 1980s. While it may seem Comcast getting control of Sky diminishes Murdoch’s influence in the British press and media, Murdoch still has enormous control over the newspaper industry. He still owns two of the most respected and popular British newspapers; The Sun and The Times. Murdoch also owns Sky Australia and Fox News, which is basically the news channel for American republicans and conservatives. Therefore, Murdoch still has plenty of political influence through his newspapers and other news channels. For example, the recent removal of former Australian Prime Minister Malcolm Turnbull was partly contributed by campaigns formed by Murdoch’s newspapers which attacked Turnbull’s energy policies.

Conclusion

In conclusion, Comcast’s acquisition of Sky sends a message to their competitors; Comcast is ready to enter the international arena of telecoms. The deal may have dented Rupert Murdoch’s influence in telecoms, but his controlling of prominent British national newspapers means he will always be a force in the media industry. As for Sky, it will be interesting to see if there will be any changes in management, but also how the partnership with Comcast will allow Sky to create new content. It remains to be seen how Amazon and Netflix will respond to the acquisition.

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