The battle for Sky reveals television’s content concerns
This week the long-running saga of who will take ownership of Sky has reached a definitive conclusion, with US-based Comcast splurging billions for control of the London-listed pay-TV provider. The battle for the company had been waged for long months between Comcast and Twentieth Century Fox, both of which saw in Sky opportunities to fortify their foothold in a highly competitive market.
So why would the two compete and, ultimately, why would Comcast buy Sky? £17.28 a share (plus £30.6bn in equity) is a huge amount of money for what is effectively a pay-TV company that exists primarily in a saturated market, so what does its purchase add to the business, and how will it change the market?
Fox/Disney throwing in the towel. Selling its 39pc of Sky to Comcast at the offer price.
— Chris Williams (@cg_williams) September 26, 2018
It had been argued that Comcast was the better fit in terms of synergies, with both companies simultaneously offering both content packages and internet/communications infrastructure – but it appears to have been the former that convinced Comcast execs to up their bid for Sky. That in turn led Fox to ‘throw in the towel’ and admit defeat, its ambitions to own the European pay-TV market abandoned.
For one thing, Sky has been making huge investments in programming, right as original television content becomes the hot commodity. Increased competition from OTT services like Netflix and Hulu has led to an increase in the number of people who get their entertainment solely from those services, undercutting the bundled approach that traditional cable and satellite providers have relied upon. Small wonder that Disney (owner of Fox) is ploughing the billions it has received from selling its current stake in Sky straight back into content.
And despite lacklustre results in its approach to commissioning new content to compete with those services, Sky has nevertheless had success with regards to securing sports and movie rights, which have buoyed it to this point. With Comcast properties behind it (it owns MSNBC, CNBC, USA Network, NBCSN in addition to Universal Pictures, to name a few) suddenly that proposition becomes a lot stronger.
That’s especially important as Sky looks to launch its own OTT services in new territories, as it already has in Switzerland and Spain. With the likes of NBC Universal and its associated content partnerships behind it, suddenly Sky looks a lot more like a competitor to Netflix. More importantly, it might help it avoid the 50% failure rate for streaming services that is becoming common in an ever more crowded industry.
That doesn’t necessarily mean it suddenly has an unassailable advantage, however. It will still be subject to the requirements regarding the amount of content that has to be produced within the countries in which it launches, for instance, and its brand isn’t as synonymous with OTT services as Netflix and Hulu.
The deal is, effectively, aggressive and proactive consolidation around a content proposition. There are still a ton of details that need to be ironed out, particularly around where cost-saving consolidation can occur and whether the senior Sky team will remain at their posts. But one of the longer-running battles for television dominance, one that has had implications for everything from media plurality to corporate culture has finally come to a close (at least for now).
Martin Tripp Associates is a London-based executive search consultancy. While we are best-known for our work across the media, information, technology, communications and entertainment sectors, we have also worked with some of the world’s biggest brands on challenging senior positions. Feel free to contact us to discuss any of the issues raised in this blog.