News Disney and Fox come to terms -- announcement soon; huge IP acquisition

[AnotherDayAnotherDollar]

Jeff Shell:
https://seekingalpha.com/article/42...merrill-lynch-investor-conference?part=single

Brian Roberts:
https://seekingalpha.com/article/42...th-annual-communacopia-conference?part=single

Can you point me to the exact quote that backs up your claim that:

Comcast will not give up their 30% of Hulu. Jeff Shell made that clear at a conference a week ago after he got his board seat. Ever since Disney decided not to play nice and possibly split assets in the Fox Deal, Brian will make this as brutal for them as possible.

The closest I found were:

Unidentified Analyst

So with the NBCUniversal's consent decree now expired, Comcast once again has management rights over Hulu. You have been named to the Board. Can you just sort of maybe talk about your overall view of how Hulu fits within Comcast now and in the future?

Jeff Shell

Yes. I only got named to the Board. I think like 20 minutes ago or something before this meeting. So I don't have a ton of knowledge. My knowledge of Hulu is that The Looming Tower is really good and The Handmaid's Tale is more of a struggle for me. But there is no question that Hulu is a great business and a very valuable business. And it's important to us not just because of our equity ownership in it but because we sell a lot of our TV content to Hulu. And I talked about our animated TV content. We also have a deal with them to sell that as well along with some feature movies. So I think it's an important asset to us and I think it's also important customer to us. And I think we are excited once again to participate in the governance of it.

Brett Feldman

You talked about being invested in platforms. Obviously Hulu is one of them. What about your own direct-to -consumer platform, what’s your view on having a strategy there?

Brian Roberts

We study these things all the time and look at the tradeoffs between doing it yourself and selling it to others. And we’re -- when you do things in partnership, there is an evolving landscape and lot with deals going on and how it all plays out. So, no news today. But, we study having a relationship with consumers through third parties and direct seems quite natural. And I think we will continue to want to do all of those, so that we make sure we continue to be on all sides of that ecosystem and continue to be growing while the change occurs. So, hopefully, leading while that change occurs.

Again, I don't want to respond without knowning exact what quote you were talking about. Neither of these quotes really back up what you said earlier, so can you point me to the exact quote?

 

[Rodan75]

Disney will take Comcasts 15 billion and use it along with the money from the sale of the RSNs and one year of delayed stock buybacks to pay off the 35 billion in cash to buy Fox. In just a year Disney will be much bigger with the same or lower debt leverage. In 2 years they can have less overall debt and be much more profitable. This is a huge win for Disney. Comcast may also gain in the long term but overall Disney will do fantastic. All the analysts thought anything over £16.00 was over paying and not a great deal.

Agreed. But I’m assuming neither Comcast nor Disney want to co-own Hulu and SKY. So at some point another deal will be made.

 

[AnotherDayAnotherDollar]

Sell the 39% of SKY and regional sports which should bring what Disney paid for Fox down a good chunk. I don't think Orlando theme park rights for Marvel are going to come into this.

On an asset trade anything outside of RSNs, Hulu, and Sky will be brought up, but will be peanuts and just something small that the other will want since they are on the table. Marvel rights and Dreamworks VOD rights that Fox owns are things each other would want to bring back in house.

I see your point but Fox Animation is lucrative asset Disney would be stupid to sell it off and I know there are some other animation studios Comcast can purchase if they really want to expand in that direction.

That was one of the weirdest theoretical trades I have ever seen. Let me break it down:

Comcast gets:
20% of Sky (~7.76B valuation)
Fox Animation (owns the rights to Simpsons, Family Guy, American Dad, Blu Sky etc. Valuation of this entity should be in the billions as well)
Certain IPs (I assume smaller known IPs such as Predator, Aliens, Die Hard. Let's say only those three. Decent IPs that are classics)
NBC products get promotion on Hulu

Disney gets:
10% of Hulu (~800MM valuation)
Disney gets the privilege to put DisneyPlay on Xfinity and Sky boxes at no cost to Comcast or its consumers
Licensing deal to distribute its properties on Sky (that is exclusive licensing deal that Disney is trying to get away from)
Cash (unspecified)

Yeah, I can see Iger signing this lol

 

[AnotherDayAnotherDollar]

Hulu will get negotiated Separately (I suspect Comcast could invite AT&T into the bid for their 30%).

Disney / Fox will want to close their deal before any money exchanges for the 39%. This includes guaranteed Access for Disney Over the Top Streaming in Europe and Marvel RIghts etc...

Disney can’t sell the Fox Sports Assets until the 21CF Merger closes. There are other 3rd parties involved in each of these (NBA, NHL owners etc)......

I think they will get done separately because otherwise I think they risk upsetting U.K. regulators. I had not previously considered that dynamic when discussing the inevitable horse trading. But otherwise I agree with your thoughts.

I don't think any trade or talk happens until after the Fox and Sky deal closes. That's why I think they'll try to get everything on the table and get a deal done.

And also:

 

[happycamperuni]

Distribution is a rapidly changing game. Traditional distribution means like cable and satellite are going to be all but gone in the next 10-15 years. Expansion in this area may have short term gain but likely result in long term loss.

Comcast and AT&T's strategy isn't competing at all effectively with Netflix and Amazon. If anything, their recent M&As are stopgaps that will help prop them up for a few more years, but none of their recent acquisitions are setting them up to compete in the long run.

Even in regards to 'the pipes', that's going to be changing as well with the introduction of 5G, which will have the longer term effect of commodotizing that delivery mechanism (high speed broadband). Content companies will either have to sell their content OTT (like Disney) or partner with a distribution company like Netflix. At this stage, if Disney wants to get into distribution, they are pursuing exactly the right strategy with their OTT plans. Sky would have been an expensive distraction and not gotten them where they need to go for future long term growth.

There's big differences between markets though; Europe is a wholly different beast from the US:

In Europe, content creators are much better protected and laws are coming around that will force distributors to honor content quotas in every EU state, some of those quotas can even apply to individual countries.

The whole reason to purchase Sky is that you already have billions in annual local content production/distribution, and for Disney that probably would have allowed them to bypass content quotas.

Without Sky, outside of post-Brexit UK, Disney may have to honor content production quotas for Germany, Italy, Spain, etc. Iger has always pointed out that Disney's streaming services are meant to be high quality, more niche plays than Netflix and Amazon Prime with a focus on Disney's major content production arms (Marvel, Lucasfilm, Pixar, Disney Live Action/Animation etc.), but that may not work in EU...

 

[BrianLo]

As far as I'm concerned, this is all fantastic news. Especially, for the parks.

1) Disney isn't saddled with legacy distribution. I don't care what Iger said publicly, to me this deal was for content in order to drive Disney's streaming platform. Seeing the Sky news stories all featuring a photo of Game of Thrones (licensed from HBO) as their big property tells me all I need to know, Sky is not a worthy content producer (unlike Star). The future money is in content, not in cable.
2) Disney cancelled 20 billion in stock buybacks (hurray!)
3) Disney is no longer on the hook for Sky, EBIDTA now sits at the much more palatable 3.4x (instead of 4.1-ish)
4) Of course RSN's are being divested, probably returning 10 billion in debt.
5) Comcast will pursue Sky without question. I don't think this multifaceted trade is occurring beyond Hulu and cash.
6) EBIDTA will sink to somewhere along the range of 2.7x by the time all is said and done.


In the end Disney gets the leaned out content and a full streaming platform (Hulu). With most of the cash portion of this offer relieved from Sky and RSN's. Disney is not over-leveraged and *hopefully* leverages within themselves more *cough* Parks and Resorts *cough*.

 

[Twilight_Roxas]

What would Disney give to Comcast in exchange for the distribution, and film rights to the Hulk?

 

[BrianLo]

What would Disney give to Comcast in exchange for the distribution, and film rights to the Hulk?

Money?

I don't know why everyone keeps acting like there is a forthcoming swap meet.

 

[SirLink]

As far as I'm concerned, this is all fantastic news. Especially, for the parks.

1) Disney isn't saddled with legacy distribution. I don't care what Iger said publicly, to me this deal was for content in order to drive Disney's streaming platform. Seeing the Sky news stories all featuring a photo of Game of Thrones (licensed from HBO) as their big property tells me all I need to know, Sky is not a worthy content producer (unlike Star). The future money is in content, not in cable.
2) Disney cancelled 20 billion in stock buybacks (hurray!)
3) Disney is no longer on the hook for Sky, EBIDTA now sits at the much more palatable 3.4x (instead of 4.1-ish)
4) Of course RSN's are being divested, probably returning 10 billion in debt.
5) Comcast will pursue Sky without question. I don't think this multifaceted trade is occurring beyond Hulu and cash.
6) EBIDTA will sink to somewhere along the range of 2.7x by the time all is said and done.


In the end Disney gets the leaned out content and a full streaming platform (Hulu). With most of the cash portion of this offer relieved from Sky and RSN's. Disney is not over-leveraged and *hopefully* leverages within themselves more *cough* Parks and Resorts *cough*.

So firstly, you have a lot of the 'wrong end of the stick'
1) The erosion of TV viewership isn't nearly as dramatic as the US, plus Disney would of had ownership of NOWTV a streaming service platform which they could of killed Disneys own Disney Life streaming service that has already launched in Europe. Sky has a lot of distribution rights with US networks, i.e. Getting all HBO content, which is done for a mature audience first. Plus Sky's biggest points are News and Sports, on the TV side. We have said it plenty of times Disney needs to cater for males and move from everying being sanitized, Disney needs to move to produce a Star Wars and Marvel life action shows with the production value of Game of Thrones, WestWorld, Britannia(a SKY original), TIn Star(another Sky original). Which Disney is incapable of producing at that level see Agents of Shield and Inhumans.
2)Disney will still buyback stock a simple google search shows nothing in the news of any cancellation.
3)Well we all should remember that Disney Lifestyle/Play/Touch streaming service is going to eat Disneys' lunch money. And when that happens get ready for more entertainment cuts heading to your local Disney Park.
5)Disney also doesn't want Blue Sky Animation they view it as a ToonStudios situation and want to offload that.
6)Hulu is only available in US makes it pretty much a worthless commodity in the whole distribution race.

Overall the UK takeover panel should of rejected all takeovers.

 

[SirLink]

Money?

I don't know why everyone keeps acting like there is a forthcoming swap meet.

Nah Hollywood style

Company A: I'm going to sell this production company for $100million
Company B: I'm going to sell these rights for this book of Franchise A for $100million
Company A & B: Cool
*They move the cash around, but in fact the only thing that has really changed are the assets no financial change apart from a paper trail for the relevant authorities*

 

[SirLink]

Don’t forget no one wanted SKY besides Murdoch. They have a lot of legacy systems issues and primarily rely on Satellite distribution. There is little broadband upside here. Comcast gets European distribution. But look at DirecTV’s results.

The reason for that is Satellite distribution for watching TV here in UK is a lot higher than cable adoption, plus not many cord cutters.

 

[Indy_UK]

And also:

Exactly what I wanted to hear.

39% of SKY doesn't really do much for Disney long term. It will be worth a lot more than the 30% of Hulu so I'm sure more would be involved.

We'll see how SKY changes with Comcast now in charge. I have SKY Q and while it's a fantastic UI, I'm already on the max of what I'm looking to pay for the service. If prices go up with Comcast in charge, I'll happily drop it next year when my contract is up.

Disney will have the much harder job if they launch Hulu over here. It's pretty unknown here (I have it via VPN) but 20 million subscribers in the US is a solid ground to start on. Problem is that we have so many streaming services over here already, will the mass market want another?

Don't quote me but I think SKY are hovering on around 10 million UK subscribers. While brining in much more money per month, that number is declining.

Steaming services have overtaken PayTV in the U.K., and I can only see that trend continuing.

Disney doesn't have the ESPN rights for the UK, BT own that and I don't think they would be willing to give that up.

For Disney, it may be a case of doing a Netflix and simply sticking their apps on as many platforms as possible to grab the subscribers

 

[SirLink]

Exactly what I wanted to hear.

39% of SKY doesn't really do much for Disney long term. It will be worth a lot more than the 30% of Hulu so I'm sure more would be involved.

We'll see how SKY changes with Comcast now in charge. I have SKY Q and while it's a fantastic UI, I'm already on the max of what I'm looking to pay for the service. If prices go up with Comcast in charge, I'll happily drop it next year when my contract is up.

Disney will have the much harder job if they launch Hulu over here. It's pretty unknown here (I have it via VPN) but 20 million subscribers in the US is a solid ground to start on. Problem is that we have so many streaming services over here already, will the mass market want another?

Don't quote me but I think SKY are hovering on around 10 million UK subscribers. While brining in much more money per month, that number is declining.

Steaming services have overtaken PayTV in the U.K., and I can only see that trend continuing.

Disney doesn't have the ESPN rights for the UK, BT own that and I don't think they would be willing to give that up.

For Disney, it may be a case of doing a Netflix and simply sticking their apps on as many platforms as possible to grab the subscribers

Above 12miliion UK Subscribers, also their was some talk in the news that UK TV license laws could be changed to include any content that has to be rated have to have a TV license to watch it, which will reverse the trend. The only reason why streaming services have increased is because of TV licensing change the law, and it will flow back.

 

[bartholomr4]

Sky reports 23 Million Subscribers out of a possible maximum of 66 Million. That's a huge percentage, which will be hard to grow. Last reported growth rate of less than 1% a year.

 

[SirLink]

Sky reports 23 Million Subscribers out of a possible maximum of 66 Million. That's a huge percentage, which will be hard to grow. Last reported growth rate of less than 1% a year.

That is across 6 countries though in Europe, with UK being around 12 million paid subscribers. With their Disney Play service when that launches in Europe in will replace Disney Life, or so I'm told, Disney will be lucky to have 22 million subscribers over 6 countries

 

[monothingie]

To all those who think this was a good thing for TWDC...

https://www.wsj.com/articles/sky-loss-is-a-disappointment-for-disney-ambitions-1537645511

 

[biggy H]

To all those who think this was a good thing for TWDC...

https://www.wsj.com/articles/sky-loss-is-a-disappointment-for-disney-ambitions-1537645511

Maybe you should put up a link that doesn't go to a paywall...

Personally I think Sky is been going down hill for ages, most people I know have dropped it completely or just gone to the basic package. Sky overpays for the football and over big sports forcing the cost up for normal subscribers.

 

[mikejs78]

To all those who think this was a good thing for TWDC...

https://www.wsj.com/articles/sky-loss-is-a-disappointment-for-disney-ambitions-1537645511

Meh. It was a good thing for TWDC. Maybe not for Was Street. If Disney had really wanted Sky zone they would have increased their last bid more than $0.02 over Comcasts' prior bid.

 

[AnotherDayAnotherDollar]

Disney wanted Sky, but they didn't want to overpay for it. It would have been good for them to get Sky at a decent price. Comcast overpaid because they needed it more. It works out for Disney as well as they will get more for the 39% ownership.

Also, these are foreign regulators that need to approve the Fox acquisition, if required:

European Union
Australia
Brazil
Canada
China
India
Israel
Japan
Mexico
Russian Federation
South Africa
South Korea
Taiwan
Turkey
United Kingdom

 

[mab7689]

Disney wanted Sky, but they didn't want to overpay for it. It would have been good for them to get Sky at a decent price. Comcast overpaid because they needed it more. It works out for Disney as well as they will get more for the 39% ownership.

Also, these are foreign regulators that need to approve the Fox acquisition, if required:

European Union
Australia
Brazil
Canada
China
India
Israel
Japan
Mexico
Russian Federation
South Africa
South Korea
Taiwan
Turkey
United Kingdom

Great information thanks. I've been looking for what the 15 were.