Disney/FOX Acquisition Thread

[DK745]

The problem with the home video business for the various movie Studios is that streaming revenue has been a complete fail for them. It's destroyed their DVD/BR sales and the streaming content for the most part just gets stolen and not paid for. Even theatrical revenue has suffered because of stolen streaming before a movie debuts. This is highly prevailent but the info is rarely released to the media/general public. The only way streaming pays is when you have a subscriber base, like Netflex has, that's paid up front for the entire service. There's been discussions among the Studios (I have this on solid sources) trying to fix the business model, that was dependent on streaming making good profits, which it hasn't , at this point in time. . So, in that regard SKY, with a large subscriber base, can be positive for Universal if they play the game right.

Some of the studios finally agreed on Movies Anywhere where you can have the same digital library across multiple services so that's a start. I could see them working together trying to figure out a new business model.

 

[Mad Dog]

Some of the studios finally agreed on Movies Anywhere where you can have the same digital library across multiple services so that's a start. I could see them working together trying to figure out a new business model.

Yeah, from the people that I know that run the home entertainment departments for the film studios, they felt like they were sold a bill of goods by the computer people that streaming revenues would be huge. They've turned out to be miniscule at best, so yes, they're looking at that failed business model and trying to adapt it so they can get that lucrative secondary profits off the films like they were doing until a couple of years ago when they dived head first into streaming to replace the 'cost' of packaged product. Hasn't materialized though. Just a big thud at this point in time.....The big problem with the internet has always been that people don't want to pay for stuff, they want everything free. Ad revenue only goes so far.

 

[JoeCamel]

Yeah, from the people that I know that run the home entertainment departments for the film studios, they felt like they were sold a bill of goods by the computer people that streaming revenues would be huge. They've turned out to be miniscule at best, so yes, they're looking at that failed business model and trying to adapt it so they can get that lucrative secondary profits off the films like they were doing until a couple of years ago when they dived head first into streaming to replace the 'cost' of packaged product. Hasn't materialized though. Just a big thud at this point in time.....The big problem with the internet has always been that people don't want to pay for stuff, they want everything free. Ad revenue only goes so far.

I'm of that mindset. Grew up with ad supported broadcasting and wont pay for tv. I know I miss some things but in the big picture does it really matter if I can see some show or movie? Not to me.. worst cable customer ever..

 

[OrlLover]

Did we all forget NBCUniversal is a multi billion dollar company itself ? Didn’t someone here say park 3 budget was already approved prior to Sky endeavor ?

 

[quinnmac000]

Yeah, from the people that I know that run the home entertainment departments for the film studios, they felt like they were sold a bill of goods by the computer people that streaming revenues would be huge. They've turned out to be miniscule at best, so yes, they're looking at that failed business model and trying to adapt it so they can get that lucrative secondary profits off the films like they were doing until a couple of years ago when they dived head first into streaming to replace the 'cost' of packaged product. Hasn't materialized though. Just a big thud at this point in time.....The big problem with the internet has always been that people don't want to pay for stuff, they want everything free. Ad revenue only goes so far.

Film for some reason isn't very good for streaming like television. Streaming of television properties however has been extremely lucrative for NBCUniversal (Brian Roberts and Jeff Shell both made that comment). The question that needs to be ask is why are people more willing to stream television properties over films. I mean look across the board. The streaming sites aren't being known for their original films but more so what television shows they are putting on. People are totally willing to pay for television streaming but film streaming has been meh.

I would argue the price of a 2 hour film is essentially the same price digitally as a 13 episode television season. That 13 episodes of 22 to 48 minutes programming in the long run will go and get me a lot more bang for my buck with rewatchablity than a 2 hour film. Essentially the studios will need to lower the cost or add some benefit to purchasing media digital in regards to film.

 

[Mad Dog]

Film for some reason isn't very good for streaming like television. Streaming of television properties however has been extremely lucrative for NBCUniversal (Brian Roberts and Jeff Shell both made that comment). The question that needs to be ask is why are people more willing to stream television properties over films. I mean look across the board. The streaming sites aren't being known for their original films but more so what television shows they are putting on. People are totally willing to pay for television streaming but film streaming has been meh.

I would argue the price of a 2 hour film is essentially the same price digitally as a 13 episode television season. That 13 episodes of 22 to 48 minutes programming in the long run will go and get me a lot more bang for my buck with rewatchablity than a 2 hour film. Essentially the studios will need to lower the cost or add some benefit to purchasing media digital in regards to film.

For one thing it's been very easy to steal, from the inside sources I've heard from. So the movies get passed all over the place. Example: I didn't hear this particular one from a Universal source, but from another in the industry, that it was well known that the new Jurassic World film had been hacked before the film even came out, and that streams of the movie were everywhere, and that had not only retarded the box office returns, but will affect the home entertainment results also. These streams are available to clients before release and sometimes that stuff just finds a way out.....And this is not like the blurry stuff they used to peddle on the streets of NYC when bootlegs filmed in a movie theater were sold on the streets. This is the legitimate streams. And supposedly that's rampant right now with just about everything. Kind of like when the illegal steals of music destroyed the CD industry. .....

 

[quinnmac000]

For one thing it's been very easy to steal, from the inside sources I've heard from. So the movies get passed all over the place. Example: I didn't hear this particular one from a Universal source, but from another in the industry, that it was well known that the new Jurassic World film had been hacked before the film even came out, and that streams of the movie were everywhere, and that had not only retarded the box office returns, but will affect the home entertainment results also. These streams are available to clients before release and sometimes that stuff just finds a way out.....And this is not like the blurry stuff they used to peddle on the streets of NYC when bootlegs filmed in a movie theater were sold on the streets. This is the legitimate streams. And supposedly that's rampant right now with just about everything. Kind of like when the illegal steals of music destroyed the CD industry. .....

Oh yea that...so two parts for those leaks. One is international same day releasing...with that, they have to send to outside agencies in foreign countries for translation and doing so especially China/Korea where no IP protection for foreign products exist lets them put it online to leak. Secondly, studios send out for your consideration screeners to talk shows and academy and festival members to vote for their films come Oscar/Golden Globes/etc. I know I have gotten to see quite a few films that way back in the day and with those DVDs, there are literally no controlled numbers tagged to the video to dictate whose copy it is. So with that, there is no fear of leaking projects that way because it can't be tied to you.

Ironically, though Fox is probably the one who I know sends those DVDs out like their candy so I won't be surprised that it will start effecting Disney stuff as well since it seems they are pushing out Disney staff in exchange for Fox executives.

 

[Mad Dog]

Oh yea that...so two parts for those leaks. One is international same day releasing...with that, they have to send to outside agencies in foreign countries for translation and doing so especially China/Korea where no IP protection for foreign products exist lets them put it online to leak. Secondly, studios send out for your consideration screeners to talk shows and academy and festival members to vote for their films come Oscar/Golden Globes/etc. I know I have gotten to see quite a few films that way back in the day and with those DVDs, there are literally no controlled numbers tagged to the video to dictate whose copy it is. So with that, there is no fear of leaking projects that way because it can't be tied to you.

Ironically, though Fox is probably the one who I know sends those DVDs out like their candy so I won't be surprised that it will start effecting Disney stuff as well since it seems they are pushing out Disney staff in exchange for Fox executives.

I'll give you a good representative story. The computer people sold the studios on streaming for home entertainment telling them it would eliminate the cost of packaged product (even though it's only about a buck and a half a DVD/BR), but more importantly they could eliminate most of their sales force with all the accompanying costs (very high salaries and huge expense accounts to entertain clients) and the fairly hefty cost of Distributors who distribute the packaged product. One of the studios, which I won't name, set up their own streaming site, kind of expecting the orders to just roll in like the early 1998-2002 internet fly by night companies expected. Well, during the months it operated the orders came. Not in the millions. Not in the hundreds of thousands, not in the thousands. But just a few hundred each month for 'all' the titles. Complete bust. Kind of why without an already paid for subscriber base, the system doesn't work.....Yeah, that will be interesting with Disney. Fox is a sieve, but Disney Studios does have the tightest controls in the industry. Disney and Free are not synonymous. :thumbsup: But Fox warehouses product for other studios besides themselves, so it definitely will be something to watch.

 

[quinnmac000]

Sky advises shareholders to accept Comcast offer 'immediately'

 

[zg44]

Comcast has 30% of the shares of Sky now (appears to mostly be at prices a little lower than 17.28 pounds and is required to offer 17.28 the rest of the way).


Disney will have to make a choice soon over whether to tender part or all of their 39% stake to lock in this 17.28 pounds price.

Given current value of Sky stake at $15 billion, I can see Disney maybe selling 60-70% of their shares and keeping $4-5 billion worth to trade with Comcast later for the 30% of Hulu.

Comcast won't offer same value later if they close their tender early...

 

[quinnmac000]

Really good analysis right here regarding the deal and the long term benefits of Comcast and Sky merging

Comcast Outbids Fox To Win Sky - Now What? - Comcast Corporation (NASDAQ:CMCSA) | Seeking Alpha

 

[LieutLaww]

I don't know how this feeds into Comcast's plans for Sky at least in the UK but Sky (in the UK) was going to be away from Satellite and moving over to everything via the internet, the next update of the Sky Q Box would be dropping the satellite connections completely but with the takeover I don't know what will happen to this plan.

 

[zg44]

I don't know how this feeds into Comcast's plans for Sky at least in the UK but Sky (in the UK) was going to be away from Satellite and moving over to everything via the internet, the next update of the Sky Q Box would be dropping the satellite connections completely but with the takeover I don't know what will happen to this plan.

That plan will accelerate.

Both Comcast and Disney realize satellite is obsolete in the longer term for paytv due to high speed broadband, just as AT&T has realized in the US for DirecTV.

I would expect an acceleration in Sky's plan to go more towards OTT and IPTV (internet protocol TV). That's the future for Sky under Comcast ownership.

We're seeing the same thing in the US for DirecTV and Dish as they shift towards DirecTV Now and Sling TV over the internet/OTT.

 

[randompixel]

Sky also have a strong partnership with Disney Channel in the UK. I wonder if this will change in the future?

 

[JoeCamel]

Sky also have a strong partnership with Disney Channel in the UK. I wonder if this will change in the future?

Not until the contract runs out. A contract is a contract just as Simpsons will not be leaving Universal until it's contract is up. Don't know the particulars but I would expect it to leave once there is no obligation.

 

[quinnmac000]

I said Comcast wasn't going to trade that stock for hulu...

Fox Will Sell Its 39% Sky Stake To Comcast, Ending Rupert Murdoch Era | Deadline

 

[zg44]

Very nice outcome for Comcast, which sets up what will likely be their attempt to create a "European Comcast", but it will likely require at least one more major acquisition to reach that point.

 

[quinnmac000]

Very nice outcome for Comcast, which sets up what will likely be their attempt to create a "European Comcast", but it will likely require at least one more major acquisition to reach that point.

A combination of two of the following would be the best options: ITV, Endemol Shine, RTL Group (Fremantle Media), Canal+ Group (Studio Canal),or Gaumont would be the best options. Preferable to do the latter three than the first two due to allowing more foreign properties in countries that Comcast, NBCUniversal, and Sky aren't major players in.

 

[zg44]

A combination of two of the following would be the best options: ITV, Endemol Shine, RTL Group (Fremantle Media), Canal+ Group (Studio Canal),or Gaumont would be the best options. Preferable to do the latter three than the first two due to allowing more foreign properties in countries that Comcast, NBCUniversal, and Sky aren't major players in.

Those are good content options; though I wonder if Sky would be able to buy ITV now. Back in 2007, Sky was forced to sell off its stake in ITV because of competition issues. Have Netflix/Amazon Prime changed the UK market so much that Sky would be allowed to be under the same ownership as ITV now? I have some doubts given how much share of UK content production Sky and ITV have. Those two and BBC are basically like 60+% of UK content production...

Canal+ Group for French content, or RTL Group with all of its various TV holdings across Europe are pretty strong options.


I think though that Comcast may look hard at a cable deal with Vodafone. Why? Because Comcast built its cable business in the US by buying AT&T Broadband to become the #1 cable company across the US. There's a unique analogue there to how Comcast could build a "European Comcast" by combining Sky and Vodafone's cable unit.


Vodafone is the #1 cable operator across Europe (it accounts for around 35% of Vodafone's European operation), and while these days there's more of a so-called "fixed-mobile convergence" (so AT&T builds out fiber now and probably regrets selling AT&T Broadband in the first place), I think that a deal for Vodafone's cable unit is the most obvious outcome.


Also, Sky's weakest division by far is its German/Austrian division, which has been plagued by cord cutting causing steep discounting to the point where the division is basically running close to $0 profits. Sky has no cable operations in Germany/Austria or Italy or Spain, where it is a major PayTV provider. If Comcast were to get cable units across Germany/Italy/Spain, that would basically enable it to easily cross-sell Sky Now TV (Sky's OTT operation) as well as shift its satellite customers in Germany/Austria/Italy over to IPTV (internet protocol TV) from satellite.

What better way to build a "European Comcast" than to copy the same playbook that built the current US Comcast?


Of course, there's 2 issues: 1) cost, and 2) willingness on the part of Vodafone. Cost of some kind of deal would probably be around $30 billion cash + $20 billion debt assumption, for a total of around $50 billion (i.e. similar to what Comcast is paying for Sky: $38.8 billion with $10.3 billion debt assumption).

The bigger question I guess is willingness, these days AT&T has been building out fiber and probably regrets selling off AT&T Broadband because of the backhaul usage of fiber/cable.


I do think though that Comcast will make an approach to Vodafone for its European cable operations; Brian Roberts has always been aggressive about buying cable units where available, and Vodafone's are at least worth an approach given they would secure Sky's German/Italian operations.

 

[zg44]

Since Comcast is going to get 100% of Sky, it's worth re-analyzing the balance sheet with this updated information:

Comcast will end up with $62 billion + $49 billion in total long-term debt outstanding or $111 billion.


I think Comcast will push to get that number below $100 billion within 2 years using cash flow; that shouldn't have any impact on the parks. Longer term, I think Comcast needs to get total debt to around $80-85 billion within 5 years so that it can be actively involved the next time major assets come up for sale including cable assets in Europe (Germany/Austria/Italy especially) as well as major content assets in the US or Europe.


If Brian Roberts is really serious about building a European Comcast out of Sky, then he'll need the balance sheet brought back to $80-85 billion before he can commit to another Sky-sized purchase.


Though there's another consideration here: Comcast didn't use stock because the stock price has been off its highs around 20-25%; if we're talking about Comcast at a much higher share value in 4-5 years, then perhaps he may be willing to use Comcast stock as Disney did with Fox.