Comcast's Sky Bid Not Seen Facing Same Regulatory Headwinds as Fox's Has

Comcast's bid for Sky likely won't raise the same types and levels of regulatory concern that initially met Fox's bid for Sky, experts told us. Unclear is whether the Fox bid -- now that it has pledged a firewall to protect Sky News operations (see 1802120031) -- still carries those regulatory concerns. Comcast announced the $31 billion proposal Tuesday. Fox said it "remains committed" to the cash offer it made in 2016, saying "no firm offer has been made" by Comcast.

Comcast/Sky regulatory approval seems to have better chances, since many of the potential public interest hurdles that have come up in Fox/Sky don't apply or are easier to surmount, said London School of Economics political science associate professor Damian Tambini. Comcast's U.K. media interests are smaller than those of Fox, so media plurality issues are less of a barrier, he said. The U.K. Competition and Markets Authority (CMA) issued preliminary findings last month that Fox's proposed buy of Sky may be against the public interest for media plurality issues (see 1801230010).

The firewall conditions probably made the chance of U.K. regulatory approval of Fox/Sky within reach, said competition lawyer Stephen Hornsby of London's Goodman Derrick: Since Comcast doesn't have a big European presence, it doesn't raise plurality issues and there's no reason to think it wouldn't follow broadcasting codes on impartiality, so it doesn't raise big red flags about commitment to broadcasting standards. That leaves Sky with largely "a level playing field" of suitors and any deal likely will focus on the best offer, Hornsby said. Comcast said its NBCUniversal assets in the U.K. include more than 1,300 employees, some production companies, and broadcasting licenses and VOD.

Other experts were more skeptical about the firewall solution and whether CMA would consider it adequate. University of Westminster communications professor Steven Barnett said Comcast made some overtures toward Sky News independence, and it's possible Comcast may bolster those voluntary commitments. The secretary of state might ask informally for some assurance about sustaining Sky News, but won't be in a position to make demands since Comcast raises none of the public interest issues created by a Fox bid, he said. Fox may up its bid for Sky, but the cable operator's bid and the lack of regulatory concerns accompanying put Comcast "in the driver's seat," Barnett said.

Critics of Fox/Sky said Comcast/Sky likely faces less regulatory headwinds. Media Matters President Angelo Carusone said Comcast/Sky still raises some concerns with the increased digital footprint Comcast would have globally. Hand in hand with that concern is that regulatory apparatuses haven't caught up to digital distribution realities and there's no mechanism from a media plurality standpoint to say what's too much concentration, Carusone said. He said a Comcast buy of Sky raises the specter of "Americanization" of Sky's approach to reporting -- though ultimately that issue likely falls outside of U.K. broadcast standards and likely wouldn't play a role in any deal review. Campaign for Press and Broadcasting Freedom organizer Josef Davies-Coates said there would likely be less opposition to Comcast/Sky than to a Fox deal, given widespread public distrust in the U.K. of Fox Executive Chairman Rupert Murdoch.

The addition of Sky's 23 million subscribers would nearly double Comcast's size, making it the largest pay-TV operator and giving it cross-border scale, Macquarie analyst Amy Yong wrote investors. It would give Comcast access to Sky's Now over-the-top platform and its Sky Q next-generation TV platform, and better opportunities for cross sharing content, she said. Yong said a Comcast/Sky deal carries few regulatory hurdles and the expiration this fall of the Comcast/NBCUniversal consent decree would let it be more opportunistic. Wells Fargo analyst Marci Ryvicker wrote investors that Fox will likely respond with a higher bid, though it's unclear how much higher. She also said if the Sky deal goes through, the odds of Comcast buying a wireless company become small. A Sky bidding war is likely, with Disney sweetening its offer for the 38 percent of Sky already held by Fox and eventually ending up owning all of both Sky and Fox, Citi's Jason Bazinet wrote.

In an analyst call Tuesday, Comcast CEO Brian Roberts said the company doesn't foresee any significant regulatory issues and expects to get "timely" regulatory approval. He said Comcast as part of the proposed deal pledges to maintain Sky headquarters and to keep Sky News independence and its local community programs. "Comcast and Sky are the perfect fit," Roberts said, saying strategic benefits of Comcast/Sky include bigger inroads into the European market and more financial resources to invest in content and product innovation. Comcast said the deal also opens the door to technology sharing and cross-distribution off NBCU and Sky content across the U.S. and Europe.