Issue of the week: Sky falls to Comcast

The giant deal has delivered huge profits for Sky investors, but is an expensive bet for Comcast

“It was a chance ride in a London black cab that alerted Comcast’s Brian Roberts to Sky’s potential,” said The Sunday Times. The boss of America’s largest cable company, in London on a business trip, was struck by the cabbie’s detailed knowledge of Sky’s product. And when Sky “clinched the rights” for a package of Premier League football matches at a knock-down price, “it helped make his mind up”. Having been outmanoeuvred by Disney in the bigger battle for 21st Century Fox, Roberts was in no mood to muck around. Last week, Comcast “blew Fox away” with a £17.28 share offer for Sky valuing the broadcaster at £29.7bn. The deal will trigger a huge windfall for investors, noted Ben Harrington in the Mail on Sunday. A cluster of “powerful hedge funds” – including Baupost, Elliott and Odey Asset Management – “stand to make a profit of more than £1bn from the sale”. Just a year ago, Sky’s shares were trading for as little as 925p.

The £30bn sum marks “the biggest investment ever into a UK firm”, said Alex Brummer in the Daily Mail. Comcast’s major goal was to capture Sky’s 32 million subscription-paying customers across Europe (mainly in Britain, Germany and Italy), giving it an “enormous audience” when added to its 30 million viewers in America, where it controls the NBC family of news channels and Universal Studios. The challenge will be to hang on to those numbers against fierce competition from online TV rivals like Amazon and Netflix. The sale will be “bittersweet for Rupert Murdoch and his family”, who for more than two years have tried to gain majority control, but were stymied by “endless regulatory reviews”. Still, the Murdochs are now billions of pounds richer and “can draw immense satisfaction from having created a technological jewel”. As can Britain. This deal underlines the value of the “creative sector”, which now makes up about a tenth of national output: “roughly the same amount as high finance and the City of London”.

The giant Comcast and Disney deals are “a vindication of the commercial nous” of Rupert Murdoch, who created Sky in 1989 “and saw it almost go bust in its first year”, said the FT. “The 87-year-old must surely have some regrets over breaking up the entertainment empire he spent a lifetime building”, but he has at least cashed out “for lofty valuations”. His buyers, conversely, “are making stunningly big bets” in an environment changing with vertiginous speed. “Getting out in front of the disrupters is a tricky business.” Comcast and Disney shareholders “can only hope that their expensive bets turn out to be the right ones”.