The Sky takeover

‘Now it’s all about what we can do from here’

The Daily Telegraph - Business - - Front Page - Christo­pher Wil­liams

‘Sky has been get­ting taken over for five years, ba­si­cally,” says Brian Roberts.

The chief ex­ec­u­tive of Com­cast, the new owner, is in West London to call an of­fi­cial end to one of Bri­tain’s long­est-run­ning takeover sagas. He even un­der­es­ti­mates how long Sky has op­er­ated un­der a cloud. News Corp be­gan hatch­ing plans for its first bid, ul­ti­mately wrecked by the phone­hack­ing scan­dal, nine years ago.

Fi­nally, af­ter a dra­matic head-to­head auc­tion bat­tle be­tween Com­cast and Dis­ney, the ques­tion is set­tled. Roberts paid £30bn to snatch con­trol of Sky away from ri­val Bob Iger, more than dou­ble its mar­ket val­u­a­tion be­fore the endgame be­gan, and there is no go­ing back.

As well as chief ex­ec­u­tive, Roberts is scion of the Philadel­phia ca­ble dy­nasty that con­trols Com­cast, and it does not sell its as­sets.

“I’ve been in the same com­pany since 1981. I’m look­ing for the very long term,” he says.

At a gath­er­ing in the vault­ing eco-friendly atrium at the heart of its West London cam­pus, Sky staff are urged to adopt the Roberts fam­ily creed – think like an owner, not a renter. The new boss of bosses wants de­ci­sions to be taken as if Sky staff “own the com­pany 100pc and you’re not sell­ing it”.

“What is the an­swer for the long term,” says Roberts. “That is the de­ci­sion you are try­ing to get to.”

It is all a far cry from the buc­ca­neer­ing Sky of the 1990s, when it looked as though Ru­pert Mur­doch might sac­ri­fice his en­tire em­pire to break into Bri­tish broad­cast­ing. At times the com­pany ap­peared days from dis­as­ter. The long-term would have to wait.

Like­wise, Roberts’ low-key, mod­est style is a world away from the bom­bast of the James Mur­doch years of the mid-2000s. Sky ter­rorised ri­vals and reg­u­la­tors to tighten its stran­gle­hold on pay-TV and ex­pand into broad­band. Yet Com­cast’s aim as it ends Sky’s 24-year run as a pub­lic com­pany is to em­pha­sise what will not change.

Jeremy Dar­roch, chief ex­ec­u­tive for a decade al­ready, will stay on and will op­er­ate Sky quasi­in­de­pen­dently as the “third leg of a stool” along­side the core US ca­ble busi­ness and NBC Uni­ver­sal, the broadcaster and Hol­ly­wood stu­dio Roberts bought in 2009. “Dif­fer­ent or­gan­i­sa­tions have dif­fer­ent philoso­phies and my dad’s phi­los­o­phy was ‘get an expert and let them do their job’,” he says. “My job is to go get the money to give to Jeremy to let him in­no­vate and fo­cus on the cus­tomer.”

Roberts also lays claim to the same “scrappy, en­tre­pre­neur­ial” her­itage as the Mur­doch clan. His fa­ther Ralph Roberts be­gan the com­pany as a chal­lenger to the lo­cal tele­phone mo­nop­oly. Then came ca­ble tele­vi­sion and an ex­plo­sion of choice for view­ers via Com­cast’s grow­ing net­work.

“The per­cep­tion may be that we’re an in­cum­bent but we view our­selves as the dis­rupter,” says Roberts. “When my dad started the com­pany we had noth­ing. The phone com­pany owned the poles and if we wanted to put a ca­ble on them they said, ‘you can’t’. The broad­cast­ers had all the view­ing too.”

The per­cep­tion of Com­cast as a slow-mov­ing mo­nop­oly has grown up in the broad­band age, which trans­formed its ca­ble net­work into a lu­cra­tive high-speed in­ter­net mo­nop­oly in many Amer­i­can cities. Con­sumers pay high prices and get cus­tomer ser­vice that Roberts ad­mits once “em­bar­rassed” him.

“We’ve made tremen­dous progress,” he says. Sky’s strong cus­tomer ser­vice record is un­der no threat, he in­sists, “be­cause we’re not go­ing to be telling Jeremy how to do that, Jeremy is go­ing to be help­ing teach us how they were suc­cess­ful”.

In truth, says Dar­roch, Sky aban­doned some of the Mur­doch doc­trine years ago. It no longer calls for an end to reg­u­la­tion, and as the pay-TV in­cum­bent is in­stead cam­paign­ing for more reg­u­la­tion of the tech giants that threaten its busi­ness.

“We have called for a level play­ing field when you talk about things like pri­vacy,” says Roberts. “I am very sup­port­ive of the idea that we as con­sumers should con­trol our own data.”

Dar­roch, who at 56 is three years younger than Roberts and has made tens of mil­lions of pounds from his shares in the takeover, is the au­thor of the more prag­matic face Sky has shown the world in re­cent years. He aims to take the same ap­proach in work­ing for Com­cast.

Ini­tially, col­lab­o­ra­tion will be mod­est. In Italy, where Sky is a part­ner in an ul­tra-fast broad­band roll-out, Dar­roch aims to make use of Com­cast’s ad­vanced Wi-Fi ser­vice xFi. Sky Q, the set-top box, will be pro­moted in the run-up to Christ­mas with an ad­ver­tis­ing cam­paign based on the new Uni­ver­sal an­i­ma­tion The

Grinch. Dar­roch sug­gests that for ma­jor US news events such as the midterm elec­tions, Sky News will be able to draw on hun­dreds of NBC reporters.

In time though, Com­cast has promised in­vestors $300m (£229m) in cost sav­ings and $200m in rev­enue syn­er­gies. Big­ger ideas will be re­quired. Com­cast’s back­ground in broad­band has prompted spec­u­la­tion that Sky could in­vest in ul­tra-fast con­nec­tions in the UK, own­ing in­fra­struc­ture rather than rent­ing BT lines as it does today.

“The an­swer to that ques­tion is what does Jeremy think?” says Roberts.

Jeremy thinks it’s too soon to say. “The UK from an in­fra­struc­ture point of view has its own pe­cu­liar­i­ties,” he says. “We can get to those things in time.”

Mean­while the FAANGs of tech – Face­book, Ama­zon, Ap­ple, Net­flix and Google – are sink­ing into the en­ter­tain­ment busi­ness. Roberts and Dar­roch are bank­ing on the scale of their com­bined busi­nesses to se­cure and ex­pand Com­cast’s role in the in­dus­try. To­gether they will of­fer me­dia rights hold­ers ac­cess to 50 mil­lion sub­scribers.

Dar­roch is con­vinced that, to­gether with Sky’s plans for stream­ing ser­vices of its own across Europe, will mean the likes of Dis­ney will con­tinue to pro­vide their pro­gram­ming. An­a­lysts have doubts, es­pe­cially as Iger is stak­ing his legacy on cre­at­ing a global “Dis­neyflix” sub­scrip­tion stream­ing with its own di­rect re­la­tion­ships with con­sumers.

Like­wise Sky’s long­time part­ner HBO, the maker of Game of Thrones, is now owned by Com­cast ri­val AT&T. Last week, for the first time in its his­tory, HBO cut off a US pay-TV op­er­a­tor in a dis­pute over fees as it shifts its busi­ness to­wards sub­scrip­tion stream­ing.

“I’m not sure that the new owner had any­thing to do with that HBO dis­pute,” says Roberts. “I don’t know, but I think it had more to do with HBO de­cid­ing to sell in a dif­fer­ent way than it had done in the last 30 years.

“Th­ese are hard con­ver­sa­tions. The first prin­ci­ple is let the per­son clos­est to the cus­tomer make that de­ci­sion. We won’t make it any­where other than here at Sky.”

“Some or­gan­i­sa­tions may say ‘we love ac­cess to the whole 50 mil­lion, that’s unique’. Oth­ers may say, ‘no we have a spe­cial re­la­tion­ship in London that is very dif­fer­ent to what we have in Philadel­phia’ [with Com­cast]. We’re go­ing to re­spect that.”

Dar­roch adds: “There may be some stuff where we can come to­gether and do a deal be­cause we can say to a rights holder, or a tech­nol­ogy com­pany or an ad­ver­tiser, ‘this is what we can give you’ ”.

Sky is keen to build a re­la­tion­ship with NBCUniver­sal in pro­gram­ming pro­duc­tion. Its own ef­forts, such as

Pa­trick Mel­rose, have won crit­i­cal ac­claim and shored up its sub­scrip­tion base. As part of a global gi­ant the op­por­tu­ni­ties to share costs and dis­tri­bu­tion are much greater, how­ever.

“We’ve got an or­gan­i­sa­tion with 50 mil­lion house­holds, some of the most valu­able house­holds in the world, and many of those are English speak­ing,” says Dar­roch. “In time we will start to say ‘right, there could be some big things we can do that re­ally utilises that as­set base’.

“The im­por­tant thing is that those things have got to be led by the op­por­tu­nity, not by a sort of prin­ci­ple or some­thing that you are try­ing to im­pose.”

It is only day one, but Roberts has no buyer’s re­morse.

“Maybe it could have been a lit­tle less, but I don’t think too much. What­ever we did, we did, it’s over,” he says.

“We’ve fi­nanced it and we’ve paid for it. Now it’s all about what can we do from here.

“Time will judge whether we were right or wrong.”

Sky staff hear from chief ex­ec­u­tive Jeremy Dar­roch, be­low left, and Brian Roberts, be­low right, chief ex­ec­u­tive of new owner Com­cast

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