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