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NEW YORK – Since the meteoric rise of Netflix Inc. sparked the revolution in online television, media officials have been debating how to react.
Is it better to have must-have programs, or pipes that deliver them to millions of homes? Should they remain focused on the lucrative American television market, but in the process of reducing it, or expand abroad, where the company still has room to grow?
The answer, according to Brian Roberts, chief executive of Comcast Corp., is to do both. On Saturday, his company donated about $ 40 billion to Sky as part of a playoff bid, led by its competitor, 21st Century Fox Inc., at an auction for the European television giant .
As the winner of a fierce bidding war, Comcast is expected to nearly double its customers. The acquisition would also help Comcast better cover its operations in a rapidly changing industry, believing that the key to competing with Netflix is to straddle both sides of the business and the Atlantic Ocean.
This is a costly gamble – and may not be suitable for investors. Comcast shares have slipped this year, shaken by a failed deal to acquire Fox's entertainment assets and now an apparently successful campaign to acquire Sky.
"This acquisition will enable us to grow our customer base quickly, efficiently and significantly," Roberts said in a statement. Without antitrust issues, it plans to complete the acquisition of Sky by the end of next month.
The victory remains darkened. Fox could refuse to pay the 39% of Sky that she currently owns. This would let Comcast share the company with Fox, which should be part of Walt Disney Co. next year.
The debt that Comcast will have to pay to close the deal is not a problem, but the price is worrying, said Craig Moffett, an analyst at MoffettNathanson LLC. The bidding war between Disney and Comcast pushed Sky's valuation up eight times its earnings before interest, taxes and depreciation to 15 times, he said.
"It will be incredibly difficult to justify paying such a high price," Moffett said Sunday. "It's an asset that neither Disney investors nor Comcast investors wanted to win."
Since taking over NBCUniversal seven years ago, Comcast has owned content and distribution. This helped to reduce his risks. Although the company was hurt by the cord cut – with thousands of cable TV customers having dropped their subscriptions – many Netflix converts still need Comcast's Internet connections. And NBC's Comcast generates lucrative fees by selling old episodes of series to Netflix, Hulu and others.
Sky is essentially the European twin of Comcast, and the buyout of the company is a massive bet that the combination of two similar activities could fuel Comcast's financial outlook for years to come.
Comcast, based in Philadelphia, will now provide television services to approximately 52 million customers in the United States and Europe, including the United Kingdom, Italy and Germany. Comcast currently earns 9% of foreign income. With Sky, that number would rise to about 25%.
"This has become an essential asset for Comcast," said Paul Sweeney, an analyst at Bloomberg Intelligence. "It's a very daring price."
Sky also has technology. Sky's pay-TV service has a smooth interface called Q box – a counterpart to Comcast's X1 decoder. And Sky has a programming in demand. While Comcast owns the NBC broadcast network, home of NBC News, "This Is Us", the Olympics and National Football League games, Sky has an important news and exclusive agreements division with matches HBO and Premiere League football.
Sky was the final price of a long battle between Comcast and Disney for most of Rupert Murdoch's media empire. Disney has rejected Comcast's attempt to buy entertainment assets by securing a $ 71 billion deal. Comcast is now about to take control of Sky and turn a cable company founded 55 years ago by Ralph Roberts in Tupelo, Missouri, into a giant of entertainment on two continents.
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