Why Comcast, Verizon and Disney Should—and Shouldn’t—Try to Acquire Fox

The “For Sale” sign is out at 21st Century Fox, and several of the biggest media companies are lining up to speak with executive chairman Rupert Murdoch and his sons James and Lachlan about buying many of the company’s most prized assets. Less than two weeks ago, news broke that Fox had been in on-again, off-again talks to sell much of its company to Disney. While those negotiations had cooled at the time, it sent the industry a clear message that Fox was in play—and several new companies have reportedly begun lining up to kick the tires. Last night, the Wall Street Journal reported that Comcast and Verizon have also had talks with Fox, while Sony has also had informal conversations. (It would seem likely that other major companies—think Amazon, Viacom and Discovery—will also at least consider a deal.) If any of these discussions would yield a deal, Fox would likely hold onto a few of its assets—the Fox broadcast network, Fox News and FS1—and operate more like a CBS Corp., while everything else—including FX, National Geographic and international assets like Sky and Star—would be sold. Fox’s surprising decision to put itself on the block, and the surge of interest from the likes of Disney and Comcast, speaks to the need for scale to compete in the evolving media landscape. (However, during Fox’s earnings call last week, executive co-chairman Lachlan Murdoch said the company already had the necessary scale to thrive.) Any potential acquisition will be fraught with landmines, as proven by the AT&T and Time Warner deal, which more than a year after it was announced, could prompt a Justice Department lawsuit to block it. That said, here is a look at the company’s top three suitors at the moment (sorry, Sony), and why each would—and wouldn’t—be the ideal choice to acquire some or all of 21st Century Fox Comcast Why Fox is a good fit: At first glance, Comcast is the least likely suitor of the three, for the reasons we list below. But according to CNBC, Comcast is interested less because of the company’s domestic linear assets and more because of its international ones. India’s Star network and Europe’s Sky (Fox currently has a 39 percent stake, and maintains that its deal to acquire the rest of the company will close by the middle of next year) would allow Comcast to rapidly expand its global footprint. Also, a deal would enable Comcast to gain control of Hulu (currently, that streaming service is jointly owned by Disney, Fox and Comcast’s NBCUniversal, while Time Warner also has a stake) at a time when every media company is looking for a streaming/OTT presence. And Comcast could mine Fox’s movie franchises for future attractions at its Universal Studios theme parks (aside from Avatar, which already has a deal in place with Disney World’s Animal Kingdom). Why Fox is a bad fit: Even if Fox holds onto the networks that compete with NBCUniversal properties—Fox, Fox News and FS1—it’s unclear how, and if, FX and USA could co-exist in the same portfolio. And the two movie studios—Universal and 20th Century Fox—would have more overlap than, say, Disney and Fox. Most importantly, out of the three suitors on the list, a Comcast-Fox deal would seem to run into the biggest problems with the Justice Department. Verizon Why Fox is a good fit: Much like AT&T and Time Warner, Verizon and Fox would offer an intriguing marriage of content and distribution—and Verizon is the only one of the three suitors that could conceivably acquire the entire company without running into major antitrust issues. If Verizon wants to compete on the same playing field as Disney, Comcast and AT&T-Time Warner, acquiring Fox gives it the best opportunity to go toe-to-toe: it would have a movie studio, TV production studio and several networks to go along with its robust wireless and digital offerings. Why Fox is a bad fit: It’s still unclear whether Verizon, which has kept its distance from so-called legacy media—wants to be a major player along these lines. Its Oath internet-media division just announced another round of layoffs—around 500 staffers from the AOL and Yahoo brands—raising questions about whether Verizon is looking to expand on the level that a Fox acquisition would require. The Walt Disney Company Why Fox is a good fit: As is the case with Comcast, the company’s international portfolio is among the most valuable asset here, and this would also give Disney control over Hulu, which could end up as the backbone of the company’s OTT service it plans to launch in 2019. The deal would also align almost all of Disney-owned Marvel movie properties under the same company (Fox has movie rights to the X-Men and Fantastic Four franchises, which also includes Deadpool), while Disney, which opened an Avatar-themed park at Walt Disney World’s Animal Kingdom in May, would have control over the Avatar franchise ahead of the coming four sequels that James Cameron has begun production on. Why Fox is a bad fit: Even without Fox and Fox News in the mix, how will a family-focused company like Disney handle some of Fox’s grittier films (think Alien: Covenant, Logan and The Revenant), as well as the FX network?