Veteran media analyst Todd Juenger of Sanford Bernstein has weighed in on the Comcast-Fox-Disney roundelay with an intriguing new report. He maintains the latest salvo by Comcast is all about nothing less than existential survival.
“Comcast must be looking into the 10-year future,” Juenger writes, “and has concluded: 1) there will only be a handful of global, entertainment video services, 2) most of those slots are already taken (Netflix, Amazon, Google/YouTube, Facebook?, Apple?), 3) likely only one company from ‘old media’ can make it only that list, 4) that survivor will be whoever acquires Fox, and 5) it would be much more valuable for Comcast, ultimately, to hold that position, than to be a U.S.-only ISP with an orphaned entertainment business.”
Juenger adds, “We are sympathetic to the view.”
Comcast last week announced it is in the “advanced stages” of bringing forth an all-cash offer for the Fox assets currently ticketed for Disney. The bid is expected to come in at or above $60 billion, north of Disney’s pending $52.4 billion deal.
In his report, Juenger mounts a passionate argument for subscription video on demand as the destiny of all in-home entertainment. SVOD, he writes, “is superior in almost every way, for almost every viewing occasion (especially on a ‘value-weighted’ basis), for consumers to acquire video entertainment. It represents a far better value from a price/utility standpoint than the linear bundle, it is advertising-free or advertising-light, it is easily and seamlessly deliverable on any type of screen, it allows for sequential ‘binge-ing,’ and it is fun.”
Sports and news video content will operate differently, Juenger predicts. “The natural end state for entertainment is on-demand. The natural end state for sports is live. The natural end state for news is, frankly, the Internet.”
Ergo, he says Comcast likely concluded, “Whoever acquires Fox consolidates their position to join the club of global video entertainment companies. Whoever loses Fox not only doesn’t consolidate the power, but now has to compete against the one who does, and essentially becomes resigned to be a niche player (or worse).”
Juenger also sees the Comcast bid as having an easier time than Disney’s making its way through Washington — even leaving aside the potential regulatory impact of the June 12 ruling in the U.S. v. AT&T. “We are even starting to question how much is contingent on that outcome, and how much of a regulatory burden really does exist for Comcast,” he wrote. “It seems to us that most of the Fox assets – and especially the Fox assets that Comcast most wants – have very little regulatory concern.”
The sentiment echoes the conclusions of a report last week by the International Center for Law and Economics, a nonprofit, nonpartisan research organization, which has received funding from Comcast and other media companies in recent years.