Disney’s Bob Iger On Need For Fox: “The Consumer Is Voting—Loudly”

UPDATED with analysis

Disney CEO Bob Iger said changes in consumer habits are driving the company’s aggressive pursuit of 21st Century Fox studio and network assets.

Facing historic levels of competition from Netflix and other digital players, traditional media powers have no choice but to act, he said in a conference call this morning with Wall Street analysts.

“Direct-to-consumer distribution has actually become an even more compelling proposition in the six months since we announced the deal,” Iger said. “There has just been not only a tremendous amount of development in that space, but clearly the consumer is voting—loudly.”

Just a few minutes before Iger and other Disney brass got on the phone this morning, they announced a new bid for Fox that is nearly 10% above the one submitted last week by Comcast. Disney’s latest enticement is worth $71.3 billion in cash and stock — nearly $19 billion north of the company’s $52.4 billion bid, which Fox accepted last December.

“To us, the fact that Disney went well above the current $35 per share Comcast bid with a 50-50 blend of cash and stock proves to any doubters how serious The Walt Disney Company is about acquiring these assets,” veteran media analyst Michael Nathanson said in an analyst report.

Nathanson anticipates a follow-up bid from Comcast, though none is expected today.

Iger said that the combination seems even more compelling, six months into integration planning, as Disney contemplates the significantly expanded presence and distribution in Europe, India and Latin America.

As to another scenario that some analysts and media observers have floated — Disney and Comcast dividing up the Fox assets — Iger said the agreement with Fox “precludes that.”

Iger emphasized the regulatory advantages enjoyed by Disney. Even though a federal judge resoundingly defeated the government’s lawsuit seeking to the merger of AT&T and Time Warner, the Disney CEO cautioned against an over-broad reading of Judge Richard Leon’s ruling as giving a green light to all vertical mergers.

“The temptation by some to view this decision as being something more than a resolution of a specific case should be resisted by one and all,” said Iger, quoting from the judge’s ruling. “One and all, as we read it, really includes Comcast.”

Iger said Comcast is not only the nation’s largest cable TV distributor, but it controls 40% of the U.S. broadband market.

“When you factor in their content ownership, already including a major broadcast network and multiple television stations and multiple cable channels, it’s just simply an apples to oranges comparison to what the Justice Department was considering when you consider the AT&T acquisition,” Iger said.

Analyst Nathanson agreed with Iger’s assessment, saying Comcast would likely face higher regulatory hurdles, noting, “Don’t forget that in the AT&T/TW case, the DOJ failed to bring up the issue of broadband ownership and zero-rated content!”