Can anyone with even the most nominal understanding of these businesses argue that having one company own the ESPN channel group along with the Fox regional sports channels would be good for consumers and competition?
Having covered these rackets for some 35 years now, there are a lot of things that were expected — and some even predicted in this space — would occur.
Rupert Murdoch throwing in the towel was not one of them.
Yet that is exactly what happened last week, when the Murdoch family agreed to sell many of Fox’s marquee assets to Disney.
Keep in mind Rupert Murdoch not so long ago sold DirecTV — a company he coveted for years in a business he tried to enter for decades before — just to keep his family’s control over these properties after John Malone stabbed his sometimes friend in the voting shares back.
There are those who suggested Murdoch’s oldest children drove the decision to sell to Disney. Others wondered if the need to address future estate tax issues were involved.
Regardless of the motive, it was in many ways just sad to see Rupert Murdoch — the once brash, keep building the company swashbuckler, trying to argue why he was not essentially giving up.
Putting aside what anyone might think of Murdoch’s political views, it would be hard to dispute his acumen and brilliance as a businessman. That all came crashing down last week.
Even if the deal never closes, the perception of Murdoch has changed forever. The consumer media, not surprisingly, focused far more on the simplistic, superficial aspects of the Disney-Fox deal rather than on the real core of the matter.
Disney buying most of Fox’s assets would represent an alarming consolidation of the domestic content and content distribution industry.
Simply put, can anyone with even the most nominal understanding of these businesses argue that having one company own the ESPN channel group along with the Fox regional sports channels would be good for consumers and competition?
Or, put another way: How moronic would it be to claim the consumer subscription fees for sports channels will go down as a result of the potential Fox-Disney deal?
Or, to be more precise, given the market realities that everyone has recently seen, will the rate of the increase in the such subscriptions fees accelerate even more as a result of the deal?
The rationale for Disney in wanting to own the Fox regional sports networks is blatantly obvious: It needs the money from the highly profitable Fox regional sports networks to subsidize the declining revenues of the ESPN channels.
Under that scenario, Disney will have numerous cross promotion opportunities between the channels. It will also implement endless wholesale price increases for all of the sports channels it controls.
Think a seven buck per month regional sports network “surcharge” that subscribers pay in some markets is high now? How about $10 per month, or $12 per month in the near term if Disney is permitted to buy the Fox regionals.
Think there are numerous blackouts when a video service cannot reach an agreement with Disney over retransmission consent fees for the ABC owned and operated stations and the Disney/ESPN channels now?
Then again, maybe that is what Disney wants. Maybe it wants to force Dish Network or another video service to decide it can no longer provide the channels Disney would own.
Maybe Disney sees its future as providing its services direct to consumers over the Internet, cutting out the middleman—cable and satellite TV services—and taking in all the revenue from a consumer.
Sounds like a familiar business plan, say, circa, 1985, when program companies saw satellite TV as a way to bypass cable operators. Only then, the programmers did not have the leverage to make their plans stick.
If Disney is allowed to buy these Fox channels, maybe it will. Does that sound like a good deal for consumers?
Disney is best known for its perception of being “the magic kingdom,” where all is make-believe and everything is wonderful.
In his numerous public appearances last Thursday, Disney Chairman Bob Iger sounded like he lived there. The industry and nation’s capital Iger was talking about and the ones that actually exist had little resemblance.
Iger all but predicted the demise of traditional cable and satellite TV services would take place week from Thursday. And in Iger-land, the legal and industry issues involved in such a mammoth transaction were nothing major.
Iger almost made Randall Stephenson on the day the AT&T-Time Warner deal was announced seem knowledgeable. That is not easy.
Then there are the legal and anti-trust issues this transaction would raise. AT&T and Time Warner have spent the last year trying to trumpet that their deal is a classic vertical merger, since they do not compete in the same markets, and as such should be approved by the Department of Justice.
Quite obviously, Disney and Fox cannot propound the same argument. Their deal would be a classic horizontal transaction, since they operate in the same market segments.
So, are vertical mergers acceptable? Or are horizontal mergers acceptable? Will the anti-trust lawyers who filed the AT&T-Time Warner suit look the other way so Disney can buy the Fox movie and production studio, the Fox regional sports networks, and the other channels and businesses?
What “behavioral conditions” would this Justice Department, which has already said it has no interest in supervising the operations of companies as a remedy to a deal, be willing to agree to in order to approve this deal?
From a broader perspective, how much consolidation can take place in the programming/content and video distribution businesses before only a handful of companies control everything?
Or has that already transpired, and a Disney-Fox deal would simply exacerbate a problem that should have been prevented from developing in the first place?
There are those who argue this deal is “juiced” at the White House because of the Donald Trump-Rupert Murdoch relationship.
Under most circumstances, and in light of the way Washington operates, that would rule the day. But this is not a typical administration. As history has shown, Donald Trump is as loyal to his friends as a high-priced Washington lawyer — creatures half a step above prostitute on the loyalty scale.
The president is going to have a hard time saying he supports the Disney- Fox deal when he has opposed AT&T buying Time Warner.
This president, of course, has often just made stuff up to justify his actions. But in this case, he would have to do that as his re-election campaign gears up.
Unfortunately for the president, the Murdoch/ Fox News constituency and his are the same. And that will not get the president over the victory line again.
In the end, it may come down to choosing to push through the Disney deal for Murdoch, or giving his opponents yet another heavy hammer to pound him with.
Bob Scherman is the editor and publisher of Satellite Business News, an independent trade publication. Scherman has covered the satellite TV, cable, and related businesses for almost 35 years. Comments on this column can be sent to [email protected].