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Disney vs Comcast Showdown: Who Needs the Fox Assets More?

Entertainment behemoths seek scale to compete with Netflix and other tech giants

Now that Comcast has thrown its $65 billion hat in the ring to acquire the key film and TV assets of 21st Century Fox, the bidding war against Disney many expected has now started.

But which company needs Fox more? Analysts and M&A experts suggest that Disney has the most to gain from the acquisition.

“While both companies would benefit enormously from the deal, I would lean towards Disney having the greater need,” Brian Frons, former president of ABC Daytime and current lecturer at UCLA Anderson School of Management, told TheWrap.

Disney CEO “Bob Iger has reconfigured his organizational structure for the digital age: the Fox deal gives Disney the scale they lack for their run for media supremacy,” he said.

As AT&T’s acquisition of Time Warner showed, media companies are looking for scale to compete with Netflix and other tech giants that have emerged in the entertainment space.

Disney is preparing to launch its own streaming service next year to compete with Netflix; and the Fox assets, which include film and TV franchises like “X-Men,” “Avatar,” “Deadpool,” “Fantastic Four” and “The Simpsons,” could be the last piece of the puzzle.

“If Disney really wants to position itself effectively against Netflix, if that’s the goal, they need that asset more,” Todd Klein, partner at Revolution Growth, told TheWrap. “They don’t have a diversified scripted capability for TV — outside of family [as a programming category] — which is an enormous part of what draws subscribers to Netflix.”

Plus, Fox’s 22 regional sports networks would give ESPN a huge lift for its nascent streaming service that was launched in April. “It really gives ESPN the content and distribution to be the worldwide leader in fact, not just in name,” Frons said.

But for those same reasons, Fox would be equally attractive to Comcast, which already controls NBCUniversal with the Universal movie studio, NBC broadcast network and cable networks such as MSNBC, E! and USA.

If Disney lost out on Fox, the company would still have Marvel, LucasFilm, Pixar and its own animation studio in its vault. Those titles alone are a credible challenge to Netflix; especially after the planned removal of its content from Netflix’s platform to populate its own streaming offering.

The loser in the fight for the Fox assets could also beef up its content offering by going after Lionsgate or Viacom or some other studio.

At least one expert suggested that Comcast has more on the line since Disney already has such valuable IP in its portfolio. “Comcast doesn’t have that luxury and must win here,” said Peter Csathy, chairman of CREATV, a media and tech-focused business development and advisory firm.

Whichever company comes out on top in the battle for Fox would also acquire its 30 percent stake in Hulu, making either Disney or Comcast the streaming brand’s majority stakeholder. “The real crown jewel here is Hulu,” Csathy said.

Hulu has broken out over the past year as its subscriber count continues to rise and it garners critical acclaim for prestige dramas like “The Handmaid’s Tale,” which became the first streamer to win the Emmy for Best Drama Series. With Disney prepping its own streaming offering, Hulu is potentially more valuable to Comcast.

“Comcast must be a major player in the new world of premium Netflix-dominated OTT video, and it must own and exclusively feature major franchises to have any chance of competing,” Csathy said. “Those necessary ingredients are missing from the Comcast NBCUniversal equation right now. And that’s a real existential problem.”

Comcast is also in need of digital distribution and global scale — Fox offers both. Comcast would scoop up the 39 percent of U.K. broadcaster Sky that Fox already owns. The company has already shown how valuable it thinks the global asset is, judging from its $31 billion bid for the company.

But analysts agreed that the content part of the deal is more valuable than whatever distribution gains Comcast would receive.

“I believe the Fox assets are more important to Disney than Comcast,” said Mary Kelly, associate chair of economics at Villanova School of Business. “The additional content on its 2019 direct-to-consumer service launched next year will be critical to its success living outside the cable bundle.”

Disney has yet to make any kind of counter-bid and it’s a toss up over which of the two business giants will come out on top.

Comcast’s bid for Fox seems more like an opening salvo in a bidding war than it does a best and final bid,” Craig Moffett, senior analyst at MoffettNathanson, wrote in a research note on Thursday.

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