Is Sky really worth bidding frenzy of £30bn?

Britain’s Sky makes about £1bn a year profit fom its 23 million subscribers in the UK and Europe, bidder Comcast (currently in the lead with a £26bn offer to buy it) makes over $20bn from a similar number of subscribers in the US and TV and film business NBCUniversal, broadcaster of the Super Bowl.

Comcast boss Brian Roberts, currently holed up in Idaho with other media magnates, is also trying to buy most of Rupert Murdoch’s Fox assets. In the lead for these is Disney with a $71bn bid.

Murdoch is trying to buy the rest of Sky (he owns 39 per cent) and then sell the whole shebang to Disney. Analysts reckon the bidding for Sky alone will reach £30bn before these media magnates look down and say: do we really think we can defy gravity?

Whoever wins (Murdoch will win either way, at least money-wise) will be landed with eye-watering debt and, possibly, political objections. The Trump administration has just announced it’s appealing a court decision to allow the merger of AT&T and Time Warner. AT&T already owns HBO, Warner Brothers and CNN and is in the process of buying ad marketplace AppNexus.

Why the bidding frenzy? Traditional media owners (this lot) are worried about the seemingly remorseless rise of Netflix and Amazon’s nascent entertainment efforts. Their subscription model is much simpler and they can spend more or less what they like on content: big budget TV series and, down the line perhaps, sports rights.

Sky’s fortunes are largely founded on sports rights, specifically Premier League football. But upstart rival BT Sport now has the Champion’s League, some Premiership games and other sports like Premiership club rugby. The new Premier League deals are costing them about £4.6bn against £5bn for the last three year contract.

Which suggests that there’s a limited appetite for football on the part of armchair fans who object to paying hundreds of pounds a year. This is surely a worry for Sky and whoever wants to buy it. Another bidder, like Amazon, could conceivably blow Sky and BT out of the water. If push came to shove the Premier League would take anyone’s money.

Sky is a well managed and innovative company, arguably Rupert Murdoch’s greatest achievement as he’s been in from the start. His last attempt to buy all of it was torpedoed by the phone hacking scandal at the News of the World which led the Government to rule that he shouldn’t own Sky News, a whole saga in itself.

But with a media market changing so rapidly are these leviathans right to gamble such mind-boggling amounts of money? Might they not be better off doing some innovating themselves?

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