How Much Could Comcast Benefit From Acquiring Fox’s Studio Business? 

by Trefis Team
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21st Century Fox (NYSE: FOX) has had a productive run over 2018 thus far, and the recent approval of the AT&T and Time Warner deal has opened up a bidding war for Fox’s assets between Disney (NYSE: DIS) and Comcast (NASDAQ:CMCSA). Disney won the original bidding for the majority of Fox’s assets last December, with a $52.4B all-stock deal. However, Comcast came in with a superior $65 billion all-cash bid after the approval of the AT&T-Time Warner deal. In response to Fox’s bid, Disney has now boosted its bid for the assets of Fox to $71.3 billion in cash and stock ($38 per share in cash and stock). Although the Fox board accepted Disney’s offer, the deal is still subject to shareholder approval and Comcast may well come back with a counteroffer. The assets being sold in this deal reportedly include Fox’s offerings on television – Fox’s Nat Geo, Star, and regional sports network – as well as a stake in Sky and Hulu, in addition to Fox Studios.

In this article, we take a look at how much value Fox Studios could add to Comcast if it comes back with a counteroffer that is accepted by Fox. We have created an Interactive Dashboard which outlines our forecast for a combined entity’s Studio business. You can modify the revenue forecasts to see the impact these changes would have on the revenue total.

Fox Studios A Good Fit For Comcast’s Portfolio

Comcast owns Universal Studios, which owns the Jurassic Park, Fast and Furious, Jason Bourne and Despicable Me franchises, to name a few. The Fox acquisition would add the likes of X-Men, Fantastic Four, Deadpool and Avatar to Comcast’s film portfolio. Per Trefis estimates, Fox’s studio operations contribute around 15% of the company’s value and almost 30% of its total revenues. Comcast could also use movie content from Fox to compete in the rapidly changing streaming space, where competition includes the likes of Amazon (NASDAQ: AMZN) and Netflix (NASDAQ: NFLX). Universal Pictures has the lowest market share among the top studios in the country, amounting to 8% year-to-date. If a potential Fox-Comcast deal were to occur, the combined entity would have around a 20% market share, which would place it ahead of competitors such as Time Warner and Viacom, but still behind Disney.

Our estimates are based on data from Box Office Mojo, which we use to estimate the total movie releases and total gross per movie (limited to major studio releases). As shown in our dashboard, the combined Fox-Comcast company would collect around $81 million per movie, relative to Comcast’s standalone estimate of around $65 million on average. These figures lag far behind Disney, with an estimated $250 million per major release due to its massive franchises including the Marvel Cinematic Universe and Star Wars.

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Like our charts? Explore example interactive dashboards and create your own.

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