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Putting aside the 800 pound media plurality gorilla in the room, the Sky bidding war can still have plenty of benefits for UK content producers

07/06/2018

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United Kingdom

Any member of the media industry not living under a rock will be aware that on Tuesday Culture Secretary Matt Hancock cleared the way for Comcast and 21st Century Fox to engage in the bidding war for Sky. This is, of course, subject to the much reported (and even, perhaps, effective) caveat that if Fox were to win the buyout it must divest Sky News to an appropriate third party to maintain media plurality.

Rather than condense, summarise, abstract or otherwise regurgitate the thousands of articles published in the wake of the decision (talk about plurality), we thought we'd be the brave souls willing to focus on the positive aspects of Mr Hancock's announcement. That is, there is a silver lining for UK based production companies pitching for commissions from the likes of Sky.

We do believe that the bidding war will protect and may even increase the value of UK produced content. At a purely financial level, whichever of Comcast or 21st Century Fox's bids are successful, Sky will likely have access to much broader working capital to commission, co-produce or distribute content. The combination of Sky and either of the bidders will, as all parties have stressed, allow the combined entity to compete more with the OTT players such as Amazon and Netflix, which should drive up the value of the aforementioned content.

Producers now potentially have a wider choice for distribution – they could accept a full buyout of rights from Sky at a higher value than they may have expected prior to the share sale or proceed with the hybrid distribution model, i.e. selling rights in a program to Sky for a particular period of time before hiving the rights off to Netflix or Amazon following such period.  Further, a Comcast win (as some commentators anticipate) brings additional US money into the UK media industry and shows the seriousness with which US media companies value UK content.

Despite the understandable concerns about plurality following Mr Hancock's decision, we believe that authorising a bidding war in this scenario is likely to better enhance UK content production in the long run.