On Thursday, Dec. 15, 21st Century Fox announced an agreement with Sky plc to acquire the remaining 60.9 percent of the Sky shares that it did not already own in order to combine the two organizations. After the announcement, 21CF hosted a conference call about the proposed acquisition featuring Executive Chairman Lachlan Murdoch, CEO James Murdoch and Chief Financial Officer John Nallen.
Here are some of the key comments from Lachlan and James on the call, which is available for replay:
On the history of 21CF and Sky: “As the founding shareholder of Sky, we are proud to have participated in its growth and development. Its transformation over the past 25 years into Europe’s leading entertainment business has been extraordinary. At 21CF, the last number of years has also been one of growth and transformation, and we are excited to bring Sky fully into the 21st Century Fox. We are energized for the future of the combined business, for 21CF’s shareholders, for our colleagues across the globe in both organizations, and for our current and future customers.”
On the fit between 21CF and Sky: “We’ve been clear that partial ownership of Sky was not a natural end state for us. Given our long history with the company and how much Sky has grown its production and distribution businesses, which fit into and complement our core competencies, fully combining the business is a clear, logical next step in our portfolio evolution… The strategic rationale for this combination is clear: It creates a global leader in vertically integrated content distribution. It enhances our sports and entertainment scale, and gives us leading direct-to-consumer capabilities and technologies. It adds the strength of the Sky brand to our portfolio, including the FOX, National Geographic and STAR brands.”
On allocating capital: “We spent a lot of time looking at how we allocate our capital, what our plans are there, what’s possible for the business. And the board and all of the management team has been very engaged on that subject, as we’ve discussed with all of our shareholders over the last year and number of years. And we really concluded that given the set of options, which was very wide, this was the thing that was going to be really the most attractive for shareholders from a value creation point of view, both in the short, medium and long term in terms of what these businesses could do together.”
On the key benefits of the transaction: “The combination creates a global leader in vertically integrated content creation and consumer experience. It adds a great brand to our portfolio. It provides us with enhanced scale and diversification of revenue streams… It is also consistent with our focus on premium upstream programming and consumer experience. Simply put, the combined company will be a global creative and consumer powerhouse.”
On the content Sky brings to 21CF: “So, at its core, Sky is a creative content business. The majority of its revenues are underpinned by a distinctive content portfolio, which is delivered primarily on the world’s leading set of direct-to-consumer platforms, reaching almost 22 million households. To give you a sense of how important and relevant to consumer Sky content is, 50 percent of all paid viewing on those platforms accrues to Sky’s own channels. Sky is also Europe’s biggest investor in content, with over £5 billion invested in content per year.”
On the capabilities Sky brings to 21CF: “Additionally, this combination brings to 21CF a set of consumer capabilities ranging from data driven digital advertising to a multi-platform leading consumer experience, including Sky Go, Sky NOW, and Sky TV. Sky is much more than a satellite distribution company. It’s a creative, commercial and consumer powerhouse, delivering its own content to customers across all platforms.”
On 21CF and Sky innovating the consumer experience: “Combining our fast-growing direct-to-consumer platforms at 21CF, including our streaming apps like FXNow and hotstar, our interest in Hulu and Tata Sky, with Europe’s leading over-the-top service Sky Go and digital video experience in Sky Q creates a consumer powerhouse reaching approximately 100 million consumer households directly on these platforms. The breadth, variety and scale of our consumer relationships will be second to none, and will enable us to be a leader in developing the innovative customer experiences and monetization models for the next wave of content consumption growth.”
On to ability to go direct-to-consumer: “I think in the marketplace that we’re in now, and I think we’ve all talked about this in the past, the ability to innovate in terms of the consumer experience is really important. And in some cases, owning that capability and that customer relationship directly or on a wholly owned basis is advantageous; in other places, we can work with partners.”
On Sky’s OTT leadership: “I think with respect to over-the-top distribution, one of the things that is attractive about this business is how much of a leader and an innovator in over-the-top distribution Sky is, with the Sky Go platform and NOW TV, which I think is the largest over-the-top platform as far as I know across Europe. It’s a very, very attractive business, and I think as an innovator in bringing over-the-top services, starting many years ago with TV Everywhere services on mobile networks in the U.K. at first, Sky has really been a leader there.”
On the global opportunity: “In short, the combination allows us to deploy all of our assets, whether that’s creative, financial, or human capital to the greatest opportunities we see in the global market. It creates a more agile organization that is better equipped to succeed in a global market and it helps complete the jigsaw of capabilities that we believe our business needs to be successful in an increasingly dynamic marketplace.”
Learn more about 21CF’s proposed acquisition of Sky by reading the press release, listening to the archived webcast and viewing a set of presentation slides about the acquisition.