How the Feds May Have Just Handed Netflix Over to Comcast | PRO Insight
In my last column, I laid out my annual 10 predictions for media, entertainment and tech, 2023 edition. Headlining my list was accelerating Hollywood M&A, and just last week euro-based media conglomerate Mediawan acquired Brad Pitt’s Plan B Entertainment in a deal I anticipated a few weeks back in another column. So check, got that one right and am off to a good start.
But let’s go bigger, bolder — courtesy of a massive new development since I wrote those predictions, but an overall antitrust theme I generally anticipated. Just last week the FTC filed litigation to block Microsoft’s $69 billion acquisition of Activision-Blizzard. And with that game move, the Feds made Comcast the leading contender to buy (really, merge with) Netflix in the mother of all unintended media consequences.
For years, I’ve predicted that Netflix ultimately will be bought. Its pure-play subscription only business model just doesn’t “work” in a hyper-competitive streaming world dominated by Big Tech. And Comcast is now poised to win that Netflix mega-deal that would fundamentally transform the entertainment landscape. Yes, you heard it here first. Just follow me as I add up the pieces the antitrust police just laid on the table.
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The Feds are all over Big Tech right now, right? So all of a sudden — and with Microsoft’s massive new Activision migraine — Big Tech’s usual suspects are unlikely buyers anytime soon of any major studio or streaming service, including Netflix. Microsoft is certainly out of the game to buy Netflix, at least for now, thanks to Activision. Google, like Microsoft, is also too big and too scary to the FTC (it is being closely scrutinized as we speak). Meanwhile, Amazon already squeaked by the Feds when it closed its $8 billion MGM deal. So star-gazer Jeff Bezos is fully sated. And Meta/Facebook (whatever you want to call it) is simply a non-starter. Resident alien Mark Zuckerberg is too much of a pariah, and rightfully so (as I recently wrote in yet another recent column). That leaves only Big Tech’s biggest goliath, Apple. But Tim Cook has his sights set on Disney and has no interest in Netflix (more on that below).
So that makes Comcast NBCUniversal the No. 1 contender to buy Netflix — actually, merge with Netflix because both share essentially the same $150 billion market cap. Just think about the power of a merger of these two very different, yet very synergistic, equals. Comcast would solve Netflix’s existential content-fueled subscription-only business model crisis, while Netflix would solve Comcast’s hidden-in-the-streaming-bushes Peacock predicament. Both companies desperately need each other to accelerate customer acquisition and monetization and to scale and compete in an entertainment world now dominated by far bigger Big Tech adversaries.
Netflix would immediately play a central role in Comcast’s multi-faceted revenue-generating machine. Its global brand and content library would immediately leap off the subscription-only screen to populate (and drive transactions in) Universal Studios theme parks and merchandise. Just imagine the power of “Stranger Things” brought to IRL (in real life). And Comcast could immediately replace sputtering streamer Peacock with Netflix’s global mega-brand and customer might, adding its own customers to the mix.
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Meanwhile, critically, Universal Studios would immediately solve Netflix’s missing franchise content link that it needs to compete cost-effectively against franchise-rich Disney and Warner Bros. Discovery in the great streaming wars. On its own, Netflix can’t continue to up its annual content budget ante which now reaches $17 billion. “Less is more” in terms of content development cost efficiency and revenue impact, and imagine the re-usable power of Universal’s “Fast & Furious,” “Despicable Me” (and its “Minions”), the “Bourne” series, “Jurassic Park” and horror franchises that range from “The Purge” to classic monsters like Frankenstein. And that’s just on the film side! NBC brings “The Office,” “Law & Order” and “SNL,” among so many others that Netflix previously lost, but now would find again.
But wait, there’s more. Netflix-fueled Comcast broadband bundles would be a match made in M&A heaven, giving consumers one more massive reason to buy — and stick with — both Comcast’s high-speed internet and reduced price Netflix subscriptions. High margin broadband is Comcast’s cash cow, and it has already partnered with Netflix for years. Comcast markets Netflix as a major benefit of its Xfinity packages. So the two companies already know each other, which could ease the way for a relatively smooth post-merger integration (and the significant cost savings that would come from it). Comcast and Netflix would be a true 1+1=3 scenario. Wall Street and each company’s shareholders would love it.
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OK, now back to Disney and my last column’s bonus prediction for 2023. Apple craves Disney cheese over Netflix. It’s a mouse and pony show that’s not even close. Remember, Steve Jobs founded Disney’s Pixar and Disney CEO v2.0 Bob Iger served on Apple’s board until 2019. The companies’ shared creative and innovative DNA is undeniable. Yes, of course the Feds’ first impulse would be to block this mega-deal. But lots of chess moves and concessions could make it happen. Apple could assuage FTC angst by divesting Disney’s theme park division — and perhaps even ABC Television and ESPN — as conditions of a deal. Apple would have absolutely no interest in operating theme parks anyhow. Yet it could still have its cake and eat it too by collecting massive content licensing revenues from the buyer’s use of its now-owned Disney intellectual property.
So open your mind and imagine these possibilities as we end the year and look forward to the next. Netflix could enter theme park turnstiles just as Apple-fied Disney exits them. Yes, it could happen, and it absolutely should. Here’s my toast to you Comcast and Netflix. Cheers to you this holiday season (by the way, another classic television franchise you can find on Peacock)! It’s time to be fast and furious in the new year!
For those of you interested in learning more, visit Peter’s firm Creative Media at creativemedia.biz and follow him on Twitter @pcsathy.