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Comcast and Disney Are Locked in a Bidding War Over the Future of TV — and Netflix Is to Blame

21st Century Fox has seen its price tag increase by nearly $20 billion thanks to the bidding war between two corporate giants threatened by television’s digital upheaval

Disney/Fox/Comcast/Ringer illustration

Way back in 2004, before Luke Skywalker, Iron Man, and many characters played by Samuel L. Jackson were the professional colleagues of Mickey Mouse, Comcast attempted a hostile takeover of Disney. The notion seemed brash at the time — what business did a Philadelphia-based cable company have owning one of Hollywood’s biggest media powerhouses? Though the deal was rejected, it foreshadowed two important developments: telecommunications and media giants were destined to become one and the same, and Disney and Comcast would have a long-lasting beef. We’re seeing both dynamics play out in the extensive attempts by each firm to scoop up 21st Century Fox.

On Wednesday, Disney announced that it was upping its bid for 21st Century Fox to $71.3 billion in order to land such properties as the 20th Century Fox movie studio, the cable network FX, and Fox’s 30 percent stake in the streaming service Hulu (Fox News, the Fox broadcast network, and Fox Sports 1 are not part of the deal). Disney had already agreed to pay $52.4 billion for Fox in December, but earlier this month Comcast swooped in with a $65 billion offer. Comcast has not yet said whether it will counter Disney’s new offer, but Fox has delayed a July 10 shareholder vote on the Disney deal just in case. According to Variety, the final price tag could be as high as $80 billion.

The bidding war is a frustrating turn for Disney CEO Bob Iger, who was positioning the Fox pickup as the crown jewel in a run of savvy media acquisitions that has included Pixar, Marvel, and Lucasfilm. Over the past decade, Disney has bet big on iconic pop culture properties, turning the cineplex into a sea of sequels and spinoffs. But the company’s footing is less sure on the small screen, where ESPN is bleeding subscribers and Netflix has effectively become half a dozen cable networks in one. Fox would help bolster Disney’s catalog for its planned streaming service in 2019 while simultaneously allowing it to sap Netflix of more content when the two companies’ licensing deal ends next year.

Comcast’s calculus is slightly different. Despite owning NBCUniversal, the company’s biggest revenue source remains cable subscriptions in an era when Netflix has made paying for traditional television seem archaic. Fox would provide some much-needed diversification to Comcast’s financial statement, especially abroad. Fox’s stake in the British pay-TV giant Sky and its other international assets would triple Comcast’s foreign revenue. CEO Brian Roberts has been trying to get away from his company’s cable roots since at least the botched Disney merger in 2004; Fox would finally provide true escape velocity.

Though both Disney and Comcast were vying for Fox behind closed doors last year, for a few months it seemed like Disney might win out simply based on legal precedent. The Justice Department’s antitrust suit to block the merger of AT&T and Time Warner made it tough to imagine that a similar tie-up between a telecom giant and a media company would pass the DOJ’s smell test. But a federal judge ruled in favor of the corporations, allowing for the merger and implicitly declaring open season on media acquisitions.

With legal roadblocks now unlikely, the fate of Fox will come down to which CEO can stomach a higher price tag. That the cost of Fox has already shot up $20 billion says a lot about how threatened Hollywood’s gatekeepers feel by the tech companies angling to take over television. The companies may fear Netflix for different reasons — Disney because the streaming service has become a juggernaut in Hollywood production, Comcast because its successful shows are convincing people to dump cable. But they’re both going to be forced to pay a premium to fight back.