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Why it matters: Fox initially rejected a higher bid from Comcast, fearing regulatory hurdles that come with a vertical merger, according to SEC filings. But if AT&T's merger with Time Warner is allowed, Fox may have reason to consider a higher bid from Comcast.
Be smart: Generally speaking, there hasn’t been as much of a regulatory fuss over a Disney merger as there would be over a Comcast merger, and Fox execs have vocalized support for Disney as a merger partner over Comcast. This could be Fox trying to play the cards it’s been dealt.
Some analysts think that even if the vertical merger were to go through, and Fox were to continue with the Disney deal, there could still be some regulatory issues, like the number of regional sports networks (RSNs) Fox would be giving to Disney — which owns ESPN — and the amount of leverage the combined company would have to increase carriage costs on movie theaters.
"We continue to be surprised how little regulatory concern investors have over a Disney/Fox combination given what appears to be an extraordinarily high combined share of box office — IP consolidation is a leading reason for the deal but it appears to leave a problematic concentration of power as Disney would be more than 4x the size of #2 Warner Bros."— Rich Greenfield, Media Analyst BTIG
Disney has already offered, per its merger agreement, to divest regional sports networks if regulators require it. (Comcast owns RSNs, which could mean the same problem would likely exist as a part of a Comcast bid, too.)
- And John Fithian, President and CEO of the National Association of Theatre Owners, has indicated support for the merger. “So, on a global scale, Disney getting bigger means broader support for the cinema experience in many ways.”
- Even the DOJ’s antitrust chief Makan Delrahim has said that Fox carved its assets “surgically” to allow for a Disney merger to go through.
Bottom line: Nothing's a sure bet. And no matter what the outcome for the AT&T/Time Warner deal, regulators will still have to evaluate this deal and every other on its own, regardless of precedents set by other similarly structured — but different — deals.