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Why Comcast Wants Sky

Little wonder Brian Roberts is trying to buy Sky: He clearly needs to find something new for Comcast to do. The cable operator’s first-quarter results showed a company throwing off plenty of cash—$3.1 billion in free cash flow in the quarter—as capex dropped 5%. But those healthy results belie some worrying long-term trends. The number of video customers continues to decline while price increases on broadband helped drive revenue growth in what is becoming Comcast’s main business.

Comcast also got a boost from its television unit’s coverage of the Olympics. Of course, that only happens once every couple of years. As for broadband, there’s only so many times Comcast can ram through price rises before it gets heat from customers, which could rebound among politicians. That leaves Sky.

Comcast has formalized its takeover offer for Sky, one that is higher than 21st Century Fox’s regulator-stalled offer for all of Sky. MoffettNathanson analyst Craig Moffett has speculated that Sky would help Comcast start a global video streaming service to compete with Netflix. That explains why Sky may be more critical to Comcast than first appeared. Still, what matters now is what Disney and its to-be-acquired partner Fox does. Disney could bid for the 60% of Sky that Fox doesn’t own to ensure it gets control. This old-media deal is getting interesting.

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