Jeremy Darroch is recalling the conversation he had with Rupert Murdoch three months ago when Comcast beat Walt Disney in a high-stakes auction to acquire Sky. “It was certainly emotional,” the Sky chief executive says, becoming a little emotional himself at the memory.
The sale would end Mr Murdoch’s long association with the pay-TV company he founded in 1989, but Mr Darroch is sticking around, with Comcast enlisting him and his management team to plot the next phase of its growth.
Comcast paid £30bn for Sky, a price that makes it the most valuable UK company to be sold in the past 30 years. Its sale also marks a turning point in UK media.
Mr Murdoch launched Sky to challenge the hegemony of UK broadcasting and the company initially had strictly domestic concerns, its main competition being cable operators and free-to-air rivals such as the BBC and ITV. But the media industry has globalised, with “over the top” streaming players such as Netflix and Amazon competing with Sky for viewer attention.
Sky is now part of a larger company, adding its European operations in markets that include the UK, Germany and Italy to Comcast’s operations. Comcast is the largest provider of cable television and broadband internet services in the US and also owns NBC Universal.
“The priority for the combined business is to exploit what we’ve put together,” said Mr Darroch. This would initially mean content tie-ups with NBC. “If you think of the US midterm elections, [Sky News] would be using a lot of agency [reporting]. NBC would have 300 people [working on it] and suddenly we have access to that.”
There are other opportunities in sports coverage. “You can think of the Premier League, the Ryder Cup in golf, NFL . . . there are lots of ways to collaborate. For example, can we get their best NBC commentators to Sky for the London NFL games?”
Sky would also draw on Comcast’s leading position in internet provision as it added broadband services in Italy. “We can now plug into the Comcast cable development team and cherry-pick some of their best ideas and use it there.”
Beyond greater collaboration, an immediate goal “is to get the debt levels down a bit” — Comcast’s net debt increased to more than $100bn so it could finance the Sky purchase.
Mr Darroch is aware that a new era in media competition is about to begin. Disney is working on a global direct-to-consumer streaming service, which will deliver content such as Marvel and Star Wars movies as well as television programming. AT&T, the new owner of Time Warner, is also developing a streaming service, which will include programming from HBO.
Claire Enders, of Enders Analysis, said any company hoping to launch a streaming service in Europe would have to talk to Sky and Comcast because of their scale and reach as distributors. “There isn’t room for a successful subscription video on-demand service in any market unless it is on all the cable infrastructure,” she said, in a nod to distribution deals Netflix has struck with Sky and others in the UK and Comcast in the US.
Mr Darroch appears to agree. “The idea that you can launch a streaming service and just put it out there and then for it to naturally scale is, I think, a real stretch. You need retail operations to make that happen and we’ve got it all here.”
He joined Sky as chief financial officer in 2004, working for then chief executive James Murdoch, succeeding him in that role three years later.
“I remember looking at Sky when I joined and it was a great business but it was rapidly running out of road. It was in danger of losing its ambition.”
He and James Murdoch wanted to “reset” Sky as a growth business. “We seemed to be saying 7m customers was our ambition.” A target of 10m subscribers was set; today the company is in 13m households in the UK, a number that rises to 23m when its European operations are included.
Comcast’s successful bid has also made Mr Darroch very wealthy. He sold his holding of Sky shares for £13.4m on completion of the deal, as well as shares that he received as part of an executive incentive plan for an additional £24.9m, according to a stock market filing.
Brian Roberts, Comcast’s chief executive, has promised to allow Mr Darroch to run Sky as he sees fit. The relationship with Rupert Murdoch has not been completely severed: last week Comcast named Sky’s studio building after him during a ceremony at its headquarters in west London. Mr Murdoch, Mr Roberts and Mr Darroch then dined together that night.
Mr Murdoch is the antithesis of the short-term view that Mr Darroch says is prevalent among UK institutional investors. “He likes risk-takers. When I first met him before I joined Sky I went to New York to have lunch with him. He was in his early 70s then and all he wanted to talk about was where the world was going to be in 20 years.”
Key moments for Darroch and Sky
Jeremy Darroch appointed Sky chief financial officer
Sky acquires Easynet to launch broadband service
Darroch succeeds James Murdoch as chief executive
Sky unveils Sky Go mobile service
Launches Now TV streaming service
Acquires Sky Deutschland and Sky Italia for £5bn
Launches Sky Mobile and streaming service in Spain
Comcast beats Walt Disney in auction for Sky with £30bn offer
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