On Monday, Sky and ITV announced a £1.6 billion deal for the Comcast-owned company to acquire ITV’s Media & Entertainment division, and the transaction is already drawing speculation from a competition perspective.
Ten years ago the idea of merging TV businesses with such a sizeable combined market share would probably have been unthinkable to regulators, but that was before the UK broadcasters faced such intense competition from US-owned streaming services. On the other hand, the acquisition would give advertisers fewer options and potentially higher prices, which will no doubt be considered by the Competition and Markets Authority (CMA).
VideoWeek asked six competition lawyers how likely it is that the deal goes through.
Daniel Bellau, Partner, Head of Corporate, Edwin Coe
The Sky/ITV deal is one of those transactions that has regulators reaching for the coffee pot early. The logic for the parties is straightforward enough: two pillars of British broadcasting joining forces at a moment when Netflix, Amazon and their friends are eating everyone’s lunch on both content and advertising.
The key question is how the CMA frames the market. If the starting point is competition between Sky and ITV for British viewers and ad budgets, the deal looks chunky. But zoom out to the global streaming battlefield and suddenly two British broadcasters teaming up looks less like a monopoly and more like a survival strategy. That framing matters enormously.
My cautious instinct is that this gets through, probably with some conditions attached and a longer-than-ideal process. Comcast is already well-versed in managing significant regulatory oversight from its US experience, and the deal’s structure – with ITV retaining Studios and Sky taking on the broadcast business – was clearly built with that scrutiny in mind. The bigger wildcard is political. Ministers have strong opinions about broadcasting, and the public interest test gives them room to express them.
Ellen Huison, Associate (Competition), Knights
It is interesting that nearly 20 years after Sky initially bought a minority stake in ITV, which it was forced to sell a large proportion of at a significant loss, it is back to take another bite of the cherry. However, even 20 years on the deal will not be a cake walk.
ITV Studios, the programme creation and production arm of ITV, will not form part of the deal, yet in the interests of continuity the parties have agreed a five-year deal for Sky to purchase ITV studios programmes which will be shown on ITV. In addition, ITV will also acquire Love Productions, the producers of The Great British Bake Off and The Piano – both currently key features on Channel 4. The CMA may be concerned that, due to the agreement and ongoing relationship between the ITV Studios and Broadcasting arms, that Sky will seek to move these key titles to ITV, strengthening Sky/ITV’s position in the market further.
A key change in legislation since Sky’s initial attempted acquisition of ITV is the introduction of the National Security and Investment Act, which would be triggered by this transaction. This Act requires notification to the Investment Security Unit (ISU) for review on national security grounds, a process which is much less transparent than CMA review.
The ISU is likely to be focused on media plurality, particularly given Sky’s US parent company, Comcast. Sky has said ITV News (produced by ITN) and Sky News would remain distinct editorial voices, which should help calm nerves. However, this is likely to be an area of particular focus during the ISU’s review of the transaction.
Nick Rowles-Davies, CEO, Lexolent
The competition analysis turns on market definition. Sky’s acquisition of ITV’s channels and ITVX comfortably clears the Enterprise Act thresholds, so the CMA will look at it, whether by reference or by calling it in within four months of completion. The substantive test is a substantial lessening of competition, and it will be fought over advertising.
If the CMA accepts that YouTube and streaming inventory constrain broadcast advertising, the overlap shrinks and clearance follows, probably with behavioural undertakings. Define the market narrowly and a Phase 2 reference becomes likely.
Plurality is the separate risk. The Secretary of State can intervene on public interest grounds, as he did when Sky was forced to unwind its 2006 ITV stake. Sky’s proposed 40 percent of ITN, which supplies news to ITV and Channel 4, sharpens that concern given Comcast’s US ownership. My expectation is clearance with conditions.
Tim Cowen, Chair of the Antitrust Practice, Preiskel & Co
I think it’s 50/50. The issue of consolidation and concentration of media is a question of public policy and the need for a diversity in the supply chain – not a matter of economics or efficiencies.
The business logic is clear as the UK has a biased regulatory regime that gives the US tech platforms advantages and they make more money because they live under a regulatory umbrella. UK businesses have to combine to compete. But then the problem becomes loss of diversity and plurality.
Anthony Woolich, Partner, Blake Morgan
I think it is likely that, subject to potentially significant remedies, the Sky/ITV acquisition will be approved in due course. There is likely to be a detailed investigation of the proposed transaction by the relevant authorities.
The main competition concern is likely to be competition in the TV advertising market, in which the merged entity would have a large share in the UK. A key question will be whether in view of the growth of the major platforms, the relevant advertising market should be regarded more broadly to include digital advertising, in which Google and Meta/Facebook have a high share.
Other issues could be plurality of media control and plurality of views in news media, but it is helpful that Sky News and ITV News (sourced from ITN) will reportedly remain editorially separate until at least 2030. Traditionally, structural remedies have been preferred, but behavioural remedies are also possible.
Caroline Thomas, Head of Antitrust and Competition, London; Partner, Norton Rose Fulbright
The competition assessment of this transaction will require the authorities to grapple with the rapid development of streaming markets over recent years. Between them, Sky and ITV are reported to account for around 70 percent of the traditional commercial TV ad market – the key question will be whether a traditional market definition is still relevant, given the way the market and consumer behaviour have changed following the rise of streaming services and digital platforms.
In terms of process, given the scale of the transaction and the potential complexity of the issues, it may be that this case is a candidate for a fast-track to an in-depth phase 2 investigation, as was done recently with Nexfibre/Substantial. This allows the parties to skip the phase 1 review process entirely and move straight to a more detailed consideration of the issues – potentially leading to a shorter overall timeline in complex cases.
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