Cable giant Comcast said on Thursday it has agreed to buy DreamWorks Animation for $3.8 billion. The move is of interest to wireless carriers for at least two reasons.
First, Comcast’s multibillion-dollar investment in a business not directly related to wireless will diffuse some of the ongoing speculation that Comcast wants to buy a carrier or launch a wireless network.
“We continue to believe Comcast will not aggressively pursue a traditional wireless business,” said analyst Frank Louthan of Raymond James. “This includes not being a material buyer of spectrum at the ongoing broadcast incentive auction, as well as doubts over oft-suggested interest in the pursuit of an existing wireless provider. We believe Comcast will be a seller at the auction and believe it is more likely to walk away with net cash from being a seller in the auction. Today’s purchase of DreamWorks for $3.8 billion and the restated commitment for $5 billion of share repurchases supports this thesis, as Comcast appears to be more focused on increasing its content position.”
Second, by buying DreamWorks, Comcast is set to become a majority owner of that company’s AwesomenessTV unit, and potentially share ownership with Verizon Wireless. The carrier wants AwesomenessTV to create more content for its Go90 mobile app, which competes with Comcast’s Xfinity mobile app. AwesomenessTV has already created shows for Go90, and Verizon Wireless liked what it saw enough to invest in the company and commit to buying more shows.
“It is critical to remember that Verizon is meaningfully overpaying Awesomeness for Go90 content,” said BTIG analyst Richard Greenfield. “Under Comcast ownership, [it is] far from clear what happens to the Verizon relationship.”
When Verizon Wireless agreed to buy AwesomenessTV earlier this month, DreamWorks CEO Jeffrey Katzenberg said he expected AwesomenessTV’s revenue to double during its first year of delivering content to Verizon Go90 under the new agreement. Now, Katzenberg is expected to leave DreamWorks and will probably end his relationship with AwesomenessTV.
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