In the coming days, Comcast will most likely unveil its takeover bid for most of 21st Century Fox, challenging Walt Disney Co. for the same Fox Entertainment assets.
Fox had turned down Comcast before, worried that the cable giant's bid — even though it was much higher than Disney's — could be blocked by regulators.
But that concern was lessened Tuesday afternoon when a federal judge approved AT&T's $85.4 billion deal for Time Warner. While AT&T's victory over the Justice Department means that Comcast now faces fewer regulatory issues in its pursuit of Fox, obstacles remain. Let's take a closer look:
The context: Disney and Comcast both want the same Fox businesses. The ones that would matter to antitrust regulators are the 20th Century Fox movie and television studios, 22 regional sports networks and a stake in Hulu, the online video service.
Comcast has been waiting to make its bid for Fox until after the ruling on the Justice Department's lawsuit to block AT&T's bid for Time Warner. Now that AT&T has won, the cable company is expected to move quickly with a Fox offer.
A question of merger type
What Disney is considering is known as a horizontal merger, combining two companies in the same industry.
A Comcast bid would involve elements of both a horizontal merger and a vertical merger. On the horizontal front, it would combine the Fox assets with NBCUniversal, another big media business. But on the vertical side, it would give America's biggest cable operator yet another major content producer.
Vertical mergers rarely have run into opposition. But the Justice Department built its lawsuit against the Time Warner deal on the argument that AT&T, with its ability to both create content and distribute it, would wield too much power over the media and telecom industries.
There is a difference between AT&T and Comcast: national presence. AT&T is a truly nationwide pay-television provider through its DirecTV satellite service. While cable companies tend to have huge presences in the markets where they operate, Comcast covers only about a third of the country.
Regulators tend to think about the pay-television and broadband markets on a national basis. (The reasoning: National providers have much more negotiating leverage than regional ones.)
But it's also worth remembering that when Comcast initially bought NBCUniversal, regulators were worried enough about combining a pay-television and broadband provider with a content creator that they demanded restrictions on Comcast's behavior.
The Justice Department's antitrust chief, Makan Delrahim, has said publicly that he doesn't like imposing conditions on companies in exchange for merger approval. He prefers requiring asset sales or blocking deals altogether. Comcast is willing to sell some businesses to win approval.
A question of sports
Then there are Fox's 22 regional sports networks. Comcast's NBCUniversal already owns nine similar networks and would argue that the two sets of properties mostly don't overlap. But if pressed, the company would be willing to sell enough networks to satisfy regulators, according to two people with direct knowledge of the matter but not authorized to speak publicly about it.
A question of studios
A Fox sale, no matter the buyer, would inevitably create significant consolidation within the movie industry. Comcast owns Universal, which has the "Jurassic World" franchise. Fox owns its eponymous movie studio, which has the "Avatar," "X-Men" and "Deadpool" franchises. Disney owns the top-performing Hollywood studio, home of the Marvel and "Star Wars" franchises.
But both Comcast and Disney would argue that there are enough content producers — Amazon, Apple and other digital players — that there's little danger they would corner the market.
What the Justice Department is thinking
Delrahim discussed the possible battle for Fox at an industry conference last week. Here's what he said of the potential state of play:
— Speaking of vertical mergers, he said, "The antitrust division, and the Federal Trade Commission, has identified problems resulting from certain vertical acquisitions that could result in exclusion, or raising a rival's cost that hurts competition." Our read: Some kinds of vertical mergers still bother Delrahim to a degree, though he later allowed that those kinds of deals could be fixed.
— On Disney and its bid, he said, "They had good advice and carved out surgically what a transaction is that might be doable and who knows where that transaction leads." Our read: Disney may not have chosen the Fox units that it wants to buy based solely on antitrust concerns, but its deal probably won't run afoul of Delrahim's team.
What experts think
— Harry First, the co-director of the competition, innovation and information law program at the New York University School of Law, said that he thought the Disney deal would pose fewer antitrust risks. "In a horizontal deal, there's probably less risk to having the deal opposed outright," he said in an interview.
— But analyst Rich Greenfield of BTIG Research wrote two weeks ago that he thought fears of antitrust blowback against Comcast were overblown.
What will Fox do?
It ultimately will be up to Fox's board and shareholders to decide whether it's worth trading in a Disney deal with a good chance of passing antitrust review for a higher-priced Comcast deal that poses more potential risks. With AT&T having won its fight with the Justice Department, their concerns about Comcast may be assuaged.