Mike Cavanagh, president of Comcast Company, at heart, in the course of the Allen & Firm Solar Valley Convention in Solar Valley, Idaho, July 12, 2023.
David A. Grogan | CNBC
Comcast is considering separating or spinning off NBCUniversal’s cable networks. If it strikes ahead with the concept, it may lay the groundwork for a reconfiguration of the complete American media panorama.
The logic for Comcast is pretty simple. NBCUniversal’s cable networks aren’t rising anymore. The corporate’s power and focus is on selling Peacock, NBCUniversal’s rising however nonetheless money-losing streaming service. Carving out the cable portfolio may placate Comcast buyers by eradicating declining belongings from the stability sheet.
Comcast shares gained greater than 3% on Thursday after the corporate’s third-quarter earnings launch and convention name.
“We at the moment are exploring whether or not creating a brand new well-capitalized firm, owned by our shareholders and comprised of our robust portfolio of cable networks, would place them to benefit from alternatives within the altering media panorama and create worth for our shareholders,” Comcast President Mike Cavanagh mentioned in the course of the name. “We aren’t prepared to speak about any specifics but, however we’ll be again to you as and once we attain agency conclusions.”
Although executives pressured that the exploration is within the very early phases, it could possibly be a prelude to broader business consolidation. NBCUniversal’s cable networks, which embrace Bravo, E!, Syfy, Oxygen True Crime and USA Community, in addition to information networks MSNBC and CNBC, could possibly be merged with one other media firm or could possibly be a catalyst for a rollup, or consolidation, of cable channels at a lot of totally different corporations.
The concept of a rollup is not new. It is one thing media mogul John Malone mentioned method again in 2016 when Lionsgate acquired premium community Starz.
“Lionsgate may purchase Starz and doubtlessly different free radicals within the business,” Malone mentioned on the time, referring to cable community teams not owned by bigger media conglomerates comparable to AMC Networks, which is managed by the Dolan household, or A&E Networks, which is co-owned by Hearst and Disney.
That imaginative and prescient by no means materialized, partly as a result of the media world’s consideration shifted from conventional pay TV to streaming, which devalued cable networks. Earlier this yr, Warner Bros. Discovery reported a noncash goodwill impairment cost of $9.1 billion, triggered by the reevaluation of the guide worth of its TV networks section.
Nonetheless, the lack of worth for cable networks has now led to a brand new alternative for a rollup, if corporations comparable to Comcast, Warner Bros. Discovery and Disney determine they need to shed declining cable belongings in favor of specializing in streaming.
To this point, media corporations have opted to maintain their cable networks, which nonetheless pump out billions in revenue whilst tens of millions of Individuals minimize the twine annually.
Comcast might set a template if it strikes ahead with a spin and sees a spike in its general valuation.
Sarcastically, Starz may once more play a job in a media shakeup. The small media firm needs to be the car for a cable community rollup, CNBC reported in 2022. Starz is ready to separate from Lionsgate on the finish of 2024.
There’s broad uncertainty about whether or not an organization that consists of solely cable networks has a viable path ahead as a publicly traded entity. Fairness buyers sometimes aren’t followers of declining belongings, even when they’re money wealthy.
However even when Starz does not obtain its imaginative and prescient of a cable community rollup, it is potential a non-public fairness agency might have curiosity in harvesting a bunch of cable networks for money. Apollo International Administration, for one, had late curiosity in buying Paramount International and has made a number of media-related investments lately, together with shopping for Yahoo.
Disclosure: Comcast owns NBCUniversal, the guardian firm of CNBC.
