Comcast President Mike Kavanaugh gave investors an eye-opening update during his third-quarter earnings call this morning, saying the company is considering spinning off its cable TV network.
“Like many of our peers in the media industry, we have experienced the impact of transitioning our video businesses and have considered the best path forward for these assets,” Cavanagh said. “To that end, we are now creating a new well-capitalized company, owned by our shareholders and comprised of our strong portfolio of cable networks, to leverage opportunities in the media industry and create value for our shareholders. We are considering whether we can produce it. We are not ready to discuss anything concrete yet, but we will contact you again when we reach a firm conclusion.”
The news comes as Warner Bros. Discovery and Paramount Global booked a combined $15 billion writedown on the value of their cable assets, and continued declines in terrestrial viewing and advertising. Announced. While cable networks continue to waste money, largely thanks to multi-year distribution contracts, advertising is rapidly shrinking. With code reduction shrinking pay TV subscribers by millions every year, it’s hard to know where the floor will end up. Live sports coverage is an incentive for some customers to stay connected to their TVs, but Comcast has been aggressive with sports rights, cutting back on its cable broadcaster NBC Sports Network and adding significant Live inventory has been moved to Peacock, where it is sometimes simulcast with NBC.
It was not immediately clear from Kavanaugh’s remarks whether private funding would be involved in the new entity, which likely would include networks such as Bravo and USA. But Kavanaugh’s use of the phrase “well-capitalized” suggests at least the possibility of third-party funding. In recent months, private equity firms that have invested in satellite TV operators, newspapers and other traditional media outlets have seen a steep decline in subscribers and advertisers fleeing to streaming, industry officials said. He told Deadline that he was having difficulty valuing his cable assets.
In addition to his comments on cable, Kavanaugh also addressed other strategic considerations. He said Comcast “elected not to participate in the M&A process surrounding Paramount earlier this year, but despite the complexities, we intend to explore partnering in the streaming space.”
During a Q&A on the earnings call, Cavanagh said the purpose of the process, which he called a “study” (rather than a formal strategic review), was to “mount some kind of attack” given Comcast’s recent momentum. He said it would be. Unlike many companies that are highly vulnerable to linear TV decline, the company is stabilized by its broadband business, theme parks and other assets. Comcast reported third-quarter results that exceeded analysts’ expectations due to NBCUniversal’s coverage of the Paris Olympics. The company’s stock price has held up much better than those of most cable network owners.
“We have a very strong hand,” Kavanagh said. “There may be a smart way to do it, so we want to study it.”
NBCU Streaming’s flagship service, Peacock, currently has 36 million subscribers but is in the red as a consensus builds that streaming is a much tougher business than in the dual revenue heyday of traditional pay TV. continues. Comcast and NBCU have been in talks with other media and technology companies about possible joint ventures in recent years, but no substantial progress has been made toward an agreement. Ironically, with Disney taking full control of Hulu, the mood toward the joint venture continues to be positive. For most of its existence, Hulu had three major media companies as co-owners (and a fourth as a minority investor). With so many stakeholders involved, decision-making and strategy implementation proved difficult.
