Comcast Corporation made a surprising announcement at the beginning of its latest earnings conference. Brian Roberts’ leading media company is considering whether to spin out its cable TV channel as an independent “well-capitalized company” that would allow it to “take advantage of business opportunities.” ”. Changing media environment. ”
Was Comcast testing the waters? Of course. Comcast President Mike Kavanaugh clarified that the company is just beginning to consider the idea and is far from making a formal decision.
But one thing is clear: Wall Street seems to like it. Comcast stock soared as the market opened, finishing up 4% on what was a rough day for Wall Street. And Comcast’s news seems to have sent ripples through the industry, with Warner Bros.’ Discovery stock soaring and Disney and Paramount also inching up. In fact, on a day when almost the entire market was down, the media and communications sector rose.
Moffett Nathanson analyst Craig Moffett wrote on Oct. 31 that a spinoff “would be a very welcome development.” “Investors have been clamoring for exactly this, or at least something close to it, for years.”
Why such enthusiasm? Comcast is heavily involved in the cable TV business and has since lost more pay TV subscribers than its rivals over the past year, which could mean a number of disparate cable channels could now balance out the future. It may be a harbinger of an undesirable world. Sharing the sheets of companies that own them will help you find your place in the spotlight and give you more freedom and flexibility to make strategic moves.
Perhaps most importantly, spinoff companies could become a land of misfit networks, a place where unwanted cable channels find a home, or at least strength in numbers. Paramount Global, for example, has many big-name cable brands like MTV, Comedy Central, and Nickelodeon, but incoming owner Skydance appears to be focused on streaming and broadcasting.
Warner Bros. Discovery has a strong cable portfolio that includes TBS, TNT, CNN, Food Network, HGTV and Cartoon Network, but has recorded more than $9 billion in channel-related impairment charges as channel values decline I needed to.
And there are still cable-focused independent companies trying to navigate these waters as best they can, and partnering with larger companies could benefit them. AMC Networks, which owns AMC, IFC, and BBC America, is one of them, as is A+E Networks (co-owned by Disney and Hearst), whose brands include A&E, History, and Lifetime. Masu. Hallmark Channel, owned by the greeting card giant, is also a major independent player.
Only Disney, which hinted last year that it might pursue some kind of move with linear channels before pulling out, appears to be out of the picture.
No one on Wall Street is more open about the need for electric power integration than Bank of America analyst Jessica Reiff Ehrlich. He has been advocating this idea for some time. “The biggest surprise was Comcast’s outright win over WBD, but we think a spinout could lead to cable network consolidation (which we think will eventually happen in the industry).” He stated this in an analyst note dated November 1st.
In fact, Leif Ehrlich said in an interview with The Hollywood Reporter after WBD’s disastrous second-quarter results that the cable channel buildup would present ample opportunity.
“Someone will separate the linear assets and someone will roll them up,” Lief Ehrlich said at the time. “We have all of these, and we call them isolated cable networks, maybe part of a large company, but they’re not an investment area, they’re not a growth area. So we combine a lot of cable networks. I think it would eliminate the overhead for the company, eliminating the duplication of advertising functions that cost a lot of money to distribute and combine to potentially do rollups.
A consolidated cable channel company could also give leverage to an increasingly bitter and acrimonious fare dispute between pay-TV providers.
Of course, there are complicating factors. Comcast’s big plans involve CNBC and MSNBC. While CNBC has historically operated as its own news organization completely separate from NBC News, MSNBC has long relied on NBC’s coverage as a supplement to its opinion programming.
If a spinoff were to materialize, MSNBC might have to build its own news organization, enter into some kind of deal to continue using NBC News’ resources, or abandon reporting altogether to focus on public opinion. (Similarly, the Wall Street Journal reported that Bravo may stay, part of Comcast, citing the success of its shows on Peacock. )
Beyond that, there are many unknowns about this deal. How should we value such a depreciating asset? How much freedom will spin-offs be given? And could such an agreement extend the lifespan of cable TV? Or is rapid decline inevitable?
These are real questions, and Wall Street seems to think Comcast will find the answers.
“While the discussions are at an early stage and the company is unlikely to provide an update anytime soon, we expect to find ways to generate added value from the spin-out, including cost synergies and longevity extensions. “Separate entities are merging/partnering with other cable networks,” JPMorgan analyst Sebastiano Petty said on November 1. “Considering this, the standalone attractiveness of these assets is unclear from an investor perspective.”
