In a sign of how struggling the pay-TV business is, Comcast’s idea to spin off its cable channels went from a balloon experiment on Wall Street to a strategy in just a few weeks.
The conglomerate that owns NBCUniversal is preparing to announce Wednesday that it will separate the unprofitable cable network from the movie and TV studio’s entertainment and parks businesses, The Hollywood Reporter confirmed. Late last month, the Brian Roberts-led company indicated to investors that it was considering plans to roll out its channels, including MSNBC, CNBC, Syfy, E!, Oxygen, Golf Channel and USA Network, as independent companies. In theory, it could keep core Comcast from being dragged into a declining pay TV environment.
“We are now taking advantage of opportunities in the changing media landscape by creating a new, well-capitalized company owned by our shareholders and comprised of our strong portfolio of cable networks. “We are evaluating whether we can create value for our shareholders,” Comcast said. President Mike Kavanaugh told analysts at an Oct. 31 earnings conference, “We’re not ready to talk about specifics yet, but we’ll get back to you as soon as we have a firm conclusion.”
At the time, Cavanagh clarified that the potential spinoff being considered would not include Peacock, the company’s flagship streaming service, which currently has about 36 million subscribers, or broadcast services such as NBC. did. Reality TV giant Bravo will remain in NBCUniversal’s portfolio and will not be transferred to a spinoff company along with other brands. The Wall Street Journal first reported that Comcast plans to announce the move on November 20th.
The spinoff raises questions about whether brands that have been consolidating behind the scenes — think NBC News and MSNBC, for starters — need to be unwound to some degree by the spinoff. “I think the questions about how to do that are why we want to research and present here. We have so many unanswered questions that we want to address. Kavanaugh said by phone.
Cable was once a source of revenue for studios, but channels have become a drag on profits these days, with investors looking to buy companies squeezed by channels tied to bundles that are rapidly falling out of favor with consumers. I’m blaming. Instead, I’ve been spending money on individual streaming services. The major pay-TV companies collectively lost about 5 million subscribers last year, and Comcast alone lost 2 million subscribers, according to Leichtman Research.
Comcast isn’t the only company hinting at some form of exit from cable and terrestrial TV channels. Disney CEO Bob Iger mused out loud at last year’s Sun Valley mogul conference that traditional television networks, including ABC, “may not be core” to the company. This summer, Paramount Global’s incoming CEO Jeff Schell announced that given that linear TV was a “declining business,” he wanted CBS to be “a little more aggressive for cash flow.” He said he plans to manage it.
And in August, Warner Bros. Discovery recorded a $9.1 billion non-cash goodwill impairment charge related to its television networks, which own TNT, TBS and CNN. A few weeks earlier, Bank of America’s analyst team announced that Warners would spin off all linear assets and put the company’s core back on track for growth as a separate holding company with an estimated $40 billion in debt. He came up with the idea that it could be done. At the time, the BoFA team announced that this spinoff company, comprised of linear TV assets, would be the vehicle to consolidate remaining linear TV assets across the industry, including channels from Disney, NBCUniversal, and AMC Networks. I wrote that it was a possibility.
Now, Comcast appears to be one step closer to that idea.
