In this article, Comcast is considering the separation or spinning off of NBCUniversal’s cable networks, a move that could potentially reshape the American media landscape. The rationale behind this decision is clear for Comcast as NBCUniversal’s cable networks are no longer experiencing growth, with the company’s focus shifting towards promoting Peacock, its streaming service that is still incurring losses. By carving out the cable portfolio, Comcast aims to appease its investors by eliminating declining assets from its balance sheet.
Following the release of the company’s third-quarter earnings and conference call, Comcast shares rose by over 3% on Thursday. Comcast President Mike Cavanagh mentioned during the call that they are exploring the possibility of creating a new well-capitalized company, owned by shareholders and consisting of the cable networks portfolio, to capitalize on opportunities in the evolving media landscape and generate value for shareholders. While details are not yet available, Comcast plans to provide updates once firm decisions are made.
Although the exploration is in its early stages, it could potentially lead to broader industry consolidation. NBCUniversal’s cable networks, which include Bravo, E!, Syfy, Oxygen True Crime, USA Network, MSNBC, and CNBC, might be merged with another media company or trigger a rollup of cable channels across various companies. This concept of a rollup was previously discussed by media mogul John Malone in 2016, but it did not materialize due to the shift in focus towards streaming services, which impacted the value of cable networks.
The devaluation of cable networks has now created an opportunity for a potential rollup, with companies like Comcast, Warner Bros. Discovery, and Disney possibly considering divesting declining cable assets to concentrate on streaming services. Despite the trend of cord-cutting among Americans, media companies have retained their cable networks, which continue to generate significant profits.
If Comcast proceeds with the spinoff, it could establish a model that enhances its overall valuation. Interestingly, Starz could play a role in the media industry’s transformation once again, as the company aims to facilitate a cable network rollup after separating from Lionsgate by the end of 2024. The viability of a publicly traded entity solely comprising cable networks remains uncertain, as equity investors typically prefer assets with growth potential over declining ones, even if they are profitable.
While the outcome for Starz’s vision of a cable network rollup is uncertain, private equity firms might express interest in acquiring a group of cable networks for financial gain. Apollo Global Management, for instance, has shown interest in media-related investments, including the acquisition of Yahoo. It is worth noting that Comcast owns NBCUniversal, the parent company of CNBC.
