Comcast to spin off some cable TV networks as streaming dominates
12:30 pm Wednesday, November 20th, 2024
By Dawn Chmielewski
(Reuters) -Comcast said on Wednesday that it plans to spin-off the bulk of its NBCUniversal cable TV networks, including MSNBC and CNBC, as it positions the company for the streaming era.
Shares of the company were about flat after the announcement that Comcast would separate its entertainment and news channels, including USA Network, Oxygen, E!, Syfy and Golf Channel, into a new, publicly traded company.
Comcast will retain the core of NBCUniversal’s entertainment assets, including its NBC broadcast network, sports and news, its film and television studios, as well as the Bravo network, which are seen as core to fueling growth of its Peacock streaming service. It also will keep the expanding theme park business.
Cowen & Co analysts in a note said the spin-off may well be a precursor to Comcast combining with another pay TV provider, such as Charter Communications, by shedding “toxic” cable channels that might be an obstacle to regulatory approval under the incoming Trump administration.
The new, stand-alone company, whose cable networks generated $7 billion in revenue over the 12 months ending in September, would similarly be positioned as an acquirer, or potential target, they said.
The tax-free spin-off is expected to take a year to complete.
“The most likely buyers of these cable channels are private equity firms or other media conglomerates,” said Emarketer analyst Ross Benes.
“PE would have an easier time hiding financial losses from a purchase than public companies would. PE buyers would cut costs and wrangle out what value is left of the networks, attempting to squeeze out quick profits,” Benes added.
Comcast’s decision comes more than a decade after it secured full control of NBCUniversal in a series of deals with General Electric, transforming the company from a cable operator to a media behemoth when such assets were attractive.
The cable networks have declined from their heyday, as millions of viewers migrated to video streaming services like Netflix and Amazon Prime Video. Still, these networks reach 70 million U.S. households, making the new company attractive to investors, distributors and potential partners.
“The company will have significant cash flow, a strong balance sheet and the financial flexibility to pursue growth opportunities, both organically and through acquisitions,” Comcast President Mike Cavanagh wrote in a memo to employees seen by Reuters.
In yet another deal underscoring the changing landscape of the media industry, Comedy Central and Nickelodeon owner Paramount Global agreed to merge with streaming-era upstart Skydance Media earlier this year.
Warner Bros Discovery in August wrote down the value of its TV assets by $9.1 billion due to the uncertainty of fees from cable and satellite distributors and sports rights renewals.
A day later, Paramount wrote down the value of its cable networks by nearly $6 billion. Walt Disney also evaluated shedding its cable networks earlier this year, but ultimately rejected the idea.
Mark Lazarus, who currently serves as chairman of NBCUniversal’s media group, will lead the new venture as CEO, while Anand Kini, CFO of NBCUniversal, will be the operating chief and finance head of the new company.
(Reporting by Dawn Chmielewski in Los Angeles, Zaheer Kachwala, Akash Sriam and Jaspreet Singh in Bengaluru; Editing by Devika Syamnath and Bill Berkrot)
