Mike Cavanagh, President of Comcast Corporation, center, during the Allen & Company Sun Valley Conference in Sun Valley, Idaho, July 12, 2023.
David A. Grogan | CNBC
Comcast is considering separating or spinning off NBCUniversal's cable networks. If the idea moves forward, it could lay the groundwork for a reconfiguration of the entire American media landscape.
The logic for Comcast is pretty simple. NBCUniversal's cable networks are no longer growing. The company's energy and focus is on promoting Peacock, NBCUniversal's growing but still loss-making streaming service. Spinning off the cable portfolio could reassure Comcast investors by removing declining assets from the balance sheet.
Comcast shares rose more than 3% on Thursday following the company's third-quarter earnings release and conference call.
“We are currently evaluating whether the creation of a new, well-capitalized company owned by our shareholders and comprised of our strong portfolio of cable networks would enable them to capitalize on opportunities in the changing media landscape and create value for our shareholders “Comcast President Mike Cavanagh said during the call. “We are not ready to discuss details yet, but we will get back to you as soon as we reach firm conclusions.”
Although executives stressed that exploration is still in its very early stages, this could be the start of broader industry consolidation. NBCUniversal's cable networks, which include Bravo, E!, Syfy, Oxygen True Crime and USA Network, as well as news networks MSNBC and CNBC, could be merged with another media company or be a catalyst for a bundling or consolidation of cable television channels into different companies .
The idea of a rollup is not new. Media mogul John Malone spoke about this back in 2016 when Lionsgate took over the premium network Starz.
“Lionsgate could buy Starz and potentially other free radicals in the industry,” Malone said at the time, referring to cable companies not owned by larger media conglomerates like AMC Networks, which is controlled by the Dolan family, or A&E Networks, which is in jointly owned by Hearst and Disney.
This vision was never realized, in part because the media world's attention shifted from traditional pay TV to streaming, which led to the devaluation of cable networks. Earlier this year, Warner Bros. Discovery reported a $9.1 billion non-cash goodwill impairment charge triggered by the revaluation of the carrying value of its TV network segment.
However, the decline in value of cable networks has now led to a new opportunity for a merger with companies like Comcast, Warner Bros. Discovery And Disney decide to cut declining cable channels and focus on streaming instead.
So far, media companies have chosen to maintain their cable networks, which continue to rake in billions in profits despite millions of Americans cutting the cord each year.
Comcast can provide a template if the company moves forward with a turnaround and sees an increase in its overall valuation.
Ironically, Starz could once again play a role in a media shakeup. The small media company wants to be the vehicle for expanding the cable network, CNBC reported in 2022. Starz is expected to separate from Lionsgate at the end of 2024.
There is widespread uncertainty about whether a cable-only company has a viable path forward as a publicly traded company. Stock investors typically aren't fans of declining assets, even if they have plenty of cash.
But even if Starz doesn't realize its vision of a cable network merger, it's possible that a private equity firm could be interested in acquiring a group of cable networks for cash. Apollo Global ManagementFor one thing, the company was late to its interest in acquiring Paramount Global and has made several media-related investments in recent years, including buying Yahoo.
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.
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