Comcast made things official on Wednesday, unveiling the spin-off of most of its cable networks into a separate entity, led by Mark Lazarus as CEO, promising “a new growth trajectory” for the combined assets. The new company didn’t immediately get a name and was instead referred to as “SpinCo.”
Lazarus and his team will “lead the development of an independent strategy, while also establishing SpinCo as a potential partner and acquirer of other complementary media businesses,” Comcast highlighted.
Cable channel Bravo, the NBC broadcast network, and streaming service Peacock will remain part of Comcast’s entertainment arm NBCUniversal.
Comcast president Mike Cavanagh had mentioned at the end of October that the company was considering a spinoff of its cable networks unit, which includes the likes of USA Network, Syfy, MSNBC, and CNBC, given the business challenges that cord-cutting amid the growth of streaming has created for cable channel units that used to be the core profit growth engines of Hollywood conglomerates.
“Like many of our peers in media, we are experiencing the effects of the transition in our video businesses, and have been studying the best path forward for these assets,” he said. A new firm could “take advantage of opportunities in the changing media landscape and create value for our shareholders,” Cavanagh also told Comcast’s third-quarter earnings conference call.
“The well-capitalized independent company (SpinCo) will have significant scale as a pure-play set of assets anchored by leading news, sports, and entertainment content,” Comcast touted on Wednesday, mentioning its revenue for the 12 months ended Sept. 30 amounted to approximately $7 billion. “SpinCo will be an industry-leading news, sports and entertainment cable television business with a focused strategic direction. SpinCo’s stable of marquee brands will provide a diverse and differentiated content offering that will reach approximately 70 million U.S. households.”
Roberts said: “When you look at our assets, talented management team, and balance sheet strength, we are able to set these businesses up for future growth.”
And Cavanagh added: “This transaction positions both SpinCo and NBCUniversal to play offense in a changing media landscape. Taken together, the entirety of NBCUniversal will be on a new growth trajectory, fueled by our world-class content, technology, IP, properties and talent – all working in concert with each other as an integrated media company.”
Structured as a tax-free spinoff to Comcast shareholders, the transaction is expected to take around a year to complete. The new networks entity’s ownership structure will mirror that of Comcast, where chairman and CEO Brian Roberts holds a one-third voting stake. He won’t, however, have a board seat or management role at the new company.
Lazarus has been overseeing most of Comcast entertainment arm NBCUniversal’s TV operations as chairman of the NBCUniversal Media Group. NBCU CFO Anand Kini will become CFO and COO of the new firm.
“We will be better positioned to serve our audiences and drive shareholder returns in this incredibly dynamic media environment across news, sports and entertainment,” said Lazarus. “We see a real opportunity to invest and build additional scale and I’m excited about the growth opportunities this transition will unlock. Our financial strength will also provide capacity for an attractive capital return policy while allowing for investment in the growth of these businesses.”
Comcast management overall is also bullish.
“The well-capitalized, independent company will be positioned to lead in the changing landscape for cable networks given the strength of its portfolio and the quality and focus of its management team,” Cavanagh said in a Wednesday staff memo. “SpinCo will provide a diverse and differentiated content offering that will reach approximately 70 million U.S. households, making it highly attractive to investors, content creators, distributors, consumers, 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 potentially through acquisitions.”
He also emphasized in the memo: “Our effort to launch SpinCo as a successful public company will be done well versus done quickly. We have begun standing up a process and dedicated resources to ensure that we identify all that needs to be done and that it is done carefully and thoughtfully, without impacting the critical work everyone is doing to drive our priorities and businesses forward. … In the interim, the most important thing everyone can do is remain focused on the work at hand to propel our continued success, so when the moment comes to launch SpinCo, both NBCUniversal and SpinCo have the same momentum we carry into this moment.”
Concluded the former banker Cavanagh: “I believe the effort will be well worthwhile, as this project will inject energy and renewed focus in both the new company and the future NBCUniversal.”