In a sign of just how embattled the pay TV business is, a Comcast idea to spin off its cable channels went from Wall Street trial balloon to game plan in just a few short weeks.
The conglomerate that owns NBCUniversal is getting ready to announce Wednesday that it is cleaving its less lucrative cable networks away from its film and TV studio entertainment and parks businesses, The Hollywood Reporter has confirmed. Late last month, the Brian Roberts-led company signaled to investors that it was considering a plan to roll out channels — including MSNBC, CNBC, Syfy, E!, Oxygen, Golf Channel and USA Network — into a stand-alone company that would, in theory, allow the core Comcast to not be dragged down by the declining pay TV landscape.
“We are now exploring whether creating a new well-capitalized company, owned by our shareholders and comprised of our strong portfolio of cable networks, would position them to take advantage of opportunities in the changing media landscape and create value for our shareholders,” Comcast president Mike Cavanagh told analysts during its earnings call on Oct. 31. “We are not ready to talk about any specifics yet, but we’ll be back to you as and when we reach firm conclusions.”
At the time, Cavanagh went on to clarify that this potential spinoff that it was studying wouldn’t include its flagship streaming service Peacock, which now has about 36 million subscribers, or its broadcast offerings like NBC. Reality television juggernaut Bravo will stay with NBCUniversal portfolio, and won’t migrate with the other brands to the spinoff company. The Wall Street Journal first reported the Comcast plan to announce the move on Nov. 20.
The spinoff raises questions about how brands that have been integrated behind the scenes — think: NBC News and MSNBC, for starters — would have to unwind to a degree with the spinoff. “I think the questions about how to do it are the reason we’re announcing here that we want to study it. There are a lot of questions to which we don’t have answers, so we want to do the work,” Cavanagh said on the call.
While the cable business used to be a cash driver for studios, the channels lately have become a drag on earnings and investors have dinged companies that have been weighed down by channels tied to bundles that have fast fallen out of out of favor with consumers who’ve spent instead on individual streaming services. Last year, major pay TV companies collectively lost about 5 million subscribers combined and Comcast alone lost 2 million subs, per Leichtman Research.
Comcast isn’t alone in hinting about divesting, in some form, from cable and linear TV channels. Disney CEO Bob Iger mused aloud while at the Sun Valley mogul conference last year that its legacy TV networks, including ABC, “may not be core” to the company. This summer, Paramount Global’s incoming CEO Jeff Shell said the plan would be to manage CBS “a bit more aggressively for cash flow” given that linear TV is a “declining business.”
And, in August, Warner Bros. Discovery took a $9.1 billion non-cash goodwill impairment charge related to TV networks, of which it owns TNT, TBS and CNN. Weeks earlier, a Bank of America analyst team floated an idea that Warners could spin off all its linear assets into a separate holding company saddled with an estimated $40 billion in debt so that the core of the company can return to growth. At the time, the BoFA team wrote that this spun off company composed of linear TV assets could become a vehicle to roll up the rest of linear TV assets across the industry, including channels from Disney, NBCUniversal and AMC Networks.
Now, it appears, Comcast is taking one step closer to that idea.