comcast President Mike Kavanaugh said Thursday that the company is considering spinning off its cable network business.
Cavanagh said during a third-quarter earnings call with investors that the company is considering forming “a new, well-capitalized company that will be owned by our shareholders and comprised of a strong portfolio of cable networks.” Ta.
He added that the potential separation does not include broadcast network NBC or streaming service Peacock. NBCUniversal’s portfolio of cable networks includes Bravo, E!, Syfy, Oxygen True Crime and USA Network, as well as news networks MSNBC and CNBC.
The comments come as millions of customers continue to flee traditional pay-TV bundles in favor of streaming. Comcast has been beefing up its streaming service Peacock, which boosted its performance in the third quarter by exclusively broadcasting the Paris Summer Olympics. Peacock ended the quarter with 36 million subscribers, an increase of 3 million from the previous quarter.
Comcast stock rose more than 3% in midday trading Thursday.
(LR) Comcast’s then-Chief Financial Officer Michael Cavanagh and Brian Cavanagh attend the annual Allen & Company Sun Valley Conference on July 9, 2019 in Sun Valley, Idaho. Mr. Roberts will have a meeting.
Drew Angerer | Getty Images
Despite the cord-cutting, traditional TV networks remain a cash cow for the media business, while streaming is piling up losses. On Thursday, Comcast announced third-quarter revenue for its media division (which primarily consists of NBCUniversal’s television networks) rose nearly 37% to $8.23 billion, largely due to the Olympics. did. Still, excluding the Summer Olympics, revenue rose almost 5%.
Mr. Cavanagh emphasized to investors that the process of considering a separation is at a very early stage and the potential outcome is still undetermined. Comcast decided to announce that it was considering the news so it could explore ideas without worrying about leaks or disruption, according to people familiar with the company’s thinking. The investigation will include people both inside and outside NBCUniversal, said the people, who requested anonymity because the discussions are private.
Beyond the main question of whether to proceed with a spinoff, there is also uncertainty about which networks should be included in the separation, including whether MSNBC and CNBC should remain part of NBC News Group, according to people familiar with the matter. That’s what it means. Comcast could decide to develop a cable network tracking stock rather than a full spin, or merge the assets with a peer company, the people said.
“I think the question of how to do that is why we want to study it and present it here. There are a lot of unanswered questions,” Cavanagh said Thursday. “And we want to work with transparency so that you can expect that every time there are rumors and things like that.”
The company lost 365,000 cable TV customers in the third quarter. The loss of cable subscribers is being felt across the industry.
Analyst firm MoffettNathanson estimated that traditional pay-TV subscribers fell by 4 million in the first six months of this year, calling it a “mind-boggling total.” This includes a loss of 2.37 million in the first quarter, considered the worst quarter ever for defectors from the bundle.
In August, warner bros discovery took a $9.1 billion write-down of its television networks following a revaluation of the division’s book value.
“Like many of our peers in the media industry, we are experiencing the effects of transition in our video business and are evaluating the best path forward for these assets,” Cavanagh said Thursday. “We are not yet ready to discuss specifics, but we will contact you again as soon as we reach a firm conclusion.”
Comcast declined to provide a specific timeline for when it will announce details of its plans for the NBC Universal network.
Analyst’s view
Wall Street analysts on Thursday welcomed the idea of separating the cable networks. The issue of separating NBCUniversal from its broadband business has been raised in recent years, as it is believed that NBCUniversal has caused its stock price to decline.
“Comcast’s gains will come from the (broadband) side,” said Ross Venez, principal analyst at eMarketer. “By separating the TV network from the rest of the company, Comcast will be able to more clearly demonstrate the growth of its ISP business. It would not be surprising if the TV network was written down. ”
MoffettNathanson analyst Craig Moffett said in a note Thursday that this is a “very welcome development,” even if it’s just a spinout of the network rather than the entire media business. “Investors have been clamoring for exactly this, or at least something close to it, for years,” Moffett said.
Kavanagh noted that Comcast distanced itself from the fray during a back-and-forth sales process earlier this year. paramount global — A storied media company that includes a portfolio of movie studios, cable networks, and streaming services.
Cavanagh added that the company is considering streaming partnerships, but is simply “open” at this point due to the complex nature of the deal.
The role of sports
It’s also unclear how the separation of the cable network business will affect the company’s sports portfolio and the entertainment content of the cable channels that will be added to Peacock. Currently, much of Bravo’s content, including the “Real Housewives” series, airs on Peacock the next day.
NBCUniversal has spent billions of dollars on Telemundo’s Spanish-language rights to major events such as the NFL’s “Sunday Night Football,” the English Premier League, college football and the World Cup. The company recently signed a $2.45 billion annual deal with the NBA to broadcast games on its broadcast network and Peacock for 11 years, starting with the 2025-2026 season.
Some of these events will also be broadcast on cable channel USA Network. USA Network became the home of NBCUniversal’s pay TV channel and aired much of this content after the closure of NBC Sports Network in 2021.
It is unclear what impact, if any, the separation will have on sports rights contracts. But the cable network’s divorce from NBC and its sports rights could make it easier for the cable network to be excluded from pay-TV distributors, said Rich Greenfield, an analyst at LightShed. In that case, Greenfield said, a publicly traded company in the cable network portfolio would likely be doomed from the start.
“Without the marquee sports, is NBCUniversal’s cable network going to be cut by the distributors and follow[regional sports network group]Diamond Sports into bankruptcy?” Greenfield said in an interview.
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC. NBCUniversal owns NBC Sports and NBC Olympics. NBC Olympics is the U.S. broadcast rights holder for all Summer and Winter Olympics through 2032.
Clarification: The headline of this article has been updated to clarify that Comcast is considering separating its cable network business.
