As the linear TV business continues to erode, Comcast is considering spinning off its cable network portfolio into a standalone company.
That portfolio includes Oxygen, True Crime, Bravo, MSNBC, CNBC, USA Network, E!, Syfy, Universal Kids and Spanish-language channel Universo. The spinoff would not include the company’s broadcast operations.
Shares of Comcast popped 7% in pre-market trading on Thursday following the announcement.
“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,” Comcast president Mike Cavanagh told analysts on Thursday during the company’s third quarter earnings call. “To that end, 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. We are not ready to talk about any specifics yet, but we’ll be back to you as and when we reach firm conclusions.”
“The reason we’re announcing here is that we want to study it, there are a lot of questions to which we don’t have answers,” Cavanagh added. “So we want to do the work, with transparency around it, so that — as you know, rumors fly and the like, you know, we expect that — but we want our shareholders to understand what we’re willing to look at.”
Cavanagh declined to say how a possible spinoff would impact overall revenue, emphasizing that the company doesn’t want to get ahead of itself.
“Obviously, if we do anything like that, it will have an impact on the consolidated company. But I think the point that we’d make is that it doesn’t change the fact that within the business today, we got six growth drivers that represent more than half our revenues that are growing this quarter at 9% or so, and on a trailing basis spinning that high single digits, sometimes 10%,” he explained. “So the company is transforming itself to a top line growing company as our mix changes. Whether we do something like a spin or not, I’d focus everybody on what the underlying is.”
He emphasized that the NBCUniversal parent has a “very strong hand” and that he’s “proud of every part of it.”
“I think the idea of playing some offense, when you combine the balance sheet strength that we have, the assets we have, and the management team we have, there may be some smart things to do and we want to study that,” he added.
Cavanagh’s remarks come as competitors Paramount Global and Warner Bros. Discovery took a collective $15 billion in write-downs on the value of their cable networks and softness in the U.S. linear advertising market during their second quarters of 2024. In its third quarter of 2024, Comcast shed 365,000 pay TV subscribers for a total of 12.8 million, with video revenue falling 6.2% year over year to $6.7 billion.
In addition to a spinoff, Cavanagh said that Comcast would consider streaming partnerships to help grow Peacock, which reported a narrowed loss of $436 million, revenue growth of 82% year over year to $1.5 billion and a 29% year over year increase in paid subscribers to 36 million during the third quarter.
“As you know, we chose not to participate in the M&A process around Paramount in the earlier part of this year, but we would consider partnerships in streaming despite their complexities,” he added.
Leave a Reply