Comcast is exploring a separation of its cable networks enterprise, President Mike Cavanagh stated Thursday.
Through the firm’s third-quarter earnings name with buyers, Cavanagh stated the corporate is exploring creating “a brand new, well-capitalized firm owned by our shareholders and comprised of our robust portfolio of cable networks.”
The attainable separation wouldn’t embody broadcast community NBC nor streaming service Peacock, he added. NBCUniversal’s cable networks portfolio consists of Bravo, E!, Syfy, Oxygen True Crime and USA Community, in addition to information networks MSNBC and CNBC.
The feedback come as tens of millions of consumers proceed to flee the normal pay TV bundle in favor of streaming. Comcast has been beefing up its streaming service Peacock, which received a lift in the course of the third quarter when it solely aired the Summer time Olympics in Paris. Peacock ended the quarter with 36 million subscribers, up 3 million from final quarter.
Shares of Comcast had been up greater than 3% in noon buying and selling Thursday.
(L-R) Michael Cavanagh, then-chief monetary officer of Comcast, talks with Brian Roberts, chief govt officer of Comcast, as they arrive for the annual Allen & Firm Solar Valley Convention, July 9, 2019 in Solar Valley, Idaho.
Drew Angerer | Getty Photos
Regardless of twine reducing, conventional TV networks are nonetheless money cows for media companies, whereas streaming has racked up losses. On Thursday, Comcast stated third-quarter income for the media section – primarily comprised of NBCUniversal’s TV networks – was up practically 37% to $8.23 billion, largely because of the Olympics. Nonetheless, excluding the Summer time Video games, income was up nearly 5%.
Cavanagh pressured to buyers that the method of learning a separation is on the very early levels, and the potential consequence was nonetheless undetermined. Comcast determined to announce it was contemplating the information in order that it may discover the thought with out having to fret about leaks or confusion, in response to individuals accustomed to the corporate’s pondering. The analysis will embody individuals inside and outdoors of NBCUniversal, stated the individuals, who requested to not be named as a result of the discussions are non-public.
Past the first query of whether or not to maneuver ahead with a derivative, there’s additionally uncertainty round which networks to incorporate in a attainable separation, together with whether or not MSNBC and CNBC ought to stay with the NBC Information Group, stated the individuals. Comcast may additionally resolve to develop a cable community monitoring inventory quite than a full spin, or the property may very well be merged with a peer, the individuals stated.
“I feel the questions on the right way to do it are the rationale we’re saying right here that we need to examine it. There are a number of inquiries to which we do not have solutions,” Cavanagh stated Thursday. “And we need to do the work with transparency round it in order that as rumors fly and the like, we anticipate that.”
The corporate misplaced 365,000 cable TV clients in the course of the third quarter. Cable subscriber losses have been felt throughout the trade.
Analyst agency MoffettNathanson estimated there have been 4 million conventional pay TV subscriber losses within the first six months of the yr, calling it “a mindboggling complete.” That features 2.37 million losses within the first quarter, thought of the worst-ever quarter for defections from the bundle.
In August, Warner Bros. Discovery booked a $9.1 billion write-down of its TV networks, triggered by the reevaluation of the guide worth of the section.
“Like lots of our friends in media, we’re experiencing the consequences of the transition in our video companies and have been learning the most effective path ahead for these property,” Cavanagh stated Thursday. “We’re not prepared to speak about any specifics but, however we’ll be again to you as and after we attain agency conclusions.”
Comcast declined to supply a particular timeline as to when it could announce extra particulars on its plans for the NBCUniversal networks.
Analysts’ take
Wall Avenue analysts on Thursday welcomed the thought of a separation of the cable networks. In recent times the query of separating NBCUniversal from the broadband enterprise has been raised because it’s thought of to have pulled down the inventory.
“Comcast earnings are pushed by the [broadband] facet,” stated Emarketer principal analyst Ross Benes. “Dividing the TV networks from the remainder of the corporate will enable Comcast to extra clearly present development in its ISP enterprise. A write down on the TV networks wouldn’t be stunning.”
Analyst Craig Moffett of MoffettNathanson known as it a “very welcome improvement” in a word on Thursday, even when it is only a spinout of the networks and never all the media enterprise. “Buyers have yearned for precisely this, or a minimum of one thing near it, for years,” Moffett stated.
Cavanagh famous that Comcast had stayed out of the fray earlier this yr throughout a back-and-forth gross sales course of for Paramount International — the storied media firm that features a movie studio, portfolio of cable networks and streaming providers.
Cavanagh added that the corporate is contemplating streaming partnerships, however because of the difficult nature of these offers the corporate is just “open to them” at this level.
The function of sports activities
It is also unclear what a separation of the cable networks enterprise would imply for the corporate’s sports activities portfolio — in addition to the leisure content material from its cable channels which can be added to Peacock. At the moment a lot of Bravo’s content material, such because the “Actual Housewives” franchises, airs subsequent day on Peacock.
NBCUniversal has spent billions on the NFL’s “Sunday Night time Soccer,” the English Premier League, school soccer and Telemundo’s Spanish language rights to main occasions just like the World Cup. The corporate just lately signed a $2.45 billion per yr cope with the NBA to air video games on its broadcast community and Peacock for 11 years, starting with the 2025-2026 season.
A few of these occasions additionally seem on cable channel USA Community, which grew to become NBCUniversal’s pay TV channel location for a lot of this content material after it shuttered NBC Sports activities Community in 2021.
It is unclear how a separation would have an effect on sports activities rights contracts, if in any respect. However divorcing cable networks from NBC and its sports activities rights may depart them susceptible to getting dropped by pay TV distributors, stated LightShed analyst Wealthy Greenfield. That will probably doom any publicly traded entity of the cable networks portfolio from the beginning, Greenfield famous.
“With out marquee sports activities, will NBCUniversal’s cable networks be dropped by distributors and fast-follow [regional sports network group] Diamond Sports activities out of business?” Greenfield mused in an interview..
Disclosure: Comcast owns NBCUniversal, the dad or mum firm of CNBC. NBCUniversal owns NBC Sports activities and NBC Olympics. NBC Olympics is the U.S. broadcast rights holder to all Summer time and Winter Video games by means of 2032.
Clarification: The headline on this text has been up to date to make clear that Comcast is exploring a separation of its cable networks enterprise