Comcast to shut down other cable TV networks as broadcast dominates Reuters
Written by Dawn Chmielewski
(Reuters) – Comcast said on Wednesday it plans to spin off several of its fading NBCUniversal cable TV networks, including MSNBC and CNBC, as the company said it repositions itself to grow in the broadcast era.
Shares of the company fell less than 1% after the announcement that Comcast (NASDAQ: ) will spin off its entertainment and news channels, including USA Network, Oxygen, E!, Syfy and Golf Channel, into a new, publicly traded company.
Comcast will retain the core of NBCUniversal’s entertainment assets, including its NBC broadcast network, sports and news, its film and television studios, and the Bravo network, which appears to be fueling the growth of its Peacock streaming service. It also plans to maintain a growing theme park business.
Cowen & Co analysts said in a note that the spin-off could be a precursor to Comcast merging with another pay TV provider, such as Charter Communications (NASDAQ:), by dismissing “toxic” cable channels that could be an obstacle to regulatory approval under the incoming Trump administration.
Cable television pioneer John Malone earlier this month told investors that Charter must merge with one of the major media or telecom rivals to remain competitive.
The new, independent company, whose cable networks generate $7 billion in annual revenue, would likewise be positioned as an acquirer, or target, the sources said.
The tax-free spin off is expected to take a year to complete.
“The potential buyers of these cable channels are private equity firms or other media conglomerates,” said Emarketer analyst Ross Benes.
“PE will have an easier time hiding capital losses on acquisitions than public companies. PE buyers will cut costs and squabble over what network value is left, trying to extract a quick profit,” Benes added.
‘BROADCASTING HAS WON’
Comcast’s decision comes more than a decade after it acquired full control of NBCUniversal in a series of deals General Electric (NYSE:), transforming the company from a cable operator to a media behemoth where such assets are attractive.
It marks a turning point for Comcast CEO Brian Roberts, who earned the nickname “builder” from a string of acquisitions that grew the cable business his father founded.
Comcast’s cable networks have declined since their heyday, as millions of viewers have migrated to online streaming services like Netflix (NASDAQ: ), YouTube and Amazon (NASDAQ: ) Prime Video.
“The majority of pay TV has had a good 30-year career,” said Jon Miller, CEO of Integrated Media, which specializes in digital media investment. “Things are changing. Streaming has won. That reality is setting in.”
Still, Comcast’s cable networks reach 70 million US households, making the new company attractive to investors, distributors and potential partners.
“The company will have significant cash flow, a strong balance sheet and financial flexibility to pursue growth opportunities, both organically and through acquisitions,” Comcast President Mike Cavanagh wrote in a memo to employees seen by Reuters.
Acting CEO Michael Wolf predicts that the pay TV business will stabilize at around 50 million US, and continue to shed cash.
“This is a smart move,” Wolf said. “It allows Comcast to continue to profit from these cable networks and focus the rest of the business on other areas with more growth prospects”.
In yet another deal that underscores the changing landscape of the media industry, Comedy Central and Nickelodeon owner Paramount Global has agreed to merge with Skydance Media, which began broadcasting earlier this year.
Mark Lazarus, currently chairman of NBCUniversal’s media group, will lead the new entity as CEO, while Anand Kini, CFO of NBCUniversal, will serve as chief operating officer and chief financial officer of the new company.
Donna Langley will become chairman of NBC Universal Entertainment & Studios, an expanded role that will give her oversight of all entertainment programming. Matt Strauss will become chairman of NBCUniversal Media Group, where he will continue to oversee the company’s hotline business and NBC Sports, ad sales and content distribution.
