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- Cable TV networks look like they’re in permanent decline.
- So Comcast, which owns a bunch of them, is proposing splitting them into a separate company.
- Warner Bros. Discovery made a similar pitch this summer, then backed away from it.
The future of cable TV channels is not looking good, at all. So what if we just got rid of the ones we own?
That, in essence, is what Comcast floated to investors on Thursday morning on its earnings call: The media/broadband conglomerate says it is thinking of taking its basic cable channels — like Bravo, USA, CNBC, and MSNBC — and cleaving them off into a separate company.
It doesn’t mean Comcast would be fully exiting the media business, which it acquired by buying NBC Universal in 2013. It would still own big assets like the NBC broadcast channel, its Peacock streaming service, and its Universal film and TV studio.
If all of that sounds familiar, there’s a good reason. In July, executives at Warner Bros. Discovery floated a similar plan (though they never said it out loud, on the record).
The impulse behind both plans seems to be the same: The pay-TV industry appears to be in terminal decline and is losing millions of subscribers a year. And basic cable TV networks are bearing the brunt of the collapse. That’s why WBD took a $9 billion charge on its cable networks this summer, and why Paramount took a $6 billion charge on its networks a day later.
So splitting the cable channels off from the main company is supposed to create value. Instead of one big company weighed down by a declining asset, you’ll have two companies: A “goodco” and a “badco.”
Comcast certainly doesn’t frame it that way out loud. Here’s Mike Cavanagh, Comcast’s president, who floated the idea to investors Thursday:
“Like many of our peers in media, we are experiencing the effects of the transition in our video businesses, and we have been studying the best path forward for these assets. 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.”
Like the WBD trial balloon from this summer, this proposal has all kinds of question marks and complexity, since the cable networks are intertwined with businesses Comcast wants to keep.
Programming from the cable networks, for instance, is part of the pitch behind its Peacock streamer. Splitting them would also affect Comcast’s ad sales, and its ability to negotiate deals with other pay-TV distributors.
There’s also the basic “who wants to own a badco?” question — if Comcast doesn’t want these assets contaminating its core business, why would anyone else want to own it?
But the first thing to figure out is whether Wall Street likes the idea. Comcast shares immediately jumped more than 6% after the company made its “What do you guys think?” announcement Thursday morning, but that bump is fading as I type this. WBD, by the way, backed off its split idea quite quickly this summer.
“A spinout would be “a very welcome development,” MoffettNathanson analyst Craig Moffett wrote in a note this morning.
In less dramatic news, Cavanagh also formally acknowledged that Comcast is interested in deals to merge Peacock with other streaming assets. Those talks have been reported in the past. They’re also very hard to make work in the real world, as Comcast CEO Brian Roberts said at a conference earlier this month.
