Comcast tests media industry with potential separation from cable networks

Comcast East I’m thinking of a separation or a split NBCUniversal Cable Networks. If he moves forward with this idea, it could lay the groundwork for a reconfiguration of the entire American media landscape.

Comcast’s logic is quite simple. NBCUniversal’s cable networks are no longer growing. The company’s energy and focus are devoted to promoting Peacock, NBCUniversal’s growing (but still loss-making) streaming service. Separating the cable portfolio could appease Comcast investors by removing declining assets from the balance sheet.

Comcast shares gained more than 3% Thursday following the company’s third-quarter earnings release and conference call.

“We are currently 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 an evolving media landscape and create value for our shareholders “, Comcast” President Mike Cavanagh said on the call. “We are not yet ready to talk details, but we will come back to you as we reach definitive conclusions.”

Although executives stressed that exploration is still in its early stages, it could be a prelude to broader consolidation in the sector. NBCUniversal’s cable networks, which include Bravo, E!, Syfy, Oxygen True Crime and USA Network, as well as news networks MSNBC and CNBC, could be merged with another media company or could serve as a catalyst for a consolidation of cable channels in a number of countries. from different companies.

The idea of ​​a rollup is not new. This is something media mogul John Malone discussed in 2016 when Lionsgate acquired premium network Starz.

“Lionsgate could buy Starz and potentially other industry free radicals”, Malone then saidreferring to cable network groups not owned by larger media conglomerates such as AMC Networkswhich is controlled by the Dolan family, or A&E Networks, which is co-owned by Hearst and Disney.

That vision never came to fruition, in part because the media world’s focus shifted from traditional pay TV to streaming, which devalued cable networks. Earlier this year, Warner Bros. Discovery reported a non-cash goodwill impairment charge of $9.1 billion, triggered by the revaluation of the carrying value of its television networks segment.

Yet the loss of value of cable networks now opens up a new consolidation opportunity, if companies like Comcast, Discovery Warner Bros. And Disney decide to shed declining cable assets to focus on streaming.

So far, media companies have chosen to hold on to their cable networks, which still generate billions in profits even as millions of Americans cut the cord each year.

Comcast can set a pattern if it moves forward with a shift and sees an uptick in its overall valuation.

Ironically, Starz could once again play a role in a media shake-up. The small media company wants to be the vehicle for a cable network rollupCNBC reported in 2022. Starz is expected to split from Lionsgate at the end of 2024.

There is significant uncertainty over whether an all-cable network company has a viable path forward as a publicly traded entity. Stock investors are generally not fans of asset declines, even if they have ample liquidity.

But even if Starz doesn’t realize its vision of a cable network consolidation, it’s possible that a private equity firm would have an interest in raising money from a cable network group. Apollo Global Managementfor my part, had a late interest by acquiring Paramount Global and has made several media-related investments in recent years, including buy yahoo.

Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.