Comcast to spin off some cable TV networks as streaming dominates

:Comcast said on Wednesday that it plans to spin-off the bulk of its fading NBCUniversal cable TV networks, including MSNBC and CNBC, as the company said it is repositioning itself for growth in the streaming era.
Shares of the company were off less than 1 per cent after the announcement that Comcast would separate 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 are seen as fueling growth for its Peacock streaming service. It also plans to keep the expanding theme park business.
Cowen & Co analysts in a note said the spin-off may well be a precursor to Comcast combining with another pay TV provider, such as Charter Communications, by shedding “toxic” cable channels that might be an obstacle to regulatory approval under the incoming Trump administration.
Cable television pioneer John Malone earlier this month told investors that Charter should merge with one of its larger media or telecom rivals to remain competitive.
The new, stand-alone company, whose cable networks generated $7 billion in annual revenue, would similarly be positioned as an acquirer, or a target, sources said.
The tax-free spin-off is expected to take a year to complete.
“The most likely buyers of these cable channels are private equity firms or other media conglomerates,” said Emarketer analyst Ross Benes.
“PE would have an easier time hiding financial losses from a purchase than public companies would. PE buyers would cut costs and wrangle out what value is left of the networks, attempting to squeeze out quick profits,” Benes added.
‘STREAMING WON’
Comcast’s decision comes more than a decade after it secured full control of NBCUniversal in a series of deals with General Electric, transforming the company from a cable operator to a media behemoth when such assets were attractive.
It marks an inflection point for Comcast CEO Brian Roberts, who earned the nickname “the builder” for the series of acquisitions that grew the cable business his father founded.
Comcast’s cable networks have declined from their heyday, as millions of viewers migrated to internet streaming services like Netflix, YouTube and Amazon Prime Video.
“The pay TV bundle had a great 30-year plus run,” said Jon Miller, CEO of Integrated Media which specializes in digital media investments. “Things change. Streaming won. That reality is now setting in.”
Still, Comcast’s cable networks reach 70 million U.S. households, making the new company attractive to investors, distributors and potential partners.
“The company will have significant cash flow, a strong balance sheet and the financial flexibility to pursue growth opportunities, both organically and through acquisitions,” Comcast President Mike Cavanagh wrote in a memo to employees seen by Reuters.
Activate CEO Michael Wolf predicts the pay TV business will stabilize at about 50 million U.S. households, and continue to throw off cash.
“This is a smart move,” said Wolf. “It allows Comcast to continue to get value out of these cable networks and focus the rest of the business on other areas which have a lot of growth prospects”.
In yet another deal underscoring the changing landscape of the media industry, Comedy Central and Nickelodeon owner Paramount Global agreed to merge with streaming-era upstart Skydance Media earlier this year.
Mark Lazarus, who currently serves as chairman of NBCUniversal’s media group, will lead the new venture as CEO, while Anand Kini, CFO of NBCUniversal, will be the operating chief and finance head 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 steaming business as well as NBC Sports, ad sales and content distribution.