Comcast President Mike Cavanagh delivered an eye-opening update to investors on this morning’s third-quarter earnings call, saying the company is exploring a spinoff of its cable TV networks.“Like many of our peers in media, we’re experiencing the effects of the transition of our video businesses and have been studying the best path forward for these assets,” Cavanagh said. “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 media landscape and create value for our shareholders. We are not ready to talk about any specifics yet, but we’ll be back to you as and when we reach firm conclusions.”The news comes in the wake of Warner Bros. Discovery and Paramount Global taking a collective $15 billion in write downs on the value of their cable assets and ongoing declines in linear viewing and advertising. While cable networks continue to throw off cash thanks largely to multi-year distribution deals, advertising is shrinking rapidly. Cord-cutting is shrinking the pay-TV bundle by millions of subscribers each year and it is difficult to know where the floor will ultimately be. Live sports has provided some motivation for some customers to stay tethered, but Comcast has been proactive with its sports rights, winding down cable outlet NBC Sports Network and shifting a considerable amount of live inventory to Peacock, sometimes in simulcasts with NBC.It wasn’t immediately clear from Cavanagh’s remarks whether private financing would be involved in the potential new entity, which would presumably contain networks like Bravo and USA. Cavanagh’s use of the phrase “well-capitalized,” though, suggests at least the possibility of third-party funding. Industry sources have told Deadline in recent months that private equity firms, which have invested in satellite TV operators, newspapers and other traditional forms of media, have had difficulty valuing cable assets given the freefall of subscribers and the flight of advertisers to streaming.Along with the comments on cable, Cavanagh addressed other strategic considerations. He noted that Comcast “chose not to participate in the M&A process around Paramount in the earlier part of this year, but we would consider partnerships in streaming despite their complexities.”During the Q&A period of the earnings call, Cavanagh said the objective of a process he called a “study” (rather than a formal strategic review) would be to “play some offense” given Comcast’s recent momentum. Unlike many companies with greater vulnerability to linear TV’s decline, the company has been stabilized by its broadband business, theme parks and other assets. Comcast reported third-quarter results ahead of analysts’ expectations, driven by NBCUniversal‘s coverage of the Paris Olympics. Its stock has held up far better than those of most cable network owners.“We’ve got a very strong hand,” Cavanagh said. “There may be some smart things to do and we want to study that.”NBCU streaming flagship Peacock, which is now at 36 million subscribers, is continuing to lose money as the consensus builds that streaming is a far tougher business than the dual-revenue heyday of traditional pay-TV. Comcast and NBCU have held talks with other media and tech companies over the last couple of years about potential joint ventures, but no real progress has been made toward a deal. Ironically, the upbeat sentiment about JVs has followed in the wake of Disney’s rollup of full control of Hulu, which for most of its existence had three media giants as co-owners (and a fourth as a minority investor). Decision-making and strategic execution proved difficult with so many stakeholders involved.
© 2024 Deadline.