Comcast (CMCSA) is offloading most of its cable properties. And it’s likely that others in the industry will take similar steps.
The longtime media giant announced the spinoff Wednesday after teasing the possibility just a few weeks earlier. At the time, the company said it wanted to “play offense” to combat an industry burdened by the increasing number of cable cuts.
“It makes sense to break up the linear assets, or most of the linear assets,” Bank of America analyst Jessica Reif Ehrlich said after the news of Yahoo Finance’s Market Domination. “All traditional media companies are thinking about which assets they should own to grow in the future and which assets they should divest.”
The spun-off company, tentatively called SpinCo, will house most of NBCUniversal’s cable television networks, including USA Network, CNBC, MSNBC, Oxygen, E!, SYFY and Golf Channel.
Comcast will continue to own its NBC broadcast network, including NBC News, along with its Peacock streaming service. The Bravo channel, which provides core original programming for Peacock, will be the only cable property not included in the spinoff.
“The cable networks are clearly in a very challenging universe,” Reif Ehrlich said. “I think this is the beginning of what could be a consolidation of the industry or a roll-up of cable networks.”
Most streaming platforms are finally profitable or at least close to breakeven. But the demise of the cable bundle is still a complicated mess for legacy players looking to survive in a new digital age.
For years, linear advertising and affiliate fees, or the fees that pay-TV providers pay network owners to carry their channels, had consistently increased revenues for these networks. But the shift to streaming decreased the number of cable subscribers, negatively impacting affiliate fees. Meanwhile, streaming companies entering the advertising market have taken another step off the stool.
The pressure of deteriorating linear networks, coupled with heavy debt burdens, has forced traditional media giants to cut costs wherever they can, leading to massive layoffs and restructuring efforts.
An example: Warner Bros. Discovery (WBD) and Paramount Global (PARA). The two companies suffered a combined $15 billion decline in the value of their respective cable businesses earlier this summer.
Wall Street analysts say this opens the door for SpinCo to acquire other neglected cable properties.
“We think this can be viewed as a positive for peers with cable network assets, such as WBD, who could pursue similar ‘Good Co’ – ‘Bad Co’ spins,” KeyBanc analyst Brandon Nispel said in a note on Wednesday.
