As Cable Networks Lose Their Value, Comcast Launches A Separate Unit


As Cable Networks Lose Their Value, Comcast Launches A Separate Unit

As expected, Comcast announced today they were spinning off a number of cable networks. At their most recent earnings report last month, Comcast said they were considering splitting their cable properties into a separate company. It is expected it will take one year for the spin-off to be completed. The Wall Street Journal first reported the announcement.

The cable networks splitting off include USA Network, MSNBC, CNBC, Syfy, E!, Golf Channel and Oxygen. Over the past 12 months, the assets from the seven were an estimated $7 billion. Among the digital properties joining the new company are Fandango and Rotten Tomatoes, GolfNow and Sports Engine.

Bravo is the only NBCU cable network that will not be a part of the spin off. Bravo has several popular unscripted programs including The Real Housewives franchise. In addition, Bravo has become a steady program supplier for Peacock. Besides Bravo, the Comcast's NBCUniversal division will retain NBC and Telemundo broadcast networks, Peacock, Universal theme parks, television and film studios, NBC News and NBC Sports.

Financial analysts noted the decision separates NBCU's growth properties with their underperforming cable networks. In a research note Craig Moffett of MoffettNathanson wrote, "Investors have yearned for exactly this, or at least something close to it, for years."

An example of NBCU's programming strategy was the 2024 Paris Olympics. For the games Peacock was the programming hub with 5,000+ hours of live coverage. In previous Olympiads, NBCU had relied on cable networks from NBC SportsNet and USA Network to even CNBC and MSNBC to televise live events. Cable was not as prevalent in the 2024 Games as NBCU pushed Peacock. At present, Peacock has 36 million subscribers and besides the hub of the Olympics has exclusively streamed NFL games and will be exclusively streaming NBA games starting with the 2025-26 season. Nonetheless, Peacock has yet to be profitable.

As part of the announcement, Donna Langley, will become chairman of NBCUniversal Entertainment and Studios. Among the roles will be overseeing content spending. Matt Strauss, will be the chairman of NBCUniversal Media Group, overseeing sports, ad sales and distribution. Also, Cesar Conde will continue as chairman of the NBCU News Group.

For now, the cable networks spun-off will be called SpinCo. NBCUniversal Media Group chairman Mark Lazarus assumes the CEO position of the new company. Lazarus will, "lead the development of an independent strategy, while also establishing SpinCo as a potential partner and acquirer of other complementary media businesses." NBCU CFO Anand Kini was named CFO and COO of SpinCo. Brian Roberts, Comcast Chairman and CEO, will have a one-third voting stake in SpinCo but will not be a member on the board of directors or a part of the management team.

When Comcast acquired a majority (51%) ownership of NBCU in 2011, the penetration of cable television had peaked at more than 90% of U.S. television homes. Since then, the penetration has fallen to nearly 50% and continues to drop cable, in part because of ongoing rate hikes and competition from streaming.

For example, in 2011, USA Network with a number of popular original scripted dramas, movies and WWE wrestling, was the top-rated cable network averaging 3.17 million prime time viewers each night. Nowadays, the average primetime audience for USA Network has fallen below one million viewers.

Also, in recent years, Comcast has shut down a number of poor performing cable networks. The list includes; The Olympic Channel, G4, Cloo, Sleuth, NBC Sports Network, Chiller, Sprout and the co-owned (with Hearst) Esquire Network.

Comcast is familiar with consumers cancelling their pay-TV subscription. In 2014, Comcast was the largest pay-TV distributor with 22.6 million video subscribers. Ten years later, while Comcast remains one of the nation's largest pay-TV distributors (along with Charter), the number of subscribers has dropped to 12.8 million. Over the past 12 months, 1.7 million video subscribers dropped Comcast.

At last month's earnings report, Comcast president Mike Cavanagh said, "Like many of our peers in media, we are experiencing the effects of the transition in our video businesses, and have been studying the best path forward for these assets."

While Comcast is the first media conglomerate to split off their cable properties, other companies have used other strategies as cable networks lose their value. Disney has said they have no current plan to separate their TV properties.

Last August Warner Bros Discovery announced they were taking a $9.1 billion write down on the value of their cable holdings which include CNN and TNT. David Zaslav, the CEO mentioned the headwinds facing legacy media companies are confronting.

Shortly afterwards, Paramount Global parent company of networks as Comedy Central, Nickelodeon, MTV among others announced a nearly $6 billion write down in response to the current video landscape.

In 2019, Fox sold the entertainment assets to Disney which included cable networks FX, FXX and Nat Geo. Fox retained the news and sports networks including Fox News and FS1.

The underperforming cable networks have also played a part in recent carriage fee negotiations.

As part of a landmark agreement between Disney and Charter Spectrum, lower rated cable networks; Baby TV, Disney Junior, Disney XD, Freeform, FXM, FXX, Nat Geo Wild and Nat Geo Mundo will no longer be available.

This year in another protracted carriage fee negotiation involving Disney, DirecTV subscribers could now split cable networks into their own programming bundles such as sports, entertainment and kids

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