Comcast Considers Cable Networks Separation Amid Streaming Shift

Comcast is exploring the potential separation of its cable networks division, a move announced by President Mike Cavanagh during the company's third-quarter earnings call on Thursday. Cavanagh highlighted the idea of creating "a new, well-capitalized entity owned by our shareholders, featuring our robust portfolio of cable networks." Importantly, he clarified that any separation would not include NBC or the streaming service Peacock.

NBCUniversal’s cable networks encompass popular channels such as Bravo, E!, Syfy, Oxygen True Crime, and USA Network, along with news outlets MSNBC and CNBC. This announcement comes as traditional pay-TV subscriptions continue to dwindle, with millions of customers shifting toward streaming options. Comcast has been ramping up its streaming service, Peacock, which saw substantial growth during the third quarter, particularly after broadcasting the Summer Olympics in Paris. By the end of the quarter, Peacock boasted 36 million subscribers, an increase of 3 million from the previous quarter, marking a significant achievement for the platform.

Despite the ongoing shift to streaming, traditional television networks remain crucial revenue generators for media companies. Comcast reported a nearly 37% increase in media segment revenue, reaching $8.23 billion in the third quarter, largely thanks to the Olympics. Excluding the Olympic boost, the revenue still rose by almost 5%. Cavanagh noted that the exploration of a potential separation is in its early stages, with many details yet to be determined.

Sources familiar with the discussions revealed that Comcast decided to disclose this consideration to foster transparency and avoid speculation. The evaluation will involve input from both internal and external stakeholders related to NBCUniversal. Notably, there are questions surrounding which networks may be included in a potential separation, particularly regarding the future of MSNBC and CNBC within the NBC News Group. Comcast may also consider a cable network tracking stock instead of a full spinoff or a merger with a similar entity.

Cavanagh stated, “The questions surrounding the execution of this process are precisely why we are announcing our intention to study it. There are numerous questions for which we currently lack answers. We aim to conduct this work transparently to manage expectations as speculation arises.”

The cable industry faces mounting challenges, as Comcast reported a loss of 365,000 cable television subscribers in the third quarter. MoffettNathanson estimates that there were 4 million losses in traditional pay TV subscriptions during the first half of the year, with the first quarter seeing a record loss of 2.37 million subscribers.

In August, Warner Bros. Discovery recorded a staggering $9.1 billion write-down of its television networks, underscoring the industry's struggles. Cavanagh remarked, “Similar to many of our industry counterparts, we are feeling the impact of the changes in our video operations and are evaluating the most effective strategy for these assets.” He noted that specific details regarding plans for the NBCUniversal networks are still under consideration.

Analysts Weigh In

Wall Street analysts have expressed support for Comcast’s potential separation of its cable networks. The idea of separating NBCUniversal from the broadband division has been discussed for years, as it is believed to have negatively impacted the company’s stock performance. “Comcast's profits are primarily driven by the broadband sector,” said Ross Benes, principal analyst at eMarketer. “Separating the TV networks from the rest of the company would enable Comcast to more transparently demonstrate growth in its ISP business.”

Craig Moffett, an analyst at MoffettNathanson, called the potential separation “a very welcome development,” even if it involves merely spinning off the networks rather than the entire media operation. He noted, “Investors have long desired this, or at least something similar, for years.”

Cavanagh highlighted that Comcast chose to remain uninvolved in earlier negotiations concerning the sale of Paramount Global and is currently exploring streaming partnerships, although he acknowledged the complexities of such agreements.

The Future of Sports Programming

The implications of a potential separation for Comcast's sports assets remain uncertain, particularly concerning how the entertainment offerings from its cable channels will integrate with Peacock. Currently, a significant portion of Bravo's programming, including the popular "Real Housewives" series, is available on Peacock the day after its original airing.

NBCUniversal has heavily invested in broadcasting rights for major sports, including the NFL's "Sunday Night Football," the English Premier League, and college football. Recently, the company secured a lucrative agreement worth $2.45 billion annually with the NBA to broadcast games on its network and Peacock over an 11-year period starting in the 2025-2026 season.

The future of sports rights agreements in the event of a separation remains ambiguous. Analysts like LightShed’s Rich Greenfield warned that removing the cable networks from NBC and its sports rights could risk exclusion from pay-TV distributors, potentially jeopardizing the viability of any publicly traded entity within the cable networks portfolio. He posed a critical question: “Without prominent sports programming, could NBCUniversal's cable networks face removal by distributors, potentially leading to a fate similar to that of the regional sports network group Diamond Sports?”

As Comcast navigates these complex considerations, the evolving landscape of media consumption continues to pose both challenges and opportunities for the company. With traditional pay-TV subscriptions dwindling and streaming services on the rise, the future of Comcast's cable networks and its overall strategy remains to be seen.

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