In the latest tremor shaking an unstable media industry, Comcast announced plans Monday to spin off its NBCUniversal media business from its cable and broadband operations.
Under the planned separation, Comcast and NBCUniversal will operate as two independent publicly-traded companies, the former run by former Comcast CFO Michael Angelakis and the latter run by current Comcast co-CEO Mike Cavanagh, with current Comcast co-CEO Brian Roberts saying on an investor call that he will remain “actively involved” in both companies. The rationale for the split, as described by Roberts and other executives on the call, is that Comcast and NBCU have the requisite scale to stand alone in their own right and separation can allow them to better focus on their increasingly distinct objectives.
“This is not about separating what we’ve built together,” Roberts said, “but positioning two exceptional businesses to move forward with greater focus, agility and the ability to fully capitalize on the opportunities ahead.”
Cavanaugh added that while Comcast once believed “scale and the diversification benefits warranted operating these businesses as one company,” it has since ‘changed its mind.’ “We’ve now concluded that future success for each of our businesses will depend on focus, speed and strategic flexibility that this separation will unlock.”
The spinoff comes as NBCUniversal has dramatically stepped up its sports expenditures, most notably its 11-year NBA rights deal with $2.5B annually, and continues to operate its streaming service Peacock. Roberts touted NBC’s “unmatched and enviable sports portfolio” on the investor call and said Peacock will hit “profitability in less than six years.” Comcast CFO Jason Armstrong added that the spinoff was not triggered by any upcoming quarterly results: “We’ll be reporting in about three weeks, and you won’t see much by way of surprise. We broadly expect financial and operating metrics to be within expectations.”
The independent NBCUniversal will retain all of the media businesses, including Sky and the Universal film studio, plus the Universal theme parks. Comcast will retain a 19.9% stake in NBCU through the first year following the spinoff, which it will use to pay down debt.
The planned separation is the second by Comcast in the span of a year, after the company spun off the majority of its cable networks — including USA Network, Golf Channel, CNBC and the former MSNBC — into a new venture called Versant.
Comcast reached a deal to acquire NBCUniversal from General Electric in 2009, a deal that upon closing in 2011 combined the NBC family of networks with Comcast-owned Golf Channel and Versus. NBCUniversal itself was only five years old at that point, having formed in 2004 from a merger of GE-owned NBC and VivendiUniversal, which owned USA and other cable properties. After the back-to-back spinoffs, what originated as three separate companies — Comcast, NBC and VivendiUniversal — will now again consist of three separate companies, Comcast, NBCUniversal and Versant.
The planned spinoff is just the latest massive shift in a media business that over the past decade has seen Fox sell the majority of its assets to Disney; the Warner networks sold to AT&T, spun off into a new venture with Discovery, and then sold again in a pending deal to Paramount; and the aforementioned Versant spinoff.
Both Roberts and Cavanagh explicitly ruled out the spinoff being a step toward any further mergers or acquisitions, with Cavanagh saying that the plan for NBCU is to “build and invest for growth.”
An independent NBCUniversal will lack the financial backing of Comcast, but may also be too big to serve as a realistic acquisition target. Paramount’s pending, $110 billion acquisition of WBD is largely considered an overpay necessitated to muscle out Netflix, which originally won the bidding for the company. NBCUniversal, which operates in more businesses than WBD, would surely command a higher price tag.
It is also hard to imagine NBCUniversal adding any additional media businesses, given it has already slimmed down by virtue of the Versant transaction. It may be that NBCU operates as a larger version of Fox, which after selling most of its assets to Disney had focused on its broadcast, sports and cable news businesses until its recent deal to acquire Roku — a deal that notably puts Fox in the position of distributing, rather than accumulating, content.
While the tenor of the investor call was that Comcast and NBCU are strong enough to stand alone, it is hard to miss the broader trend that companies who bought into media content are largely exiting the space. Between the Fox, Warner and now NBC transactions, dozens of networks have now either changed hands or been discarded via spinoff in less than a decade, and that is not including the musings by then Disney CEO Bob Iger in 2023 that the various networks owned by that company may not be “core” to its business.
