Comcast (CMCSA) is offloading off most of its cable properties. And it’s likely others in the industry will make similar moves.
The legacy media giant announced the spin-off on Wednesday after teasing the possibility just a few weeks prior. At the time, the company said it wanted to “play offense” in order to combat an industry burdened by increased cord cutting.
“It does make sense to split out the linear assets, or most of the linear assets,” Bank of America analyst Jessica Reif Ehrlich said on Yahoo Finance’s Market Domination following the news. “All of the traditional media companies are thinking of what assets they need to own to grow going forward and what they should divest.”
The spun-off company, dubbed SpinCo for now, will house most of NBCUniversal’s cable television networks, including USA Network, CNBC, MSNBC, Oxygen, E!, SYFY, and the Golf Channel.
Comcast will maintain ownership of its NBC broadcast network, including NBC News, along with its Peacock streaming service. The Bravo channel, which provides key original programming for Peacock, will be the only cable property not included in the spin-off.
“The cable networks are clearly in a very challenged universe,” Reif Ehrlich said. “I think this is the beginning of what could be industry consolidation or an industry roll-up of cable networks.”
Most streaming platforms are finally profitable or, at the very least, close to break-even. But the demise of the cable bundle is still a complicated mess for legacy players looking to survive in a new digital-first era.
For years, linear advertising and affiliate fees, or the fees pay-TV providers pay to network owners to carry their channels, had consistently boosted revenues for these networks. But the shift to streaming saw cable subscribers decline, hurting affiliate fees. Meanwhile, streaming companies entering the ad market have taken another leg off of the stool.
The pressure from deteriorating linear networks, coupled with heavy debt loads, has forced legacy media giants to cut costs wherever they can, resulting in mass layoffs and restructuring efforts.
Case in point: Warner Bros. Discovery (WBD) and Paramount Global (PARA). The two companies took a collective $15 billion hit on the value of their respective cable businesses earlier this summer.
Wall Street analysts say this opens the door for SpinCo to acquire other beaten-down cable properties.
“We think this could 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.
