Comcast declared last year to separate 30% of its NBCUniversal cable TV networks that include MSNBC, CNBC and USA Network. This step is still realigning the company to adapt to the growing popularity of the streaming services in the media industry.
Comcast to Spin Off Cable Networks as Streaming Takes Over
The new company planned to list itself on the stock market and its networks will include Oxygen, E!, Syfy, and Golf Channel. It is has a strategy of cutting its exposure to cable TV business which has been declining in recent years in order to shift resources to areas of growth.
Comcast will retain strategic assets directly related to the streaming vision for the business . This includes NBC’s TV broadcast network, its film and television studio divisions, and the Bravo networks, all of which are critically involved in Peacock, NBCUniversal’s streaming service.
Also, the company wants to retain the growing theme park division as it emerges as a source of significant cash inflows. The spin-off will provide Comcast a more focused, stronger foothold in both entertainment and streaming, and thus away from losing cable subscriptions.
Speculations have been made that consequent of the spin off , other strategic maneuvering such as a merger with other cable service providers such as charter holdings could be in the offing. This shift may assist the company like Comcast to offload some of those marginal performing assets while dealing with future possible regulatory challenges.
John Malone Advocates for Charter Merger as Cable Industry Evolves
An earlier cable TV visionary John Malone himself has encouraged Charter Communications to look for a merger with a bigger media or telecom player. Such a suggestion is in line with trends in this sector where cable providers are really under pressure from the streaming services.
Charter’s cable networks that currently pull in $7 billion in revenue will form a new company after Charter has completed a spin-off plan. Analysts within this industry reveal that this company may either be an active acquirer of other small companies or perhaps a target on which larger media firms may consider opting for acquisitions on.
The tax-free spin-off being planned will take a year to be concluded which will provide Charter ample opportunity to reconstruct its plans. It is also a part of the recent phenomenon in the industry where cable companies are looking for a way on how to cope up with the change that brings the sudden rise of streaming services into the market.
Per data from eMarketer analyst Ross Benes, PE firms are among the likely acquirers of these cable assets. He said it would enable PE firms to handle monetary risks and plan how to rake in cash briskly by optimizing PE costs and avoiding wastage.
Comcast’s decision to spin off its cable networks is a remarkable turnaround from when it gained full ownership of NBCUniversal more than a decade ago. These type of assets were once quite popular when cable networks where on the rise, but streaming is now dominating, causing cable to be revalued.
Comcast's Shift Marks a New Chapter for CEO Brian Roberts
Comcast’s change of approach is a major turning point for the ‘builder’ chief executive officer, Brian Roberts, who has overseen the growth of a cable business that was started by his father. While at the helm of affairs at Comcast, this giant in media became a conglomerate through mergers.
Still, the cable industry has been shrinking as millions of viewers have deserted traditional pay-TV for online video streaming services such as Netflix, YouTube and Amazon prime video. Consequently, the change of consumers’ habits has also presaged a reconsideration of Comcast’s fundamental activities.
At the conclusion of the event, Jon Miller of Integrated Media observed: ‘”Streaming won.” The previously dominant pay-TV bundle that operated for more than three decades has recently been declining in share and is being replaced by Internet-based streaming services, shifting the overall media environment.
Nevertheless, Comcast’s cable networks, MSNBC for example, are still watched by 70 million American households, which remain an interesting object for investors and other stakeholders. Favourable cash flow generation and balance sheet structure will allow the company to seek value creation opportunities, via internal investments, acquisitions.
The fact that Comcast decided to shift its focus while still offering value in their cable networks is right on par with the trend. This business, as Activate CEO Michael Wolf has noted, might eventually level off at around 50 million homes worldwide, hampered by having already produced good cash flow while Comcast shifts its focus to areas of even greater growth, such as streaming.
