Comcast to spin off cable business to focus on streaming

The US cableco announced the creation of the new business, which it has dubbed SpinCo, on Wednesday. It’s a business of significant size, the assets it contains having brought in revenues of US$7 billion in the 12 months to the end of September.

SpinCo, which will be publicly traded, will be made up of NBCUniversal's cable TV networks, including USA Network, CNBC, MSNBC, Oxygen, E!, SYFY and Golf Channel, plus what Comcast terms complementary digital assets such as Fandango and Rotten Tomatoes, GolfNow and Sports Engine. Essentially, it is building a news, sports and entertainment-led cable TV business that will have a footprint of 70 million US households.

Meanwhile, Comcast will narrow its focus on its core growth businesses, which it identifies as residential broadband, mobile services, business services and NBCUniversal's streaming, studios and theme parks.

"This transaction positions both SpinCo and NBCUniversal to play offense in a changing media landscape," said Mike Cavanagh, President of Comcast. "Taken together, the entirety of NBCUniversal will be on a new growth trajectory, fuelled by our world-class content, technology, IP, properties and talent – all working in concert with each other as an integrated media company."

That changing landscape has had an impact on all legacy TV providers, the rise of streaming hitting top lines across the industry.

But there is still value in the businesses Comcast is spinning off.

"As a standalone company with these outstanding assets, we will be better positioned to serve our audiences and drive shareholder returns in this incredibly dynamic media environment across news, sports and entertainment," said Mark Lazarus, current Chairman of NBCUniversal Media Group, who will serve as SpinCo's CEO.

"We see a real opportunity to invest and build additional scale and I'm excited about the growth opportunities this transition will unlock. Our financial strength will also provide capacity for an attractive capital return policy while allowing for investment in the growth of these businesses," Lazarus said.

Comcast has made no secret of the fact that it will be on Lazarus – and Anand Kini, designated as SpinCo's CFO and Chief Operating Officer – to develop an independent strategy for the business, while also positioning it "as a potential partner and acquirer of other complementary media businesses."

It doesn't take much reading between the lines to deduce that SpinCo could be an acquisition target as well as a potential buyer.

"With significant financial resources from day one, SpinCo will be ideally positioned for success and highly attractive to investors, content creators, distributors and potential partners," said Comcast CEO Brian Roberts.

Reuters quoted Emarketer analyst Ross Benes as noting that private equity firms or other media conglomerates would be the most likely buyers of SpinCo, adding that the former would be able to cut costs and squeeze out whatever value is left in the cable assets.

The newswire also hypothesised that the spin-off could be a precursor to a merger for the remaining Comcast business; by losing the cable channels, the company would remove a regulatory hurdle, it suggested. It named Charter as a possible candidate for a merger.

It could be some time before we know what the future looks like for either side of the business though.

Comcast said it expects the spin-off to take around a year, subject to various conditions including the green light from its board of directors and completion of SpinCo financing. It added the usual caveat about there being no certainty that the separation will go ahead, but we can be fairly sure that it will pull out all the stops to make sure it does.