Comcast recently announced plans to spin off its entertainment businesses. The newly created NBCUniversal will include the NBC and Telemundo broadcast networks, Bravo, Peacock, the European media business Sky, along with theme parks and other businesses. The Peacock subsidiary has been actively buying rights to sporting events. Comcast had begun the spinoff of entertainment subsidiaries early this year when it spun off cable networks, including MSNBC, CNBC, USA Network, E!, Syfy, Oxygen, the Golf Channels, and digital brands like Fandango and Rotten Tomatoes into the Versant Media Group. A Comcast shareholder will get a share of each new business. Comcast says it will retain a 19.9% share in NBCUniversal for at least a year.
The post-split Comcast will retain the core broadband, cellular, and cable TV business lines. The company will also retain Comcast Spectator, which owns the Xfinity Arena in Philadelphia, the Philadelphia Flyers, and the FreeWheel tech ad business. The public announcement said that the company no longer sees any synergies or financial benefits from operating two distinct lines of business. Wall Street instantly applauded the move with an upward bump in the Comcast stock price.
This should allow Comcast to concentrate on the increasingly competitive communications business. The company has been steadily losing broadband customers every quarter since 2023. It’s seeing competition from fiber overbuilding, FWA cellular, and even satellite. The cable TV business has continued its long, downhill slide. Comcast has seen significant growth in the cellular business and is approaching 10 million cellular customers.
The news instantly set off speculation about how both of the new businesses are attractive M&A targets now that they are separate. I saw speculation that Netflix, Amazon, and Disney/Paramount/Fox ought to be interested in NBCUniversal. I saw instant speculation that SpaceX, Charter, or one of the big cellular companies would be interested in a standalone Comcast.
I could never understand the presumed benefits of combining ISPs and media companies. When Comcast purchased the entertainment businesses, the reason given at the time was to take advantage of the content. But I never understood this since an ISP already delivers all kinds of content.
The other attempts in the industry to combine an ISP with content were big failures. The biggest failure of all was AT&T’s $85 billion purchase of Time Warner in 2018. Within a few years, in 2022, AT&T spun off Warner Media to Discovery for $43 billion. This bad deal was bad for AT&T in many ways. CEO Randall Stephenson, a champion of the merger, stepped down in 2020. AT&T’s stock took a huge hit during the time that it owned Time Warner, and AT&T had to slash its dividend in half.
Verizon also took a shot at buying content. The company purchased AOL in 2015 for $4.4 billion, a price that startled the market. The company then purchased Yahoo in 2017 for $4.48 billion. Verizon repackaged the two companies into a new subsidiary called Oath, which was later renamed Verizon Media. Verizon eventually sold Verizon Media to Apollo Global Management for $5 billion. Before that sale, Verizon had separately sold HuffPost, Tumblr, and MapQuest.
The Comcast sale means there are no ISPs left with big content businesses. Combining the disparate businesses never made sense since Verizon’s purchase of AOL, and hopefully, the Comcast spin-off ends this failed experiment.