Severity of Drop in Viewership at Comcast's SpinCo Cable Networks Labeled as 'Disastrous' by Expert
In the ever-evolving landscape of the cable industry, Comcast's decision to spin off its cable networks into a new entity called "SpinCo" is being viewed as a welcome development, albeit one that may take some time to materialise.
The proposed spinoff, which includes popular networks such as USA Network, MSNBC, CNBC, Golf Channel, Oxygen, and E!, is all about consolidation in the declining cable programming business. Comcast plans to retain control of its NBCUniversal media unit, holding onto broadcasters NBC and Telemundo, their stations, streaming platform Peacock, cable network Bravo, the Universal studios, and theme parks.
The rate of decline in ratings for these cable networks has slowed in recent years, offering a ray of hope. However, MoffettNathanson Research described the viewing of Comcast's cable networks as "catastrophic." Contrastingly, CNBC and Golf Channel have relatively strong and focused platforms and relatively high engagement, with attractive demographics.
The spinoff is expected to improve the growth prospects for Comcast's remaining assets. It is also anticipated that the market-derived valuation of SpinCo will make deal-making more likely and easier. The report notes that inflated self-worth has been an impediment to transactions in the past, and a market-derived valuation can help overcome this issue.
However, the spinoff of SpinCo is not expected to be transformational to Comcast's valuation, according to the report. Furthermore, MoffettNathanson does not consider cable network consolidation through SpinCo to be imminent, predicting it will likely occur by 2026.
The spinoff of these cable networks and digital assets (Fandango, Rotten Tomatoes, GolfNow, and Sports Engine) is scheduled to be tax-free. Media companies and telecom operators with an interest in expanding their cable channel portfolios, such as Comcast, Warner Bros. Discovery, ViacomCBS (Paramount Global), or smaller niche content providers, are likely to be keen observers of this development.
Interestingly, MoffettNathanson asserts that creating SpinCo does not signal a merger between Comcast and Charter Communications. However, the report does not predict any specific timeline for a potential merger between the two giants.
Despite the challenges, the cable industry continues to evolve, with consolidation being a key strategy for survival. The spinoff of SpinCo and potential future consolidation scenarios will be closely watched by industry insiders and investors alike.
