Breaking Up Isn't Hard to Do
As soon as we saw the Monday morning headlines, we started humming the Neil Sedaka tune. You know the one, it begins with the memorable lyrics:
“To do do, down dooby doo down down. Comma, comma, down, dooby doo down down…”
Sedaka’s tune seemed to be the soundtrack our subconscious wanted to attach to the big breaking news in the financial world. Comcast will split itself into two companies. The move will place its NBCUniversal media holdings into a separate company, which will include the NBC and Telemundo television networks, the Peacock streaming business, Universal’s movie studios and theme parks, and also the various European holdings under the Sky brand.
Comcast will return to its roots as primarily the nation’s largest broadband (also known as cable) services provider, while adding wireless services to its consumer-facing Xfinity brand. Comcast will hold nearly 20% of the new NBCUniversal for some period. The deal, expected to close in less than a year, will result in current Comcast shareholders receiving stock in the newly spun-off media company, which will be known as simply “NBCUniversal.”
This will make the three largest companies in the media/entertainment sector look remarkably similar over the next 12 months or so. Disney has television networks (ABC), various movie studios, and, of course, a few theme parks amongst its holdings. Paramount/Skydance will have a similar portfolio, if and more likely when it closes on Warner Bros. Discovery. That will include television networks (CBS), various movie studios, but notably, no theme parks.
But while Disney and Paramount will hold various cable networks (like ESPN for the former and CNN for the latter) within their portfolios, NBCUniversal will emerge from its Comcast ownership unencumbered by those declining businesses. Comcast spun off its cable network group, including MSNBC (rebranded as MS Now), CNBC, and others, into a separate business known as Versant earlier this year.
The piece that will make the new NBCUniversal the most different from its two main rivals will be outside of the United States, and it’s this part of the split between the legacy cable operator and its various media holdings that we find the most interesting part of today’s announcement.
We’d speculate that most people don’t know a ton about Sky, which is technically named Sky Group Limited. The UK-based company is Europe’s largest media company and the largest pay-TV provider. It was Comcast Chairman Brian Roberts’ consolation prize when he dropped out of 2017’s bidding war to acquire Fox from Rupert Murdoch. Murdoch had held nearly 40% of Sky since its founding as the offspring of the 1990 merger of pay-TV rivals Sky Television and British Satellite Broadcasting into BSkyB, which eventually dropped the two Bs to simply be known as Sky. Murdoch would eventually sell his Sky holdings to Comcast in 2018.
In the 1990s, direct-to-home satellite providers were booming. Seen as the first real viable alternative to cable TV for delivering all the channels that weren’t available from terrestrial broadcasters, Sky grew in Europe at the same time DirecTV did here in the U.S. That included swallowing up rivals as small satellite dishes began to dot the landscape.
For its part, Sky is a much larger media company than its US-based cousin. Sky operates more like a broadcast network in that it produces a large quantity of original programming, including coverage of the very popular Premier League in the football (soccer) crazy UK, along with F1 racing and other major sports. It also operates a large news network, with Sky News rivaling the BBC in the 24-hour news business.
All of which might explain why Comcast chose to put Sky into the soon-to-be-separate NBCUniversal portfolio. It is a major content acquisition and production company, but it is also a major distribution and infrastructure provider, similar to what the newly slimmed-down Comcast will be. Color us a bit intrigued that Sky didn’t stay with Comcast.
Andrew Ross Sorkin’s Dealbook newsletter from The New York Times speculates on what deals might be ahead for the newly split Comcast and NBCU. He suggests that NBCU could be a target to either do some hunting for acquisitions like AMC or Starz, or NBCU could become the hunted, and be eyed for being taken over by the likes of Netflix, Apple, Amazon, or even Disney itself.
Could one company own two broadcast networks, such as ABC and NBC, in the United States? Well, if one company can own two local television stations affiliated with two different networks, you have to wonder what the logic would be to prevent that on the larger network level?
On the call with investors this morning, Chairman Brian Roberts was asked if the move to split Comcast from NBCU was a step toward potential strategic transactions for either company. His response: “absolutely not.” But given the current penchant for consolidation in the media business, we don’t believe that anything is beyond the possible these days.
In early trading on the stock market, Comcast (CMCSA) shares were trading at least 10% higher. The stock has been, like much of the media sector, pretty stuck in neutral for the past few years. It will be interesting to see what else transpires throughout that sector as we count down the next 12 months.
Back in 1975, when we were starting our broadcasting career by spinning records on the radio (and yes, it was still AM radio) we were informed by the late Casey Kasem on his eponymous “American Top 40” weekly countdown that Neil Sedaka had first recorded “Breaking Up Is Hard To Do” as a single in 1962. It would top the charts, reaching number one in August of that year. The 1975 remake would only reach the No. 8 spot on the Billboard “Hot 100” chart.
But that was better than another remake of the song, done just three years earlier in 1972. That version never made it past the 28th top spot on the Hot 100 chart. A bit of a surprise, given that the artists were being seen weekly at that point. The artists? That would be television’s “The Partridge Family.”
As Casey would always say at this point in a musical backstory: “Now…on with the countdown!”
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