LOS ANGELES: Brian Roberts lost out on an opportunity last year to merge NBCUniversal with Warner Bros Discovery Inc. But the process helped get the chairman and co-chief executive officer (CEO) of Comcast Corp thinking about what NBCUniversal would look like on its own.
Now he’s about to find out just how valuable the company behind Saturday Night Live, The Office and Jurassic Park is, and see how it stacks up against its main rival, Walt Disney Co, with parks, movie and television (TV) franchises and streaming services, all as a standalone enterprise.
Comcast announced on Monday that it will spin off NBCUniversal and its European media unit, Sky, into a separate, independently traded company. Comcast will hang onto its cable-TV, broadband and wireless businesses.
“The world is changing faster than ever,” Roberts told analysts on a conference call Monday.
“As we look ahead, it has become clear that our technology and media businesses each have compelling opportunities in front of them that are distinct in nature and best pursued with dedicated, focused, strategic flexibility and tailored investment priorities.”
The separation, which came as a surprise to investors, could set the companies up for even more deals in the future.
Given the active bidding for Warner Bros, ultimately won by Paramount Skydance Corp, a standalone NBCUniversal may find itself an attractive target for a rival media or tech giant.
Meanwhile, the Comcast cable and Internet assets, with over 30 million customers domestically, could be a partner for a telecom giant looking to bulk up.
The new plan is a strategy that Comcast has already soft-launched. Earlier this year, it spun off cable-TV networks, including MS NOW and CNBC, into a new company called Versant Media Group Inc.
Comcast won’t merge its Versant spinoff with NBCUniversal as it sees them in different lanes and it already did the work to set Versant up as an independently traded entity. But other partners are possible.
Netflix Inc failed in a bitter takeover battle for Warner Bros, and has since demonstrated an appetite for doing more deals.
The streaming company is already investing heavily in sports rights, including two L games on Christmas Day, so NBCUniversal’s extensive sports portfolio could look like a good fit.
Still, Netflix would have to decide whether it’s worth making an overture and whether it wants to own a traditional TV network.
The separation of Comcast’s Internet and cable TV assets from the rest of the media business could set it up to combine with Charter Communications Inc, the largest broadband and pay-TV provider in the United States.
Charter’s shares jumped 9% on Monday buoyed by news of Comcast’s separation plans. But any merger between Comcast and Charter would be complicated.
Charter is already in the process of combining with Cox Communications in a deal that would unite two of the biggest US cable providers.
Analysts suggest the market could support a single cable player to compete against the wireless giants on home Internet services and the streaming services on content.
“Longer term on the cable side, it probably makes sense to consolidate the whole country,” Oppenheimer & Co analyst Timothy Horan said in an interview. “It would make sense to bring Comcast in, but that’s probably going to take quite a while.”
There are a few hurdles for any potential tie-up. Charter has a heavy debt load that could make it an unattractive deal partner to Comcast for the foreseeable future.
And any nationwide merger of the top-two pay TV providers would receive heavy regulatory scrutiny.
So in the near term the plan may be to just operate the Comcast and NBCUniversal businesses independently, searching for new opportunities for growth.
The new structure gives NBCUniversal the opportunity to be valued alongside entertainment peers like Disney, which trades at about 10 times expected earnings before interest, tax, depreciation and amortisation, compared with Comcast’s five times. — Bloomberg
