Well, so much for Brian Roberts getting an Oscar. Following quickly on the heels of spinning off Versant Media earlier this year, Comcast is now off-loading the entirety of NBCUniversal.
Once again, we’ve got yet another transaction that will remake the media world. As with all of these media mergers and acquisitions, this spin-off carries more questions than answers.
Is it OK for me to be a little sad?
There’s no crying in media M&A. And the relationships between multichannel video providers (cable and satellite operators) and content owner/producers have never been a warm and fuzzy hug fest. Anyone who has spent time negotiating these distribution deals – hi there – can tell you that. But like many this is an industry I “grew up in,” first on the cable operator side and then years inside of NBC (pre-Comcast). The dual-revenue streams of consumer subscription fees and brand advertising purchases fueled nearly four decades of mutually beneficial growth and culminated in the pre-streaming days of the Peak TV with The Sopranos, Mad Men, Breaking Bad and their ilk. And that’s all in the rear-view mirror.
Few of the dozens of cable networks that have defined the multichannel era, from HBO in the 1970s (thanks Chuck Dolan) to the CNNs and USAs of the early 1980s to the retransmission consent-driven broadcaster channels of the 1990s such as MSNBC, FX, MSNBC and The Food Network, would have survived without cable industry cash.
As the existential crisis deepens for these networks, it will only be exacerbated by the cutting of direct ties between leading players on the distribution and content sides of the business. Comcast was the last of that breed on the distribution side. Some commentors have already noted how much easier it will be for Comcast to further dig in on all of its content negotiations. Understandable, but remember the term partnership? It still goes a long way.
What has changed so dramatically in the last six months?
You don’t need a way-back machine to remember that Comcast closed on its spin-off of Versant Media (home of NBCU’s former cable networks like CNBC) only six months ago. At that time NBCU CEO Mike Cavanaugh (who will become CEO of the “new” NBCU) was asked about also spinning out NBCU. He said that the company “doesn’t get stronger by being smaller as a standalone entity.”
But what Cavanaugh seemed to rule out in January is exactly what the new NBCU will be – smaller, standalone and without the Comcast checkbook. In fairness, Cavanaugh acknowledged the turnabout in the new spin-off announcement: “Where we previously believed that scale and the diversification benefits warranted operating these businesses as one company, we’ve now simply changed our mind about that. We’ve now concluded that future success for each of our businesses will depend on focus, speed, and strategic flexibility that this separation will unlock.”
Although it seems like something the late Ted Turner might have said, it was actually Ralph Waldo Emerson who argued that “a foolish consistency is the hobgoblin of little minds.” But Comcast may have set some type of speed record with its 180-degree strategic rewind. It may be simply that the absence of a boost to Comcast’s stock price from the Versant spin-off led to a doubling-down by Comcast, looking for a bigger bang from spin-off part two. But be careful betting on any specific reaction from the fickle financial markets. It’s only been a week since this deal was announced, but the immediate positive move on day one has disappeared since. The future market reactions are far from clear for Comcast or NBCU.
Does anyone but David Ellison still want to be in the media business – and what is the roadmap forward?
As usual with media mergers and acquisitions in recent years, it’s a lot easier to discern the financial maneuvering than any strategic roadmap. The history of media deals is littered with mistakes and disappointments from AOL Time Warner through AT&T/Warner Media through Disney’s overpayment for Fox. Ironically, Comcast’s purchase of NBCU from General Electric in 2011 has been viewed as one of the exceptions to this pattern with Comcast bringing to NBCU much needed resources and media-focused management.
And now Comcast wants out. Unfortunately, especially in a world where AI is changing consumer and business behavior week to week, and new content creators emerge every day, just making a deal does little to ensure future growth. The speculation game is already underway. Who might buy the new NBCU – Netflix? Amazon? Probably not a lot of options there. Who might sell NBCU their pieces? Sony? Lionsgate? All interesting, but all sound like more – or less – of the same.
The David Ellison pitch has been that media’s future lies in technology innovation. He and Skydance haven’t been long at the helm at Paramount, but the early stages look a lot more like traditional cost cutting and frustrated reorganization than a methodical innovation path. Will he have more success over time overseeing the vast empire of Warner Bros. Discovery? Other than consolidating studio and cable network operations, I’m not seeing it yet.
Consumers haven’t lost interest in watching sports, news and entertainment, playing games, and even going to movie theaters when they’re given a reason (thanks Backrooms and Obsession). But we still await not the next deal but the first innovation playbook – for both sellers and buyers. Is Godot out there?