Media’s ‘Spinoff Moment’ Should Benefit Emerging Sports Leagues

Media’s ‘Spinoff Moment’ Should Benefit Emerging Sports Leagues

Comcast Corporation (NASDAQ: CMCSA) announced plans to spinoff all NBCUniversal’s cable TV channels, except Bravo, into a new publicly traded SpinCo back in late November (think: USA, CNBC, MSNBC, Oxygen etc). NBC and Peacock will remain under the existing entity, along with Telemundo, the company’s theme parks business, and its film and television studios, when the network split occurs in late 2025.

But speculation exists that CMCSA may not be the last media conglomerate to remove non-core entertainment assets from a revamped balance sheet focused on sports, news, and streaming.

“Hearing bankers are helping media co's spin the tires on their version of SpinCo,” television executive Kevin Button wrote on X on December 9.

The thinking is that the present may be the last time established media companies will have the chance to unload their cable entertainment assets and still get any sort of meaningful value for them.

“In five years, you aren’t going to be able to get anything,” one well-connected industry insider opined. So, “the question is [are] you [going to] hold them all the way down or let someone else.”

That pressure, along with Comcast’s willingness to take a first-mover position, could result in another spinoff, which would seemingly be a positive short to mid-term outcome for sports properties. At least, those a bit further down the value chain.

Comcast’s creation of a new SpinCo enables it to lop off some slow and negative growth components from the core NBCUniversal enterprise. Doing that allows the company to shift its narrative and once again present itself to investors as a ‘fast-growing’ company. 

The spinoff also allows Comcast to refocus its efforts on driving growth rather than the day-to-day programming of its entertainment assets, and it was structured in a tax-free manner that should guarantee existing company investors are able to generate a ‘decent return’.

“You go from owning Comcast stock, to owning Comcast and this new entity. So, you're basically [gaining] a little bit of value for both,” the insider said.

While SpinCo will be the ‘weaker’ of the two entities, the independent cable TV business is expected to be well capitalized and will hold little debt. A company like that should be able to survive, if not thrive, for some time–assuming it has the legs to stand on.

That is why Comcast was willing to ‘part’ with valuable sports assets, like Golf Channel. 

"Golf has lower viewership [than other sports],” the insider said. “But those [who tune in] tend to watch a lot of golf, similar to viewers of Fox News.”

The presumption is there will also be a long-term agreement between NBCUniversal and USA Channel that allows for the rebroadcast of NBA games on the cable network.

That does not mean there has been a change in Comcast’s sports strategy. However, if an additional SpinCo were to emerge and it wanted to sublicense sports rights, the company would seemingly be positioned to become more of an ‘arms dealer’ now with the remainder of its existing deals (think: ESPN sublicensing CFP games to TNT).

News of the Comcast SpinCo was well received by the street. 

"It does make sense to split out the linear assets, or most of the linear assets," Bank of America analyst Jessica Reif Ehrlich told Yahoo.

So, it’s logical to believe other media company CEOs are at least kicking tires on the idea of following suit.

“Those cable and entertainment networks have value, especially to a PE firm who just wants to take the cash, pay off the debt, and [doesn’t care if] they die in five to ten years,” the insider said.

It’s long been speculated that Disney could go down the spinoff path. But the company has stated time and again that the strategy does not make sense for them–particularly, with plans to offer ESPN on a direct-to-consumer basis in ‘25. 

However, a split of cable entertainment assets from news/sports and streaming could be in the cards for another established media conglomerate. In fact, LightShed Partners’ Rich Greenfield called this ‘media’s spinoff moment’. 

That seems like a slight exaggeration. It’s not as if we’re going to see a slew of NewCos created. Particularly, now that Warner Bros. Discovery has announced plans to split its cable and streaming businesses into two separate operating divisions in mid-2025.

Like with a spinoff, that restructuring should make it easier for a potential acquirer to value the company’s linear networks. Remember, WBD revenue (and its debt rating) are more certain/secure now that it has a new distribution deal in place with Comcast.

The difference is WBD’s cable assets will remain under the corporate umbrella.

Paramount seems like the most likely candidate to follow Comcast’s lead. The company has explored selling assets for years, and logically speaking, is probably the only one a spinoff would make sense for. 

AMC Networks and A&E Networks are already all entertainment channels and probably not going to be spinning anything out. The same could be said for Diamond Sports Group’s RSN conglomerate (just with sports). And Fox is almost exclusively news and sports already.

However, one could imagine David Ellison separating the MTV and BET Group portions of the CBS Entertainment suite (which Tyler Perry bid $2bn for in ‘23) from CBS and the studio business.

Media’s ‘spinoff moment’ should be a net-positive for the sports industry as it will create new –and more– opportunities (even if profitability is the core problem, not distribution). 

“You could go from having four or five major [bidders for rights] to having four broadcast players focused on sports and news and then another four, five, six that are focused on everything else and [would likely] begin to tip their toes into sports,” the insider said. “They could [even] partner with Sinclair, Tegna or another local broadcast company and gain economy of scale from a broadcasting standpoint.”

It shouldn’t negatively influence any existing rights holders’ willingness to invest in sports, either. In theory, all would be creating healthier companies and incremental value.

And in Paramount’s case, the presumption is that a SpinCo would only consist of cable assets (i.e. Paramount+ and Max would remain with the core assets). One must imagine the company would still want/desire live rights for those services.

Of course, these SpinCos aren’t going to prevent the tech companies from coming in and taking top-tier rights from the broadcast networks (or their affiliated streaming assets) if/when they want them, either. 

While the most valuable properties are unlikely to be impacted by the emergence of a new SpinCo or two, it should be a positive development for emerging leagues. 

“There is [going to be] an opportunity [for some nascent properties] to go from a FAST channel to being on USA or an offshoot [cable] channel and to go from ~5,000 viewers to ~100,000,” our insider said. These new SpinCos are “going to be willing to take risks [as they need valuable content to gain leverage in negotiations and can’t afford tier one sports].”

Look for Vice TV to be among those offshoot cable channels. Vice Media recently announced plans to turn its cable channel into a sports-focused property.

At least until it, and other cable properties, are eventually swallowed up by PE. Then they won’t be any appetite for risk.

That doesn’t mean there is going to be an open checkbook in the short-to-medium term. But the shifting cable landscape should present opportunities for rights owners to prove themselves on a bigger stage.

“If I’m the buyer of that content, I’m not going to pay them for it just yet,” our insider said. “Give us the rights for free for a year or two, let’s see how it goes, and if it goes well, we can [and will] pay for it.”

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