Comcast is planning to spin off NBCUniversal and Sky into a separate public company. It is not simply restructuring. It is recognising that the convergence strategy which shaped much of the media industry over the past fifteen years has largely run its course.
On completion of the split, expected to be within a year, Comcast shareholders will own shares in both Comcast and NBCUniversal, creating two companies, each with significant scale, strong financial profiles and distinct strategic opportunities.
Brian Roberts will continue to be actively involved in the leadership of Comcast and NBCUniversal, working in partnership with the chief executives of both companies. He said: “The transaction we are announcing will unlock a more entrepreneurial management approach and open up a multitude of new opportunities for each business.”
Mike Cavanagh will be the chief executive of NBCUniversal and former chief financial officer Michael Angelakis will return to Comcast as a strategic advisor and become its chief executive.
The proposed split effectively creates a technology company with a network business and a separate global media and entertainment company that includes Universal film and television studios, theme parks, NBC, Telemundo, Peacock, Bravo, and Sky.
Mike Cavanagh said: “Both companies begin this next chapter from positions of strength. Comcast will continue to build on its leadership in connectivity, while NBCUniversal, together with Sky, will have the scale, brands, content and financial resources to compete as a premier global media and entertainment company.”
It seems that the assumed benefits of vertical integration have changed.
Fifteen years ago, the acquisition of NBCUniversal looked strategically compelling. The theory was to own premium programming and the distribution network. That was supposed to create lasting strategic advantage. It did not last long.
Today, analysts generally see the industry very differently.
Networks are infrastructure businesses with predictable cash generation. They have different profiles to entertainment businesses based on global intellectual properties and require different management focus.
As a combined conglomerate, investors who wanted stable infrastructure cash flow had to own a media business and those that wanted media growth had to own a cable company losing subscribers.
Comcast has already spun out most of its cable television networks into a separate company called Versant.
It seems likely that a standalone NBCUniversal becomes easier to merge with another media company. Sky, which is currently considered alongside the NBCUniversal business, is currently poised to close a deal to acquire the broadcast business of ITV. That would leave the standalone ITV Studios production business as another potential acquisition target.