Comcast to Spin Off NBCUniversal in Surprise Strategy Reversal

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1:26Not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business. IBM. Bloomberg Audio Studios. Podcasts, radio, news. This is Bloomberg Business Week Daily, reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy. Plus global business, finance, and tech news as it happens. The Bloomberg Businessweek Daily Podcast with Carol Masser and Tim Stenebeck on Bloomberg Radio. Comcast shares, they were up as much as 17 % earlier in the session.

2:12They're up about 6 % right now. This is pretty wild. The company plans to spin off NBCUniversal and Sky, unwinding a strategy that began more than a decade ago after struggling to demonstrate that a cable and media conglomerate would benefit shareholders. I mean, listen, what we have been seeing when it comes to media companies, cable companies in particular, I feel like the build, the add-ons, and now we're seeing the unwinding in a big way. Well, let's talk about that unwinding. Chris Palmieri is Bloomberg News Senior Editor and Entertainment Team Leader. He joins us from Los Angeles. Okay, I'm going to go through this slowly for folks who have not written all this down on the whiteboard yet, Chris.

2:47NBCUniversal, it'll have the Theme Parks Division, Universal Film and Television Studios, and the NBC and Telemundo Broadcast Networks, Peacock, Bravo. European media business Sky, Comcast will have the company's original cable TV, broadband, and wireless businesses. So does this mean Comcast is getting completely out of content? Yes. Yeah. I mean, Brian Roberts, the chairman and co-CEO said today on the call, he said, look, 15 years ago, cable networks were king and they were buying them. That's when they They first invested in NBCUniversal for a while. It was perceived as they got a great deal.

3:27But the world, as he noted, has changed. And people are canceling cable. They're certainly not watching cable TV networks. And broadcast is even struggling. I mean, they almost bought this at the peak, Chris, right? I think it'll probably spin off at a price that's higher than what they paid 15 years ago. But certainly for the exact same assets. Yeah. Yeah. But I mean, it's it'll not. Well, no, they've spun off Versus. Yeah. It won't be the entire collection of assets. Yeah. But I think people are talking about thirty five, forty billion dollar valuation for these businesses. That's probably around what they paid all in.

4:12All right. So then I don't know what happens. Does Netflix want it? Does Apple want it? Does Amazon want it? Like, is that kind of the next step here or does it go alone? Well, and we think, you know, Comcast bid on Warner Brothers late last year. It didn't win, obviously. But we think that that was a catalyst here for what's going on. It showed a lot of interest in that business, the Warner Brothers business, as challenged as it is. And so will Netflix, which has sort of publicly admitted that they've whetted their appetite a little bit for mergers and acquisitions, come in? Will somebody else?

4:48I mean, it's an easier bite to take, you know, than trying to acquire all of Comcast. Now, there's there's some issues here. If they do a spinoff, they can't immediately do a deal for a couple of years for to maintain their tax free nature. The Roberts family still has pretty much control of the business, about a third of the voting stock and will of NBC as well. So so nobody's going to do a deal without Brian Roberts. So by spinning it off, it's not like that they think it's worth nothing. They think there's value, but it's better as its own entity. It's certainly not been working together. I mean, if you look at Comcast stock price, it's still trading below what it was in 2021.

5:29They've taken all these steps. As I mentioned, they spun off the cable networks into Versant. They've been talking about their six big growth businesses, which include wireless phone and theme parks and that. But it still hasn't worked. The stock was down 22 % through Friday's close. So this is an acknowledgment that they weren't getting any credit for this business. And as they said, they want to be flexible. They want to be able to do deals and move in this new media environment quicker. Yeah, it's pretty wild here. I think anyone going back 15 years ago when we saw this tie up, people were concerned about antitrust because they controlled the pipes and they also controlled the content.

6:11And then there was the whole net neutrality debate a few years later. And none of that really ended up coming to fruition. A big part of that had to do with really the rise of what we now consider the incumbents, like the Netflix's of the world, the YouTubes, the unbundling of cable. What was the what was the biggest catalyst, Chris? Was it just the fact that, you know, people don't buy pay TV anymore? Yeah, I mean, that that is a huge problem for Comcast as a whole. I mean, NBC, as big as it is, was really only a fraction of the overall enterprise. And for a while, it was just understood that cable TV was sinking because people are canceling that.

6:52But in recent years, Comcast has been losing the Internet subscribers, which was supposed to be the future. Everyone still needs Internet to get Netflix or whatever. And that's because the telecom companies have been coming on really strong with the wireless and fiber high speed Internet access. And so they've got to fix that. And this, you know, arguably, if you believe that a more focused business will try to figure out and be more creative ways to survive, then that's a good rationale for splitting these two businesses. But I mean, even the traditional, the business that they're holding on to, that Comcast is holding on to as the core business is under attack.

7:31There's concern about, well, think about broadband, for example. I mean, it's no longer just the big Fios and fiber and cable players, right? You have Starlink in there. You have T-Mobile in there offering competitive broadband. So they're kind of facing challenges on all fronts. Right. And that's part of their strategy is to really kind of be a lot nicer than the cable company was traditionally to consumers. You know, they're getting in these long term price guarantees, you know, without raising prices for a while. They're bundling everything, in some cases, a free telephone, mobile phone line.

8:09So they're really trying to hang on to those customers because it's a lucrative business when it works. It's just right now the cable and broadband business is shrinking. All right, Chris, we need to leave it there. Our apologies. Chris Palmieri, Bloomberg News Senior Editor and Entertainment Team Leader with the latest on Comcast. Stay with us. More from Bloomberg Businessweek Daily coming up after this.

9:00We all move forward. COTALITY. Intelligence beyond bounds. So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now, a global workforce of 300 ,000 can use AI to fill their HR questions, resolving 94 % of common questions. not noise proof of how we can help companies get smarter by putting ai where it actually pays off deep in the work that moves the business let's create smarter business ibm support for the show comes from public.com if you're actively involved in your portfolio you probably catch yourself repeating the same actions buying the dip manually sweeping idle cash putting on a hedge on public you can now create ai agents that handle all these tasks on your behalf just describe what you want to do in plain English.

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10:53carplay and android auto with the bloomberg business app or watch us live on youtube as we mentioned carol's kind of all over this story it's the leverage that helped fuel the u.s stock rally now becoming an increasing source of unease matt levine also out with a column yeah his column today is all about that too the surge in market leverage it stems in part from the massive growth of levered etfs or levered exchange-traded products retail margin accounts hedge fund deposits at prime brokers. It's stoking worries that it may exacerbate the next crisis. We got James Saifert with us, Bloomberg Intelligence Senior Research Analyst.

11:28He joins us from our Princeton Bureau. This is your world because you're the ETF analyst. I could say that about crypto to you too, I guess. I don't know if I'm, can I talk about your book? I don't know if I can talk about your book. I just did. But, you know, so this is part of your world. This is not your entire world. But how would you explain, you know, sometimes we have folks on who have levered ETFs and have these products. How would you characterize the amount of money that are in these so-called levered ETFs right now? So we've had levered, like, broad-based index ETFs going back to basically the financial crisis, right?

12:03So those things have been around for a very long time. What's relatively new over the last four or so years is these single-stock levered ETFs, and that's where a lot of the growth is coming from. But we're talking, you know, a couple hundred billion dollars in these things, right? So the single stock ETFs alone have crossed 50 billion now. So that's where all the growth is coming from. And most of these products, the way they get their exposure is via swaps at banks. And the way they work is they're going to give you daily exposure. So they reset every single day, which is the number one thing that you have to explain to people when they're talking about these things.

12:34These things reset every single day. They are built to be trading tools, not built to be things that you're going to hold long term. Levered in either way, in other words, expecting big gains or expecting big sell-offs? Yes, exactly. So right now, so one of the things I do track is like the AUM and levered long ETFs versus levered short. Going back to like pre-2010, there was actually more money in the short ETFs than the long. That hasn't been the case for a long time. But right now, we're at like 15 to 16 times long the size of AUM and the long ETFs versus the short. So 2x long, what have you, And then most of the short are either 1x inverse or 2x inverse.

13:11So what could possibly go wrong? Or tell us why we should be concerned here. Yeah, I mean, there's ebb and flow with these things. Like right now we are at a record, but like it kind of goes up to some sort of peak. And then obviously we have some sort of thing that washes things out, whether it's a subsection of the market or specific things related to an underlying ETF. And then it comes down to a more normal level. The ratio has been in the single digits for a long time. Right now, like I said, we're up over 15. So at some point, we're probably going to come and pull back. But like the real concern, I'm not like from my it's really easy to sit here and it sounds really smart to be all doomer about like the potential concerns here.

13:48The real concerns is like in niche parts of this market where you have like smaller single stock ETFs that are 2x levered and they get too big for the underlying stock. We had that happen with MicroStrategy or MSTR in like October, November of 2024, where like the banks wouldn't even generate swaps anymore. So you have these mid-cap or small-cap ETFs that are single-stock levered. That's where I worry that you could end up with the tail wagging the dog. But these large names, I mean, these ETFs need to get absolutely massive to really start completely offsetting things. Now, that's not to say they don't impact it, but it's not as scary yet, just yet.

14:20Is there any reason, in your view, for people who are not exposed to these products to be concerned? They definitely increase volatility, no matter how you slice it. Like I said, the MSTR is a good example of a time where you had these single stock ETFs that were definitely increasing the vol. And Saylor, even at that time, was kind of leaning into it. He liked it because he viewed the volatility as a way to sell more expensive options on his product and convertible notes. So I would say it's something to be aware of. But still, a lot of the assets are mostly in the broad-based things. 2X S &P 500, inverse Qs.

14:56Those are the types of things where you see most of the money. Obviously, there are extremely high asset single stock ETFs on things like NVIDIA. And again, in really volatile days, those types of options where you're levered with a swap to a bank can impact things over a shorter time period. So it's something to be wary of. But like I said, the one thing I would be careful of is watching the size of some of these ETFs versus the underlying market cap of the underlying assets. But for the most part, what we're seeing is that these are being used accurately, right? Like they're trading a lot. What you don't want to see is tons of money in there and like it's not turning over a lot.

15:29These things are turning over a ton. So people are mostly using them the way they're built to be used. Well, are people using them or are institutions using them? I think it's both. It's largely a retail thing because you basically get institutional level cost for your leverage, right? There is a lot of cost for trading on margin. And when you're using these ETFs, for the most part, you're getting that institutional level margin quote, right? Like you're getting in and whatever the fees are. The other thing is for these issuers, they're charging over 1 % annually. And when you're trading in and out of these things on a regular basis, you don't really care that much what the fee is.

16:00But you get a few billion into these, and these issuers are sitting pretty earning 1 % to 1.5 % on annual AUM. Hey, one of the things I want to ask you about, James, and just looking at a story by our Christian Das that's on the Bloomberg Terminal, and he talked to somebody, Andy Kent, it's a broker at Kite. And Andy's saying, this is a quote, leverage has become one of the defining themes for investors. Margin debt is elevated, barring across parts of the shadow banking system continues to expand. What insight can you give us into in terms of margin debt and any concerns we need to be there? And where's the oversight?

16:36Because I feel like we have learned a lot of things since the great financial crisis. It feels like there's a lot more layers and protections. But again, nothing's 100 percent. Yeah, exactly. I mean, nothing is 100 percent. And I'm not going to pretend to be a complete expert on exactly how much margin. I read that exact piece you're talking about. The thing I come back to is, like I said, when I'm looking at these ETFs specifically, for the most part, the banks are kind of policing themselves. Like you go back to what I just spoke about with MSTR. The banks stopped allowing these ETFs to get any bigger because they felt it was too big for their books.

17:07The risk departments were putting a lid on these things. So you do see some like self-policing at these banks because like I said, these are all swap space. So what ended up happening is those ETFs have to go out and use options to try and do their best to give like a 2x type exposure. So for the most part, there is some sort of self-policing. We are at really high levels of margin debt. I'm not going to pretend to be the expert. And like I said, it's really easy to call out these things and try to be early and call for the big short. But I think at the end of the day, for the most part, these things are kind of being self-contained.

17:36But like I said, it's something we're watching and we are paying attention to and we're concerned about. And we are at extreme levels of the ratio between long to short. But there's a reason for that. The market has gone up a lot. And that's what most of the most of these assets have gone to. But the other thing I would say is, I talked about behavior. We do see good behavior in these things, because what you end up seeing is, as these ETFs go up, you tend to see outflows. So people are taking money profits. And as these things go down really bad, so if the market were to have a huge turn, you're going to see a lot of money pull into the long ETFs and come out of the short.

18:10So people are taking profits, and they're buying bottoms, which is the exact opposite of how most of the other ETF industry works. People tend to come in as it goes up, but that's not how these products work. Hey, James, before we let you go, just 30 seconds. SpaceX shares are higher after being added to the Russell 1000. SpaceX bears are bracing two for billions in passive index fund buying. We could do an entire conversation about this stock being added and the rules there. But what's the smart view just in 30 seconds on the indexes or the passive money going in? Yeah, I mean, the numbers you cited are correct.

18:42Russell 1000 added them on Friday after the market closed. I mean, the one thing I would say is that we have over 200 ETFs that already have exposure to SpaceX, despite it only being a couple weeks old, right? So this is the fastest we've ever seen an IPO be added to ETFs across the board. And that doesn't even include the leveraged SpaceX ETFs I'm talking about. I'm talking about things that bought the actual underlying stock. So it's growing really quickly. Is that good or bad? Because it creates kind of almost an artificial demand there real quickly. Yeah. So the stock, the index ad, it does create a little bit of artificial demand, but the S &P 500 decided not to do it.

19:15So they're waiting a whole 12 months. So NASDAQ and Russell 1000, they're big, but not like the S &P 500, tens of billions big. James Saifert, you rock. Bloomberg Intelligence Senior Research Analyst joining us from Princeton. Stay with us. More from Bloomberg Businessweek Daily coming up after this.

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21:57Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube. Well, about 17 million Americans are considered credit invisible. That means having little to no credit history. And that, no surprise, right, can prevent consumers from reaching first-time milestones. And that includes things like renting an apartment, Tim, or buying a car. We get it. Yeah. And just last month, Bloomberg News reported on how Intuit Credit Karma is opening its site to Americans who have no credit history. It allows them to take the first steps to building credit.

22:31It's also a conversation that's happening at the federal level, especially with regard to mortgages and the way that people are approved for mortgages. Right. We keep talking about people who can't really access the financial system. Well, someone who's looking to help Americans actually build a credit profile is our next guest. It is Cynthia Chen. She's founder and CEO of Kickoff. She comes to us from San Francisco. Cynthia, great to have you here on Bloomberg Businessweek Daily. First of all, tell us about Kickoff, launching back my understanding in 2018. It seems like it's a little bit of a personal story to your own understanding when you came over from Beijing, your days at Columbia.

23:06you didn't have a credit history. No, I did not. I came to the U.S. when I was 17 years old as a first-generation immigrant with no friends or family, no financial resources, obviously no credit. That's why I realized at a very early age that if I wanted to rent my first apartment after college by my first car or even pass my employer's background check, I would need to deal with credit. So then enter kickoff. It's been a few years since you started the company. Explain exactly how it works, because it has to do with people making on-time payments and those payments being reported to the credit bureaus, which is really the basic way to build credit.

23:52How does it work? Yes. The most important factor in the credit building process is positive payment history. And we deliver exactly that at Kikop to millions of Americans. We offer Americans multiple ways of building credit, and our flagship product is an unsecured credit that allows the consumer to make a purchase on from our proprietary kickoff store and then pay off that purchase over a period of 12 months, starting from only$5 per month. And then as they make timely monthly payments, we report the payments to the three major credit bureaus, Equifax, Experian, and TransUnion, that's helping them establish payment history.

24:45And we also help consumers build credit by reporting their rent payments and utilities payments to the credit bureaus so that they get credit for what they're already paying for. So essentially, it's a couple of things. As you said, rent payments are tracked, and so they get a track record there, but also the subscription that they pay to you guys, correct? That is correct. So how do you know, I guess, in particular, rent, right? These are things that people have to pay, and so their ability to make those payments is a very consistent indicator, important indicator, correct? Yes, I agree. And data supports that.