Will the Comcast-NBCU Split Lead to Another Huge Hollywood Deal?

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0:59Matt Belloni:This episode of The Town is presented by HBO Max. For your awards consideration, Max presents Hacks, the Emmy award-winning series starring Gene Smart and Hannah Einbinder. In the aftermath of mistaken news reports that Debra passed away, she and Ava returned to Las Vegas determined to secure Debra's legacy as a comedian. Don't miss the series Variety is calling one of TV's best comedies ever. Hacks is streaming on HBO Max. Watch now. It is Monday, June 29th. Never a dull moment in the business these days. We've got another studio sale. Well, not a sale, really. A spinoff. Comcast is separating NBCUniversal, creating two publicly traded companies.

1:39Matt Belloni:One for the connectivity business, that's Comcast Wireless and Cable, and a new unit for the media business, that's NBC, Peacock, Sky Overseas, and the Universal Studio and Theme Park business that it acquired about 15 years ago. Remember, Comcast already spun off its cable networks into Versant earlier this year. And now, according to Comcast leadership, NBCU on its own will be, quote, poised for growth. Maybe. Or maybe this is a prelude to another sale. The Roberts family will retain control of both companies. So the question is, why are they doing this? First off, the stock is down about 30 % over the past year and has been stagnant for more than a decade.

2:19Matt Belloni:So many analysts, including people on this show, have noted that they kind of need to do something. And obviously, they're seeing what happened with Warner Brothers Discovery. The leadership there moved to split that company into a pure play studio and streaming unit. And Warner's was rewarded by a bidding war that included Netflix and Comcast, and ultimately was won by Paramount at a huge premium. But a move like this could open the floodgates of more M &A and media, reshaping the content landscape at a time of pretty massive upheaval. And of course, this spinoff involves NBC, the broadcast network, so it must be approved by the Trump administration, which is no fan of Comcast or Brian Roberts, thanks to MS Now.

2:59Matt Belloni:This is not about separating what we built together, Roberts, the current CEO stepping down, told investors this morning. It's about positioning two exceptional businesses to move forward with greater focus, agility and the ability to fully capitalize on the opportunities ahead. Okay, so what does this mean for Comcast's vast Hollywood operation? Everything from The Tonight Show to The Minions and The Odyssey. And is NBCUniversal now a buyer or a seller in the frenzy to compete with big tech? We've got Lucas Scharr, a Monday guy from Bloomberg. He's back today, and we're going to go into it. It's the spin-off of NBCUniversal, and does this put another studio in play?

3:40Matt Belloni:From The Ringer and Puck, I'm Matt Felony, and this is The Town.

3:48Matt Belloni:Okay, we are here with Lucas Shaw, our normal Monday guy, back from his wedding. Lucas, how was your wedding? I am not offended that Craig and I were not invited. I think the invite might still be in the mail. No, no, no, Craig. I know it was a small wedding. I am 100 % not offended. And I would actually like to thank you for not inviting Craig and not me. That I would have been very offended by. That would have been very weird. Understandable. It would have made sense if you invited Matt and not me. That would have been acceptable. Craig, it's 10 times more fun at weddings. So I would have understood a little bit.

4:24Matt Belloni:But I thank you for not inviting both of us. There were zero people whom I know professionally who were at my wedding. Well, besides the entire C-suite of Netflix, I assume you invited them. None of them were invited. I did have one person at a certain point ask who knew nothing. thing was like so are you gonna invite Ted Sarandos to your wedding and I was like no that is not gonna no nor would he go nor would he just be awkward he'd have to get you a gift though it would be very awkward all right welcome back and luckily for us news dropped this morning pretty big news this to me is pretty transformational Comcast splitting off NBC Universal into its own separate company that will trade and be controlled by the Roberts family what is going on here is Is this just deal envy?

5:16Matt Belloni:They saw what happened to Warner Brothers Discovery and the mere prospect of splitting the company up into a pure play streamer and television that caused a bidding war to occur and an outrageous price to be paid. Is this deal envy by the Roberts family or is this something more strategic? Well, deal envy can be strategic, but I think this is a company that's been in need of some kind of dramatic change for a little while, right? Their stock has been going down for years. You know, their core business, which is connectivity, cable, broadband, wireless, you know, the cable business, as we all know, has been in free fall.

5:57Wireless has kind of stopped growing. There's a bunch of competition from phone companies. And the people who are invested in Comcast for that, especially the last few years as sort of their optimism about the media business has gone down, they're just like, why do you own this entertainment business? How does this help you win when you're under a lot of threat with connectivity? And same on the media side. I mean, they already took the step of spinning off Versin. I just think they looked at it and said, we can trade at a higher multiple and have more optionality if we separate them because they'd explored other deals and not done them.

6:33Matt Belloni:Yeah. They've tried everything they could possibly try with this company together to try to raise that share price and nothing's worked. You know, they've had great years at the movie studio. The parks business is going great. The television stuff was siphoned off to the loser cable networks. And now they have NBC, which is potentially a stable business going forward. Nothing worked. And the question then becomes, is this an indictment of the entire synergy argument? The Comcast symphony and the kind of vertical integration argument that has been so prevalent in Hollywood for the past 20 years.

7:15Matt Belloni:And we've seen it now where AT &T couldn't make distribution and content work. Verizon couldn't make distribution and content work. And now Comcast is essentially saying we can't really make this work. They were always held up as the one successful example. yeah we've talked about it because it seems on the surface that it's worked yeah and i i think it worked for a time and then it didn't and it's also up for debate you know when we say it worked the company did well but were were they really benefiting from being part of the same and again maybe they were at this point it certainly seems like they're not and the logical question is what do they do now?

8:01Is splitting it really all they're trying to do or is this teeing them up for some next move?

8:08Matt Belloni:Yes, and we will get there because I think this is a sign of forces beyond the initial business strategy behind this company. Whereas they said, if in an age where distribution matters and we are a main distributor of content via Comcast, it's meaningful to own all this media assets of. Now, when the means of distribution are so far beyond and they have struggled with global scale, this company is not global in the same way that many of their competitors are. And Peacock is really not a scaled player. Well, in fairness, in their main business, which is connectivity, there basically aren't global companies.

8:52Maybe Starlink is sort of being that. But if you think about phone companies, internet companies, cable companies, it tends to be domestic or at least regional, right? You'll have a company.

9:03Matt Belloni:But Starlink wants to be global and it's pushing down their share price because everyone's looking at this behemoth owned by Elon Musk and saying, why wouldn't Starlink kick their ass? Right. Or it's going down because of the competition from the Verizons and T-Mobiles and AT &Ts of the world, which have siphoned away some of their customers. But yeah, I mean, look, it's hard for them to not look at the processes they've just been through where they were interested in Warner Brothers discovery and just didn't have the balance sheet to really compete with Netflix or the Ellison family. I think they, you know, they took a look at Roku and decided it wasn't really in their best interest, but also that it was, you know, they, they wanted too much money.

9:45Um, and so now they have to, you know, this is, I guess, akin to, to, to what Warner brothers did, right? Where they decided to try to, they were fine, they're fine going this way. They think it'll unlock value because the people who want to invest in Comcast can do that. People who want to invest in NBCUniversal can do that. And if, oh, by the way, sometime in the next six to 12 months, someone comes along and wants to try to buy one of them, it's much cleaner to do that because the type of company that wants to buy NBCUniversal doesn't want to own Comcast and vice versa.

10:16Matt Belloni:Yeah. And that's a key point here because Peter Supino, the analyst, he wrote today in a note. He said, we doubt that this breakup will occur. Instead, we expect one or both Comcast units to merge with peers or competitors. That's what Warners did, right? The mere prospect of a split awakened Netflix, awakened these other companies to say, oh, these are great assets that are being undervalued as part of this conglomerate. we can swoop in and get these. The stock of Charter went up. That's a Comcast competitor. The stock of Charter went up today because the street thinks that if Comcast is separated from NBCUniversal, it's a prime target to merge with Charter, which is already trying to merge with Cox to create one mega cable connectivity company, perhaps even a national either duopoly or monopoly over this and NBC Universal will be left to merge with Netflix or Apple or one of these other companies and it's the same thing we went through with Warners where one of them will all, one of them will ultimately win out and absorb the NBC Universal studio we will all get our cable or internet from one company or one company competing with Starlink and competing with some of these other big tech player companies.

11:41Matt Belloni:And it'll be one sort of legacy roll up competing with those. Yeah. This split, they can kind of do pretty easily. But in terms of future M &A, do you think that the Trump administration would try to thwart the Roberts family from doing anything? I think that it would be difficult. I mean, obviously, Trump doesn't like the Roberts family because MSNBC, now MSNBC now, or MSN now. And if they could muck that up, perhaps, but also perhaps there's a scenario where NBC goes to another buyer. If Netflix looks at these assets and says, yes, we would like the studio. We would like the branded content from Bravo.

12:22Matt Belloni:We would like the theme park business. We do not want NBC, a broadcaster. Maybe that becomes an opportunity to spin that out from the spinoff and get someone more Trump friendly to buy it and grease that deal. Yeah. Well, I actually think that NBCUniversal is just as good a fit for Netflix as Warner Brothers Discovery was. Whether they are going to... Oh, it's better. Yeah. I think it's actually better. Other than NBC, the theme park business is something that Netflix, I think, would like. Because I've said this before on the show. If you look at the Disney theme park business, that is 100 % branded Disney content.

12:58Matt Belloni:It's going to be very difficult for anyone else to buy that and incorporate. But the universal parks, most of the IP in those parks is not universal IP. It's Transformers. It's Simpsons. It's Harry Potter. Netflix could buy that and then slowly take it over. Transformers becomes Stranger Things. Simpsons ride becomes the Bridgerton ride. And that's a much better way for Netflix to get into experiential in a bigger way and then have all these amazing film properties that they could exploit. Of course, whether Netflix shareholders are keen for them to do a deal, given that they didn't want the Warner Brothers deal.

13:38We'll see about that.

13:40Matt Belloni:I mean, do you think they'll say, I mean, Netflix stock is still down 30, 40 percent from before they went after Warner's. The shareholders have pretty clearly said they didn't like that. Or at least that pursuit opened up the fears of a slowdown at Netflix. I think it's more of that. You could make the argument that it makes them a little bit more keen to go after IP because of the engagement problems they may be having. Could be. I don't know that that necessarily solves the question for them. But as much as Netflix said that Warner Brothers was a one-off thing, this has always been the other shoe to drop.

14:21The other thing hanging out there is one other. I want to take a step back, though. When you think about the consolidation and the merger and just all the stuff that's happening, it doesn't it feel like all of the like all of the media companies that sort of ran the world for so long are sort of slowly disappearing or maybe rapidly disappearing yeah well think about when you were at at thr when you started and like what were like the six or seven biggest companies that sure you guys box was in there fox time warner was in there Warner Brothers about to be gone.

14:55Matt Belloni:Yeah. Universal. NBC Universal was owned by GE at the time, but it was a major player. You know, Sony was, I mean, Sony's still there. Viacom, CBS. Yeah. And they've been replaced by Netflix, Amazon, Apple, basically. And Google. And those are the only ones that are in the professionally produced content business, YouTube and Meta. But that's the landscape we're in right now. No, I totally agree. And we've covered it. I just, when these big moments happen, I sometimes have to take a step back and think about it, especially because the Warner Brothers thing is ongoing and who knows now what's going to happen with Universal.

15:32It's just very symbolic of sort of what has happened to this industry over the last 15 or 20 years.

15:37Matt Belloni:And it begs the question, could the Ellisons go after NBC Universal and make it a full legacy Hollywood roll-up to compete with big tech? Can you imagine that? I think Lena Kahn's head would explode. I don't understand how regulators would allow that to happen. I don't either. I mean, two broadcast networks. Two broadcast networks. Three major studios. Like, yeah. But you know what? If Larry Ellison writes another big check and they can get it in before 2028 or President J.D. Vance has a similar opinion of the Ellison family, who knows? This episode is brought to you by FanDuel Predicts. You can predict the Summer Soccer Showcase action all the way to the final match with FanDuel Predicts.

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19:38the leader?

19:38Matt Belloni:Well, I think you sort of answered your own question, is that he is the Gunnar Wiedenfels of this scenario, where he is in charge of this entity if it's spun off. But if it's not spun off and it's sold, then he gets a gigantic payout and goes away. And it's the most interesting thing about this entire transaction from a people perspective is that Brian Roberts is stepping down as CEO. You used the phrase stepping down. I don't want to be semantic, but I sort of view it as like stepping up or stepping aside where it's a little, it's a little like, you know, Brian Roberts is pretty friendly with John Malone and John Malone spent years sitting on top of this constellation of businesses where he had some of Live Nation and Sirius XM and the Atlanta Braves and Formula One and all this other stuff.

20:30And he wasn't really the CEO of anything, but he was in a lot of ways the ultimate decision maker of sort of big strategic moves at those places and and he sat on on all the boards and you also see a guy like barry diller who sort of bought and sold and aggregated a bunch of companies and so maybe that's what brian roberts is seeing for himself where he's you know he's he's he's effectively split one company into three and he can have different leaders for all of them but his family is still a major shareholder in all of them and he's a major decider and he can be, he can, he can work 20 % less hard.

21:05Matt Belloni:I know he's 67 years old. So does that mean that in five years, these three companies will still exist in the way that they are today? I mean, it seems to me that these companies are positioned to either be buyers or sellers. And we don't know whether NBC universal is a buyer or a seller at this point. No, I think it would be surprising if they were looked exactly the same as they did five years from now. And I think that Brian Roberts and Mike Kavanaugh would own that, right? They split off Versan and said, okay, it might go and buy other businesses in the cable digital media space. Now NBCUniversal is sort of an unencumbered entertainment company that could go and try and hoover up some of the other businesses.

21:54Although I don't know why it would buy a bunch of cable networks since it already spun off cable networks.

21:59Matt Belloni:I know people are joking that they're going to buy Versant. I don't think that's going to happen. And I don't know why they'd suddenly be a buyer for Lionsgate. I don't know what that gets them, but they could certainly do something. And if they don't buy something, it could be appealing for someone else. We already talked about Netflix. And yeah, the connectivity business is now rid of this asset that most of its investors didn't want it to have at this point. But what is there for NBC Universal to buy that's meaningful? Like Lionsgate? Okay, whatever. They already have a way better studio. They'd have a bigger library.

22:34Matt Belloni:Cool. What else is there? That doesn't help them with... The number one goal for NBC Universal is very clear, right? They have a very successful studio and a very successful parks business. And the NBC helps them with sports and is, you know, NBC and Bravo are fine. Their streaming business has been a disaster. They say it's about to be profitable. We'll see if it stays that way when they end up having to pay more for the NFL. But it's figuring out what to do in streaming. So does that mean that they buy something else in streaming? I don't know. They have not effectively outlined what the strategy is for that business.