Comcast weighs spin-off of declining cable networks after strong third quarter

By Harshita Mary Varghese

(Reuters) -Comcast said it was considering spinning off its cable networks that include CNBC and MSNBC into a separate company, as the media industry grapples with a decline in traditional TV viewership due to cord-cutting by consumers shifting to streaming.

The potential spin-off would exclude the NBC broadcast network and the Peacock streaming service. The company, however, is interested in seeking a partner for Peacock to help grow that business, Comcast (NASDAQ:CMCSA ) president Mike Cavanagh said on Thursday.

"We chose not to participate in the M&A process around Paramount in the earlier part of this year. But we would consider partnerships in streaming," Cavanagh added.

Shares of Comcast were nearly 3% higher in early trading as the company also reported better-than-expected revenue for the third quarter on the back of box office hits and an Olympics-driven surge in ad sales.

Declining profitability in cable TV has been pushing media companies to explore options for their legacy businesses, even as they struggle to stem losses at their streaming services.

Earlier this year, Paramount Global - which owns cable television networks Comedy Central, Nickelodeon and MTV - agreed to merge with streaming-era upstart Skydance Media in a deal that signaled a changing of guard in the industry.

"We are now exploring whether creating a new well-capitalized company owned by our shareholders and comprised of our strong portfolio of cable networks would position them to take advantage of opportunities in the changing media landscape," Cavanagh said.

STRONG THIRD QUARTER

The comments followed strong third-quarter results, in which Comcast's media business saw a $1.9 billion revenue boost from the Paris Games - its highest-ever for the Olympics - that was driven mainly by increased advertising by brands.

Its studio unit enjoyed blockbuster hits including "Despicable Me 4" and "Twisters" in the quarter, helping the unit's revenue rise 12.3% from a year earlier to $2.83 billion.

The strong results elsewhere helped make up for a 5.3% decline in revenue at the company's theme parks business, which grappled with a shift in customer spending towards international travel and cruises.

The owner of Xfinity-brand of internet and cable services lost 87,000 broadband customers in the quarter, compared with estimates for 143,200 losses, according to FactSet.

The losses were primarily due to the end of the federal Affordable Connectivity Program (ACP), which subsidized internet access for low-income households in the U.S.

The company said excluding ACP's impact, broadband saw net additions of 9,000.

"The headlines will all focus on the potential spin-off of their legacy cable networks, something Comcast investors have long hoped for and will undoubtedly celebrate. But the bigger story may be the fact that they soundly beat expectations for broadband net additions," said MoffettNathanson analyst Craig Moffett.

Comcast's total revenue was $32.07 billion, above estimates of $31.66 billion according to data compiled by LSEG, with media revenue rising 36.5%.



Its Peacock streaming service added 3 million paid subscribers in the quarter, bringing the total to 36 million.

Comcast also lost 365,000 video subscribers, compared with expectations for 420,300, according to FactSet, as customers switch from traditional TV to streaming services.

Source: Investing.com