One of America’s biggest cable TV companies wants out of the cable TV business

After years of investor anticipation, Comcast Corp. is now exploring the potential to spin off its cable networks into a separate entity, Comcast president Mike Cavanagh revealed Thursday during an earnings call. The parent company of NBCUniversal is also considering new partnerships in streaming. 

The potential strategic moves come as the pay-TV industry is navigating the challenges posed by cable TV cord-cutting. These days, linear cable networks are increasingly a drag on traditional media businesses like NBCUniversal, which Comcast acquired more than 13 years ago as part of an industry-shifting merger that gave it control of content and distribution.

Cavanagh said the spun-off company would be “well capitalized”—implying that it would not be loaded up with debt from its parent company, a common tactic for corporate spin-offs. NBCUniversal’s cable networks portfolio includes Bravo, E!, Syfy, Oxygen, and USA Network, as well as news networks MSNBC and CNBC.

He emphasized that the NBC broadcast network and streaming service Peacock would remain with the core company. 

“Like many of our peers in media, we are experiencing the effects of the transition in our video businesses and have been studying the best path forward for these assets,” Cavanagh said on Comcast’s third-quarter earnings conference call Thursday. “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 and create value for our shareholders.” 

Comcast reported third-quarter earnings and revenue that topped Wall Street targets, with its stock rising on Thursday in response. The quarter’s pay-TV subscriber losses, at 365,000, also came in lower than expected. 

“We’ve got a very strong hand,” said Cavanagh on the earnings call. “There may be some smart things to do and we want to study that.”

“Spinning cable networks into their own company will make it easier for Comcast to cleave off its TV properties and sell them,” eMarketer analyst Ross Benes told Investor’s Business Daily.

Earlier this year, Warner Bros. Discovery wrote down its cable businesses by $9.1 billion, while Paramount issued a $6 billion write-down.

Broadband’s tough year could have been worse

In addition to the general shift from cable to streaming, it was a tough year for broadband. The end of the Affordable Connectivity Program (ACP) earlier this year—which subsidized cable for consumers—as well as phone companies signing up home internet customers for wireless connections, helped contribute to losses for cable providers. 

For at least the past two years, investors in cable stocks have focused heavily on broadband subscriber growth. While Comcast’s loss of 87,000 broadband customers was its worst ever for the third quarter straight, the drop was not as bad as investors had feared, according to a report Thursday from analyst firm MoffettNathanson. 

Comcast indicated that without the impact from the ACP, it would have posted a net increase of 9,000 subscribers. However, “ACP churn” is hard to measure, MoffettNathanson points out, as it’s unclear whether some of those customers would have left for competitive offers.

But with that estimated net positive broadband subscriber increase, “the whole ACP saga—or at least the vast majority of it—is behind us,” writes MoffettNathanson. The firm expects Comcast’s broadband part of the business to show steady improvement.

In the meantime, the winners of the cable cord-cutting trend have been telephone companies selling fiber connections and home wireless service powered by their 5G networks. For example, T-Mobile sells wireless internet plans for the home at $50 a month, compared with the average cable internet bill of $65 to $70. 

​​Verizon Communications, T-Mobile US, and AT&T are expected to report they added more than 900,000 broadband customers in the third quarter, including wireless home service and fiber, according to estimates compiled by Bloomberg.

Streaming is the future, but where are the profits?

Comcast also said on the earnings call that it will consider partnerships in streaming to help boost the business. This could allow the company to share the cost of operating a streaming business with a partner. 

Though streaming service Peacock is nowhere near profitable—it lost $2.7 billion last year—it boosted its revenue this year and gained 3 million paying subscribers throughout the summer due to the Olympic Games, the company said Thursday.

“The losses at Peacock are, thankfully, getting smaller,” wrote MoffettNathanson. “We have almost certainly seen the bottom of the Peacock drag.” 

Though Comcast has already teamed up with Paramount in Britain to start a streaming joint venture called SkyShowtime, Cavanagh noted on the earnings call that Comcast had stayed out of this year’s sales process for Paramount Global. 

He added that reaching a deal would be “very complicated” and limited to “when a good idea comes along.” 

As for the decision to announce that Comcast is looking into these possibilities, Cavanagh said the company wanted to disclose the idea to Wall Street early, rather than have it leak out later.

“The reason we’re announcing here is that we want to study it,” he said. “There are a lot of questions to which we don’t have answers.”