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

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 businesses these days, we've got another studio sale. Well, not a sale, really, a spin-off. Comcast is separating NBC Universal, creating two publicly traded companies. 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 had acquired about 15 years ago. Remember, Comcast already spun off its cable networks into verse-in earlier this year, and now according to Comcast's leadership, NBCU on its own will be quote, "poise 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. 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 freemium. 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 spin-off 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 MSNow. 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 in the Odyssey. And is NBC Universal now a buyer or a seller in the frenzy to compete with Big Tech? We've got Lucas Shah, a Monday guy from Bloomberg. He's back today. And we're going to go into it. It's the spin-off of NBC Universal, and does this put another studio in play? From The Ring or in Puck. I'm Matt Bellany, and this is the town. Okay, we are here with Lucas Shah, our normal Monday guy, back from his wedding. Lucas, how is 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, Craig, I am, I know it was a small wedding. I am 100% not offended the only, and I would actually like to thank you for not inviting Craig and not me. That I would have been a very offended by. That would have been very understandable. It would have made sense if you invited Matt and not me. That would have been an example. Craig is 10 times more fun at weddings. So I would have understood a little bit, but I thank you for not inviting both of us. There were zero people who might 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. I was like, so are you going to invite Ted Miranda to your wedding? And I was like, no, that is not going to happen. No, nor would he go. Nor would he go. It would 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 drops 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 this just deal envy? 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. Their core business, which is connectivity, cable, broadband, wireless. The cable business, as we all know, has been in freefall. Wireless 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 version. I just think they looked at it and said, we can trade it a higher multiple and have more optionality if we separate them because they'd explored other deals and not done that. Yeah, they've tried everything they could possibly try with this company together to try to raise that share price. And nothing's worked. They've had great years at the movie studio. The park's 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. 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 talked about it because it seems on the surface that it's worked. Yeah. And 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 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, you know, what do they do now? Is splitting it really all they're trying to do? Or is this peeing them up for some next move? 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 asset stuff. 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, they're basically aren't global companies. Maybe 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. 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 Verizon's and T-Mobile's and AT&T's 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 Allison family. I think they took a look at Roku and decided it wasn't really in their best interest, but also that they wanted too much money. And so now they have to, you know, this is, I guess, a kin to what Warner Brothers did, right? Where they decided to try to, they were 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 NBC Universal 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 NBC Universal doesn't want to own Comcast and vice versa. Yeah. And that's a key point here, because Peter Supino, the analyst, he wrote today to 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 Warner's 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 NBC Universal, 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 Warner's, where 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. 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 Robert family from doing anything? - I think that it would be difficult. I mean, obviously Trump doesn't like the Robert's family because MSNBC now, MSNBC now, 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, 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 spin-off and get someone more Trump friendly to buy it and grease that deal. - Yeah. Well, I actually think that NBC Universal is just as good a fit for Netflix as Warner Brothers discovery was, whether they are gonna-- - 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 in the show. If you look at the Disney theme park business, that is 100% branded Disney content. It's gonna 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 become 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, we'll see about that. - I mean, do you think those, I mean, Netflix stock is still down 30%, 40% 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. - I think it's more of that. - You can 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, the other thing hanging out there, there what is one other thing. Can I, I want to take a step back, though, when you think about the consolidation and the murder and just like all the stuff that's happening, it doesn't it feel like all of the media companies that sort of ran the world for so long or sort of slowly disappearing, or maybe rapidly disappearing. - Yeah. - The thing about when you were at THR when you started and like what were like the six or seven biggest companies? Dead. - Sure, I mean, Fox was in there. - Fox. - Time Warner. - Warner Brothers is about to be gone. - Yeah. - Universal. - NBC Universal was owned by GE at the time, but it was a major player. Sony was, I mean, so they called it 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, I mean, but that's the landscape we're in right now. - No, I totally agree and we've covered it. I just, when these, 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 gonna happen with Universal. It's just very symbolic of sort of what has happened to this industry over the last 15 or 20 years. - And it begs the question, could the Ellison's 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 Khan's head would explain it. - I don't understand how regulators would allow that to happen. I don't either. I mean, two broadcast networks and all the other-- - 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. Bance has a similar opinion of the Ellison family, who knows? - This episode is brought to you by Fandool Predicts. 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Are you at all surprised that it is Mike Kavanaugh, currently co-CEO of Comcast, sort of formerly a Wall Street guy, who's gonna be the CEO of NBC Universal, and does that solve the sense of strategic drift that company has had over the last couple of years where there hasn't, they've said he's the leader, but because he's also been running Comcast, people haven't really felt like he's the leader. - Well, I think you sort of answered your own question. Is that he is the gooner weed-and-fells 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 use the phrase stepping down. I don't wanna be semantic, but I sort of view it as like stepping up or stepping a side 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 serious XM and the Land of Braves and Formula One and all this other stuff. And 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 he sat 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 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 work 20% less hard. You know, he's 67 years old. So does that mean that in five years, these three companies will still exist in a 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 Versa and said, okay, it might go and buy other businesses in the cable digital media space. Now NBC Universal is sort of an unencumbered entertainment company that could go and try and hoover up some of the other businesses, although I don't know why it would buy a bunch of cable networks since it already spun off cable networks. - I know, people are joking that they're gonna buy Versa. - I don't think that's gonna happen. - And I don't know why they'd suddenly be a buyer for Lion's Gate, 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 who 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 Lion's Gate, okay, whatever. They already have a way better studio. They'd have a bigger library. - 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 in a very successful parks business. And the NBC helps them with sports and is, you know, NBC and Brava 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. Bye. 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. And here's the issue, and I think this is the core problem that they have now, is that without all the revenue from the cable and connectivity business, and without all of the cash flow that gets thrown off of the cable networks, how is this NBC universal entity going to compete in the future for sports rights and for big deals like the Taylor Sheridan deal that they've already done? They want to invest in making NBC universal a big competitor, but how is this not just a another version of Warner Discovery that was too small and had too little cash flow to really compete? Well, the problem for Warner Brothers Discovery was all the debt. The debt, and so some of this, some of this also had the cash flow from the networks that NBC universal is not going to have because those are itverson? Yes, but NBC universal still has NBC and Bravo, and they also have the park's business which generates a meaningful amount of cash. It is a smaller company, is it going to be if they go head-to-head on something with Netflix or Amazon? Are they going to have or Apple? Are they going to or even Disney, although Disney doesn't do that much of that? Are they going to have the advantage? Probably not. They will be the smallest of those players. That seems like a bigger issue for sports than it does for entertainment. If I'm looking at Sunday night football right now and I'm Netflix, I start salivating because all the sudden NBC universal is a much smaller company and maybe isn't going to be able to keep Sunday night football when the NFL demands a huge rights increase, and NFL wants that weekly number one show event of the week to power its ad business. Yeah, certainly could be, or they could split the rights in some way. I think that's a meaningful thing because NBC has spent the past five years. They've made peacock all about sports, and now they have a lot less money to spend, and like the NBA deal, even though the ratings for the finals and the playoffs were good, you know, there are a lot of people who have questioned whether it was worth it considering what they get in the regular season out of those games. Yeah, and this transaction doesn't really solve the peacock problem. I mean, we knew NBC was going to do something. We knew Comcast was going to do something here, but I thought whatever they did would come with a quasi-solution, a joint venture, a sale, or something of peacock. And this isn't that. They still got to figure out the peacock question. Well, I've never understood how the joint venture stuff works. I don't know how you solve, I don't know how you solve the streaming question. The answers that other people have had have basically been huge mergers, right? Paramount and Warner Brothers combining Fox and Roku combining. This is how people have chosen to address being sub-scale and streaming. Well, there's been a rumor going around that peacock is going to become a tile on Netflix. And there would be some kind of a joint venture or arrangement where peacock goes global via Netflix, like they've done with those cable channels in Europe. And then there's a revenue share or some kind of data share or something that makes it worth wild for both sides. I hear you, but my feeling on that is that's not really a streaming joint venture. That is Netflix absorbing peacock. Except they don't own it. They don't own it, but it's like a massive licensing deal. Yeah, it's distribution arrangement. Right. It's Netflix doing Amazon channels with with Comcast streaming service. But also if you, yeah, anyways, those types of things are, they're called joint ventures, but ultimately someone has to be the in control and Netflix is in control in that scenario. Yeah, except they don't own it. And the Robert's family would get to say we still own these assets, even though they've had to bend the knee. And it would make peacock profitable because they'd make hundreds of millions of dollars, presumably, or billions of dollars a year from the licensing, which they could put under the peacock bottom line. Yeah. So maybe that'll still happen. So if you're if you're a banker, what deal do you pitch? What deal or is this all preordained that this is the step step three of a five step transformation process that began with spinning off person and is going to end with a new media conglomerate or with Comcast simply going away. I mean, Comcast Charter is the one that's the loudest right now. It doesn't really solve the fundamental challenge for either business, but it does give them enough scale to just be seemingly impregnable impregnable. Yeah. But if I'm trying to fish for a deal, I feel like you you try to make the Netflix and BC universal thing happen. You you call up heads around us and Greg Peters and say, I know you didn't I know you walked away from the other one. What about this one? David Ellsson who was the your two competitors in that one of them's off the table and the other one you're now swallowing. So who's really going to compete with you for this? That's probably what I would do. Yeah. And the question then becomes how open are Ted and Greg to doing another deal. And how willing is in that scenario like Brian is doing all this stuff for the Robert's family still retains a lot of control. Yeah. And if they did a charter deal, which which by the way was has been part of the Malone portfolio, that could also be is that something that they could still have some control over you do the Netflix deal your app. Yeah. So is he ready to say, you know, I don't need an entertainment spend nice, but I don't need it anymore. Would NBC you be much more expensive than Warner Brothers was? Good question. The market cap of the whole company right now is about 85 billion or it was before the sock went up today. Yeah. But remember what Warner Brothers market cap was and then what it traded exactly. It would all depend on who else is in. If it's one buyer, their Netflix is not going to overpay like they like Paramount did. Yeah. Warner Brothers felt more limited, right? Like their sports rights weren't as good. They don't have a theme park business. Like NBC, you feel a little bit more varied. I haven't done the numbers in a while, but I believe that NBC Universal is larger than Warner Brothers and would command a lot more for the reasons you just said and is not making most of its money from a shrinking business. At least not anymore. They got rid of that. Not anymore. All right. Well, another fascinating development. Thank you, Lucas. All right. We are back with the call sheet. Craig, did you see this investment news? Sony is investing in this shared viewing experience company. Cosm. Yeah. Cosm. I never loved the name of Cosm, but yes. So now Sony has Alamo Drafthouse and now they have Cosm in the live event space. Yes. They own Alamo Drafthouse and they now have a $100 million minority investment in Cosm, which has they launched in LA and Inglewood, but they have been used in Atlanta, Dallas. I think a couple more are coming. And it's basically sort of like the sphere, but on a downscaled, it's to watch sports in an immersive environment. They have movies. They showed the Matrix, Harry Potter. It's kind of a good business, I think. It makes sense. They would do this. Yeah, this is like the lower budget competitor to the sphere. And I wonder if there's just going to be more of these popping up all over to compete with the sphere. They've invited us to come over there. And we haven't gone yet. We need to go. We should. I have to say, I was skeptical at first. And then I saw some photos of what their dome, like sports viewing experience looks like. It does kind of look you're in look like you're in the stadium. I mean, you should take your fantasy football podster guys and go to an experience that we should actually. That's a good idea. We should do that. My prediction today is I think this is only the beginning. I think that Sony will ultimately end up owning this company. And that that will happen in the next few years. Sony clearly looking at the content landscape. It's already a Japan-based hardware technology company. And they're looking at the content market right now for Sony Pictures and the CEO, Ravia Houdja, who's now going to be on the board of Cosm. They're looking at these AI-proof quote-unquote experiential businesses that everybody's interested in right now. And I think Sony will try to build up this theaters, but not theaters. They don't want to own AMC. They don't want to get into the mass market theater business. But something like Cosm to go with Alamo Drafthouse makes a lot of sense for Sony. I think they will buy it. When you say AI-proof, what do you mean? Cosm is live experiences or something that can't be corrupted by AI? Yeah, there's this whole movement right now in the investment community for live experiences. Things that you cannot replicate at home and that cannot be disrupted by AI. Doesn't matter if we're all sitting in pods, experiencing entertainment on our headsets in five years. People will still want to go to concerts and out-of-home activities like festivals. Arya Manual has this whole company, Mari, that is buying up businesses that support live entertainment. He said it on the show. He thinks that because of AI productivity and work from home and all these things that there is going to be a four-day work week and three days of the week are going to be for out-of-home experiential things. That's going to give a big opportunity to live nation and all these businesses that focus on the out-of-home community. And that's what this is. Cosm is a experience you can't get at home, you can't replicate it, be any kind of algorithm or anything that will serve you content at home or on your phone. This is where it's going to be at. Yeah, it'll be interesting to see if these These types of things can pop up more at a more affordable price because Cosim is still kind of expensive. Obviously, the sphere is expensive, finding the middle ground where it's something that a normal person could just kind of go do on a Saturday that doesn't cost like 250 bucks. That's kind of like in between a sports bar and going to Dodger Stadium is interesting. Yeah. They position it exactly that, but for a special occasion type thing, it's dynamic pricing. So if you go to a Tuesday night Dodger game, it's less expensive than going to an NFL playoff game to watch there. Maybe we should do our box office draft live from the Cosim so people can watch there. We'll have a big stadium event and you can go to the Cosim's in various cities and experience our box office draft. Let's not commit too quickly. We'll see if Dolan's interested. Maybe we'll do it at the sphere. Sorry. Bit more. Bit more for this. Yeah. Sphere will be amazing. Yeah. Lucas's face on the giant big screen at the at the sphere. All right. That's the show for today. I'm Lucas Shaw, producer Craig Horoback, artist John Jones and Jesse Lopez. I don't want to thank you. We'll see you one more time this week.