Interesting take, though I come at Comcast from a totally different angle. The spreadsheet may like the 'clean broadband utility' story. I understand why some investors may want to separate the pipes from the pictures. However, Comcast/Xfinity, from a customer and execution standpoint, has always struck me as one of the worst run major businesses in this country. The friction, the service experience, the arrogance, the operational incompetence, it is astonishing what customers have been trained to tolerate. So, I have a really hard time getting excited about the Comcast side just because the structure looks cleaner. A cleaner corporate structure does not magically fix a company culture customers still have to deal with. Comcast has been losing broadband customers, and Reuters reported somwhere that Comcast introduced a five-year Xfinity price lock to counter subscriber losses and rising competition from AT&T, T-Mobile, and Verizon. Comcast was tied to serious racial-discrimination allegations and has also operated in broadband markets where minority and low-income communities often had worse access, higher friction, and/ or fewer good options - but collecting monthly subscriber fees in thoose market was very profitable. I did not and will not forget that corporate culture. I think they did not get rid of it, either. So, Comcast was and still is out for me as an investment. The part I find more interesting is NBCUniversal. Maybe those assets are finally getting out from under Comcast’s stranglehold. Studios, parks, IP, content, brands, international reach, there may be more oxygen there once they are no longer trapped inside a company whose core consumer reputation is, politely said, not exactly beloved. So yes, the breakup logic makes sense. However, I would be far more curious about what NBCUniversal can become outside Comcast than I would be about investing in Comcast itself. Maybe I can go to a Universal park again.
Thank you for reading and for taking the time to lay out your thinking...this is exactly the kind of pushback I write for.
Here's the irony in your position, though: if NBCUniversal outside of Comcast is the more interesting story (and I think you're onto something there), the cleanest way to own that story today is... Comcast. This is a spin-off, not a sale. Every CMCSA shareholder who holds through the spin wakes up owning the new NBCUniversal — parks, studios, IP, Peacock, Sky — and captures whatever upward re-rating the market hands it. You don't have to love the pipes to want the pictures. You just have to be on the shareholder register when they separate.
On the customer service point...I hear you! I've been on hold with my local cable company too. But complaints about cable service are as old as cable itself, and they're not unique to Comcast. Frustrating? Absolutely. Thesis-changing? I don't think so. The legal matters you raise I can't speak to directly, but I'd put them in a similar bucket: real, and worth remembering.. just not what moves the valuation math here.
Stick around, over the coming wks/ months I'll be doing deep dives on exactly what NBCUniversal is and what it can become on its own. That's a business I know intimately, going back to my Goldman days sitting a few seats from the team building the original deal. And yes, Epic Universe is worth the trip...I have heard great things from friends who have gone!
Great article. Couple things I'd love to mention/ask:
1. Very interesting point about the huge tax bill that will hit NBCU if they decide to sell. But at the same time, I believe NBCU is a better acquisition target for Netflix that what WBD was half a year ago. Excellent studio + excellent park business, that Ted and Greg would love to have really badly. But for now, taking their word that they will not be interested in media deals.
2. On the Comcast/Charter possible merger, not only it will bring a big antitrust issue, but in the world, we are living now they can be solved only through the white house and they are not big fans of Roberts family due to the MS Now and others that make this merger even more unlikely.
3. What do you think is the future for NBCU in terms of M&A activity? If they are not a seller, then who would they approach as a buyer? It seems like the only problem they will have to fix is Peacock...
Thanks again and looking forward for your feedback!
1. On Netflix and the WBD comp. I'd be careful using Warner Bros. as the template. That was a genuinely unique situation: a bidding war broke out, and the winning buyer pushed the price farther than anyone else in the room was willing to go. Scarce assets plus multiple motivated bidders is lightning in a bottle. I don't expect that dynamic to repeat for NBCU, and the tax-free spin structure takes an outright sale off the table for roughly two years anyway. But you're right that WBD shows what's possible when trophy assets hit the market. And yes, an excellent studio plus a parks business Ted and Greg could never build themselves is a tempting combination. For now, I take Netflix at their word too.
2. On Comcast/Charter and the White House. The antitrust politics here are harder to predict than people realize. The conventional wisdom says this administration is no fan of the Roberts family, MSNBC baggage and all. But here's a wrinkle worth knowing: Comcast was one of roughly three dozen companies and individuals who contributed to the White House ballroom project. Enough that some critics accuse the whole exercise of being pay-to-play. I'm not saying a donation buys a merger approval. I'm saying the relationship is more transactional, and less fixed..than the headlines suggest. Handicap accordingly.
3. On NBCU's M&A future. I'm building my list of potential moves now... that's coming in future coverage. But two underrated points in the meantime. First, they don't need to buy or sell anything to create value: expect more licensing and cross-content deals, putting NBCU content on other streamers in exchange for fees or broader distribution. Second... and this is the quiet gift of the spin...independence means control of your own capital allocation. Even if NBCU sits out M&A entirely, it can buy back its own stock, without asking investors to also fund a broadband utility they never wanted. And agreed: Peacock is the fix-it project. More on that soon!
This is all part of my coverage going forward — so stick around, and please share and spread the word.
Very interesting! I am a Comcast stock owner and very keen on the media business. Expecting a significant rerate in line with peers. Warner Bros sold at very high multiple in spite of large debt pile. The parks and IP are valuable - especially in the AI world. Sold off Versant quite quickly.
Thank you for reading.... and it sounds like we've been reading from the same playbook. Selling Versant quickly was the right instinct in my view. It's been my Underperform since the spin, and nothing in the Q1 numbers changed my mind. (Full case is in the Accrued Interest archives if you ever want the receipts.)
On the media re-rate, one friendly caveat before you pencil in peer multiples. Warner Bros. is the right comp in one sense.... it proved the market will pay up for scarce studio and IP assets even with an ugly balance sheet attached. But there's a key difference: that multiple came with a takeout. NBCUniversal can't get one. The tax-free spin structure effectively takes a sale of the company off the table for roughly two years. NBCU walks out a predator, not prey.... free to go shopping, but nobody can pay shareholders a premium to take it out. So in the near term, the re-rate has to come from execution and the multiple the market assigns on its own merits, not from a bid.
Where I'm fully with you: the parks and the IP are the crown jewels, and owning irreplaceable characters and franchises only gets more valuable in a world drowning in AI-generated content. Scarcity is the moat.
More NBCU deep dives coming...this is the fun part of the story! - Sim/AccruedInt
Interesting take, though I come at Comcast from a totally different angle. The spreadsheet may like the 'clean broadband utility' story. I understand why some investors may want to separate the pipes from the pictures. However, Comcast/Xfinity, from a customer and execution standpoint, has always struck me as one of the worst run major businesses in this country. The friction, the service experience, the arrogance, the operational incompetence, it is astonishing what customers have been trained to tolerate. So, I have a really hard time getting excited about the Comcast side just because the structure looks cleaner. A cleaner corporate structure does not magically fix a company culture customers still have to deal with. Comcast has been losing broadband customers, and Reuters reported somwhere that Comcast introduced a five-year Xfinity price lock to counter subscriber losses and rising competition from AT&T, T-Mobile, and Verizon. Comcast was tied to serious racial-discrimination allegations and has also operated in broadband markets where minority and low-income communities often had worse access, higher friction, and/ or fewer good options - but collecting monthly subscriber fees in thoose market was very profitable. I did not and will not forget that corporate culture. I think they did not get rid of it, either. So, Comcast was and still is out for me as an investment. The part I find more interesting is NBCUniversal. Maybe those assets are finally getting out from under Comcast’s stranglehold. Studios, parks, IP, content, brands, international reach, there may be more oxygen there once they are no longer trapped inside a company whose core consumer reputation is, politely said, not exactly beloved. So yes, the breakup logic makes sense. However, I would be far more curious about what NBCUniversal can become outside Comcast than I would be about investing in Comcast itself. Maybe I can go to a Universal park again.
Thank you for reading and for taking the time to lay out your thinking...this is exactly the kind of pushback I write for.
Here's the irony in your position, though: if NBCUniversal outside of Comcast is the more interesting story (and I think you're onto something there), the cleanest way to own that story today is... Comcast. This is a spin-off, not a sale. Every CMCSA shareholder who holds through the spin wakes up owning the new NBCUniversal — parks, studios, IP, Peacock, Sky — and captures whatever upward re-rating the market hands it. You don't have to love the pipes to want the pictures. You just have to be on the shareholder register when they separate.
On the customer service point...I hear you! I've been on hold with my local cable company too. But complaints about cable service are as old as cable itself, and they're not unique to Comcast. Frustrating? Absolutely. Thesis-changing? I don't think so. The legal matters you raise I can't speak to directly, but I'd put them in a similar bucket: real, and worth remembering.. just not what moves the valuation math here.
Stick around, over the coming wks/ months I'll be doing deep dives on exactly what NBCUniversal is and what it can become on its own. That's a business I know intimately, going back to my Goldman days sitting a few seats from the team building the original deal. And yes, Epic Universe is worth the trip...I have heard great things from friends who have gone!
Great article. Couple things I'd love to mention/ask:
1. Very interesting point about the huge tax bill that will hit NBCU if they decide to sell. But at the same time, I believe NBCU is a better acquisition target for Netflix that what WBD was half a year ago. Excellent studio + excellent park business, that Ted and Greg would love to have really badly. But for now, taking their word that they will not be interested in media deals.
2. On the Comcast/Charter possible merger, not only it will bring a big antitrust issue, but in the world, we are living now they can be solved only through the white house and they are not big fans of Roberts family due to the MS Now and others that make this merger even more unlikely.
3. What do you think is the future for NBCU in terms of M&A activity? If they are not a seller, then who would they approach as a buyer? It seems like the only problem they will have to fix is Peacock...
Thanks again and looking forward for your feedback!
Great questions, so let me take them in order.
1. On Netflix and the WBD comp. I'd be careful using Warner Bros. as the template. That was a genuinely unique situation: a bidding war broke out, and the winning buyer pushed the price farther than anyone else in the room was willing to go. Scarce assets plus multiple motivated bidders is lightning in a bottle. I don't expect that dynamic to repeat for NBCU, and the tax-free spin structure takes an outright sale off the table for roughly two years anyway. But you're right that WBD shows what's possible when trophy assets hit the market. And yes, an excellent studio plus a parks business Ted and Greg could never build themselves is a tempting combination. For now, I take Netflix at their word too.
2. On Comcast/Charter and the White House. The antitrust politics here are harder to predict than people realize. The conventional wisdom says this administration is no fan of the Roberts family, MSNBC baggage and all. But here's a wrinkle worth knowing: Comcast was one of roughly three dozen companies and individuals who contributed to the White House ballroom project. Enough that some critics accuse the whole exercise of being pay-to-play. I'm not saying a donation buys a merger approval. I'm saying the relationship is more transactional, and less fixed..than the headlines suggest. Handicap accordingly.
3. On NBCU's M&A future. I'm building my list of potential moves now... that's coming in future coverage. But two underrated points in the meantime. First, they don't need to buy or sell anything to create value: expect more licensing and cross-content deals, putting NBCU content on other streamers in exchange for fees or broader distribution. Second... and this is the quiet gift of the spin...independence means control of your own capital allocation. Even if NBCU sits out M&A entirely, it can buy back its own stock, without asking investors to also fund a broadband utility they never wanted. And agreed: Peacock is the fix-it project. More on that soon!
This is all part of my coverage going forward — so stick around, and please share and spread the word.
Very interesting! I am a Comcast stock owner and very keen on the media business. Expecting a significant rerate in line with peers. Warner Bros sold at very high multiple in spite of large debt pile. The parks and IP are valuable - especially in the AI world. Sold off Versant quite quickly.
Thank you for reading.... and it sounds like we've been reading from the same playbook. Selling Versant quickly was the right instinct in my view. It's been my Underperform since the spin, and nothing in the Q1 numbers changed my mind. (Full case is in the Accrued Interest archives if you ever want the receipts.)
On the media re-rate, one friendly caveat before you pencil in peer multiples. Warner Bros. is the right comp in one sense.... it proved the market will pay up for scarce studio and IP assets even with an ugly balance sheet attached. But there's a key difference: that multiple came with a takeout. NBCUniversal can't get one. The tax-free spin structure effectively takes a sale of the company off the table for roughly two years. NBCU walks out a predator, not prey.... free to go shopping, but nobody can pay shareholders a premium to take it out. So in the near term, the re-rate has to come from execution and the multiple the market assigns on its own merits, not from a bid.
Where I'm fully with you: the parks and the IP are the crown jewels, and owning irreplaceable characters and franchises only gets more valuable in a world drowning in AI-generated content. Scarcity is the moat.
More NBCU deep dives coming...this is the fun part of the story! - Sim/AccruedInt