Would David Zaslav Really Give Up His Precious Cable Channels?

The defender of the cable bundle could save the cable bundle by spinning off his cable bundle. We'll explain.

Comcast has turned against its NBCUniversal cable TV assets, with plans to spin off its portfolio of cable channels (other than Bravo, which like NBC has a next-day arrangement with streamer Peacock). It’s an interesting pivot considering Comcast is literally a cable provider — but it’s not a unique proposition. Bob Iger publicly toyed with the idea of selling off Disney’s linear networks, including broadcaster ABC; he’s since walked that idea back.

But Comcast is plowing ahead with the plan for the new company, temporarily dubbed “SpinCo,” to launch within one year. By then, it may be a bigger package than just USA Network, CNBC, MSNBC, Oxygen, E!, Syfy, and Golf Channel. (SpinCo will also contain some weird ancillary things like Fandango, Rotten Tomatoes, GolfNow, and Sports Engine).

Comcast in its November 20 announcement set up the spun company as “a potential partner and acquirer of other complementary media businesses.” One “potential partner” stands out to the media analysts at Bank of America, led by Jessica Reif Ehrlich.

In a note to clients published on Nov. 27 and shared with select media (including IndieWire) on Monday, December 2, Ehrlich pinpointed Warner Bros. Discovery as “a very logical option” to follow suit — and suit up for Team SpinCo.

The way she sees it (hypothetically) going is this: WBD spins off its studio and streaming business, leaving its cable channels — and about $40 billion of debt — behind. Warner Bros. the studio and Max would be “unburdened” by what Ehrlich deemed an “onerous debt load.”

In such a scenario, it feels reasonable that David Zaslav, the CEO of Warner Bros. Discovery, would elect to travel with the prestigious elements; he’s called the WB studio the “crown jewel” of his enormous portfolio. It would mean giving up leadership of his beloved Discovery cable channels, which he’s lovingly shepherded since 2006.

Though cable isn’t the business of the future, it is the cash cow of the present. SpinCo will start with very little debt — it could take some of WBD’s on. As a matter of fact, $40 billion could pretty quickly become $33 billion, Ehrlich estimates. In return, Food Network, HGTV, and other Discovery cable channels could help SpinCo tip the scales in the contentious carriage battles to come. (Not as much as they would have in the past: After losing the NBA, Warner Bros. Discovery was forced to devalue its cable properties by a massive $9.1 billion dollars.)

WBD CEO David Zaslav has been licking his chops over the M&A opportunities under another Trump presidency, saying on his company’s recent earnings conference call that the new administration “may offer a pace of change and an opportunity for consolidation that may be quite different, that would provide a real positive and accelerated impact on this industry that’s needed.”

Apparently Joe Biden’s SEC didn’t move fast enough in approving the formation of Warner Bros. Discovery. (Perhaps they saw the debt issue coming?)

But the real winners in this theoretical scenario are the remaining Comcast businesses and the Warner Bros. studio-led company. For companies believed to be undervalued, spinning off the “good” stuff from the “bad” stuff (or vice versa if you see a difference) is considered a shortcut to unlocking value, a buzzy term in the otherwise consolidating Hollywood (and beyond). Lionsgate and Starz have been doing this for what feels like a decade.

WBD has not publicly discussed such a spin, though it was reported in July that the company was thinking about one. A Warner Bros. Discovery rep did not respond to IndieWire’s request for comment on this story.

Immediately after Comcast announced its plan, its stock price rose, indicating a favorable investor response to the plan to dump dead weight. WBD’s famously undervalued stock could sure use a boost.