The first rumblings about Comcast considering a major change involving NBCUniversal started this time last year.
Now, in the wake of NBCUniversal CEO Jeff Shell’s abrupt firing, industry speculation about what may be in store for the network-studio conglomerate has gone into what-if overdrive. Maybe NBCU merges with Hulu to become a stand-alone company. Maybe the cable operations of Comcast and the satellite business of the U.K.-based Sky are separated from NBCU. Maybe NBCU makes a bid for Activision Blizzard if the latter’s $69 billion acquisition deal with Microsoft falls through. Or perhaps Comcast bides its time to see if Warner Bros. Discovery is game to walk down the aisle with NBCU in 2025 or thereabouts.
So many scenarios, so little clarity. Knowledgeable Comcast and NBCU sources maintain that the most likely outcome in the near term is … the status quo. Despite reports in May 2022 that Comcast had been in talks with video game giant Electronic Arts about a possible merger with NBCU, sources stress that the company is not actively hunting for alternatives for NBCU, or for Sky or Comcast Cable, either. Those sources point to recent comments from Brian Roberts, Comcast chairman and CEO, who has routinely emphasized that he likes the diversified mix of distribution and content assets under the roof of the company that his family controls through preferred stock holdings.
“I think we are in a fabulous place,” Roberts told investors in July. “We have unprecedented cash flow and scale [generated] by what we’ve got as one company. We’re working really well together.”
The only certainty that can be drawn from the tumult at NBCU that began April 23 with the news of Shell’s ouster is that Michael Cavanagh is the one to watch. Cavanagh was promoted to president of Comcast in October after serving seven years as the company’s chief financial officer. He’s seen as Roberts’ right-hand executive — a role that was previously filled by Steve Burke, who was Shell’s predecessor as NBCU chief executive until his retirement in August 2020.
Cavanagh has stepped in as the corporate overseer of NBCU and the manager of the film, television and theme park executives who previously reported directly to Shell. Cavanagh has gradually become a bigger presence in the NBCU orbit, particularly since he was promoted to the president role. Signals from Comcast that there would be no interim leadership appointment beyond Cavanagh — nor plans to launch a CEO search — sparked a torrent of conversation about Comcast’s larger vision for NBCU. By the end of the first full workday following Shell’s exit, it was clear that Cavanagh would be in charge for the foreseeable future.
One reason the CEO shuffle comes at a bad time for NBCU and Comcast is that the company is in the midst of a strategic push to harness companywide resources to expand its Peacock streaming platform. Moreover, Comcast faces a multibillion-dollar decision about whether to sell its one-third stake in Hulu to Disney (which owns the rest of the streamer) or whether to make a bold bid to acquire Disney’s two-thirds stake.
Hulu will be valued in its entirety at a minimum of $27.5 billion, under the terms of a 2019 agreement between Disney and Comcast that also set the timetable for the final buyout options to be triggered as early as January 2024.
Craig Moffett, a longtime Comcast watcher and analyst for MoffettNathanson Research, says that shareholders are wary of the conglomerate going much bigger in entertainment. There’s real “fear” about the rumors that Comcast hopes for future nuptials with WB Discovery because the economics of film and TV production are so challenged. But he doesn’t rule it out.
“Comcast needs to get bigger in streaming if they want to be one of the last men standing. Do they get bigger by selling Peacock to someone else? Either way, Peacock is going to need a partner, and the logical partner is WB Discovery,” Moffett says.
The possibility of Hulu and Peacock combining on some level is more remote.
Shell’s departure “probably increases the likelihood that they stick with the obvious Plan A of selling their stake in Hulu,” he says. “It’s harder to see them making a major strategic pivot and buying the bulk of Hulu given how quickly all of this happened.”
Comcast stock has been depressed for many quarters because of investor concerns about how the company — famously dubbed “Kabletown” by “30 Rock” writers — has managed its disparate assets.
“They still haven’t really articulated a compelling logic for why the pieces of Comcast fit under one umbrella,” Moffett says. “Collectively, they don’t add up to anything more than the sum of the parts.”
That said, Cavanagh is a strong choice to step into the void at NBCU left by Shell.
“He has both the talent and the skill to be able to make it work. But it’s going to take a deft touch if only because the situation he inherits is complicated and volatile — and that’s not just a comment on NBCU but the whole industry,” Moffett says.
Comcast shares held up fairly well after the shock of the Shell news, with only a modest decline of 1.4% posted on April 24. But the real impact will be registered not in the immediate market cap swings but in how dramatically (or not) operations are affected in the coming months.
“It’s a shame to see a company have to go through upheaval like this because of the indiscretion of a leader,” Moffett observes.
(Pictured: Comcast president Michael Cavanagh talks with chief executive officer Brian Roberts)
