Yahoo Lifestyle Inside the Cable TV Hospice: Can NBCUniversal’s Divorce From MSNBC, Syfy, E! and More Prolong the Life of Once-Popular Channels?
In the early 1980s, when cable TV was young and music videos were on the cutting edge, Doug Herzog used to fly coach for his job as a junior MTV programming executive.
When he traveled, Herzog would make a point of wearing something with the familiar logo, and he would pack a generous amount of MTV-branded swag — T-shirts, hats, tote bags. At the check-in counter, if the ticket agent was under 50, Herzog would almost always get a question or comment about MTV. When he did, he was quick to offer the agent a free T-shirt or hat.
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“Next thing you know, you’re flying first class,” Herzog recalls. “That was absolute currency. People loved those MTV satin jackets and would kill for one back in the day.”
Today, you can still buy MTV T-shirts at Target. But nobody’s getting a seat upgrade on the strength of a free branded network hat. MTV’s fortunes have declined so far that most Gen Z and Gen Alpha consumers have never seen more than a few minutes of the channel, other than old clips harvested on TikTok and YouTube. Fewer still have actually watched MTV via an old-fashioned cable TV subscription.
And MTV is not alone. The traditional cable television business that gave rise to CNN, USA Network, ESPN, Nickelodeon, TNT, Discovery Channel and A&E Network is in steady decline. Some would call it a “state of decay,” made worse by a woeful lack of investment. Although cable’s been waning for years, industry veterans are still stunned to see long-established brands evaporating against the competitive challenge posed by streaming platforms. In recent years, the money and resources that NBCU once funneled into channels like USA and Syfy has been diverted to build up NBCUniversal’s Peacock platform.
Nothing is more symbolic of cable’s hard times than the news announced in late November by NBCUniversal’s parent company, Comcast, that it was selling off most of its linear cable channels. (Comcast, the largest provider of cable and broadband service in the country, makes most of its money from providing the northeastern U.S. with high-speed internet access and cable TV subscriptions.) NBCUniversal will hold on to the NBC network and the ever-buzzy Bravo, but will essentially divorce itself from the not-inconsiderable problems faced by seven outlets that were once the backbone of NBCUniversal’s TV division: USA Network, CNBC, MSNBC, Syfy, E!, Oxygen Media and Golf Channel. (Also included are digital assets like Fandango and Rotten Tomatoes.)
If that’s not “inflection point” enough for the biz, there are also big shifts afoot elsewhere. This year, Warner Bros. Discovery’s ad-supported entertainment networks have a new leader in Channing Dungey, who is plotting a different course for channels like TNT, TBS and Discovery while keeping her primary focus on running Warner Bros. TV Group. And Paramount Global is about to be acquired by Skydance, which brings with it a new leadership team that likely has its own ideas about what to do with a once-vibrant collection of cable brands like MTV and Comedy Central.
How quickly things changed after Netflix revolutionized the way we watch TV. Since the rise of that platform, the media giants that own the largest cable channels have turned their focus to building up streaming services. Peacock, Max, Disney+, Hulu and Paramount+ are now the flagship outlets for the conglomerates, serving as a cable replacement for a new breed of TV viewers. Amid this generational transition, long-established outlets that still generate solid profits have been left to wither on the vine.
Many industry veterans are dismayed at how quickly Big Media gave up on the channel brands that helped introduce the concept of cable TV service to Americans in the 1980s and offered up an enviable dual revenue stream. Others caution against engaging in nostalgia, and they note that consumers have been voting with their wallets for 15 years. In the U.S., cable and satellite service subscriptions peaked at roughly 100 million households in 2010. That amounted to a penetration rate of 90% of all TV homes in the country. Today that number stands at 85 million, which accounts for about 65% of available households.
“These brands are just basically gone. And it’s a real shame. There is just an abject lack of strategy at most of these enterprises that just confounds you,” says Evan Shapiro, a veteran of New York’s once-thriving cable programming scene, who is now a media analyst and NYU adjunct professor. “In many cases, they’re just not decisions — it’s just, ‘We’re going to make cuts to improve the bottom line, but we’re not going to make choices about where we’re investing otherwise.’ And that’s how you get where you are.”
Comcast will undertake a complicated stock transaction to cleave off the channels into a smaller, still-unnamed new company (currently referred to as “SpinCo,” although NBCU marketers and a few outside firms are currently brainstorming new names) whose stock will largely be owned by Comcast shareholders. Besides NBC and Bravo, the slimmed-down NBCUniversal will continue to operate Peacock, Telemundo, the sizable Universal film and TV studios, the Universal theme parks and the Sky pay TV service that operates in the U.K., Germany, Italy and Ireland. The deal is expected to close by the end of this year.
“My first instinct was ‘Wow, they are building an iceberg bravely facing the sun,’” says Herzog of SpinCo. “I honestly don’t know what to make of it.” (Herzog was there at the peak of cable, overseeing networks including MTV, Comedy Central and USA Network through his career, but left Viacom as head of its music group in 2017.)
Comcast is pitching the spinoff plan as a best-case scenario for both companies: NBCUniversal gets to focus on programming two strong networks that aim for distinct audiences and provide the most-watched elements of its Peacock streamer (specifically, live sports and that addictive Bravo fare). On the production side, Universal Studio Group still sells shows to rivals including Netflix, Amazon, Hulu and CBS, which gives it marketplace clout beyond NBCUniversal’s walls. The streamlined NBCU is projected to generate $40 billion in annual revenue. Meanwhile, SpinCo’s channels are projected to bring in about $7 billion, and the company will shoulder minimal debt when the stock spinoff is completed. Mark Lazarus, a longtime NBCUniversal executive, will exit as part of the spinoff to take the helm of SpinCo as CEO.
“We believe we’ve got a really strong set of assets,” says Lazarus, who notes that NBCU over the past decade hasn’t been afraid to shut down underperforming cable networks including Esquire, Cloo, Sleuth, G4, NBC Sports Network and (as of next month) Universal Kids. With the channels that are left, Lazarus sees opportunity in live sports — USA Network will still get to carry the Olympics even after the separation (and also has the Premier League and NASCAR), while Golf is bulking up its businesses in that niche pastime. With E!, he points to that channel’s live red carpet coverage. And there are new digital opportunities with MSNBC and CNBC, which just launched its own streaming platform.
The hope is that with tighter focus, SpinCo’s leaders will find better ways to manage the decline, and possibly even rehabilitate its channels with new original programming. Meanwhile, here’s a rarity in the business right now: SpinCo is hiring. As it decamps from NBCU, it needs to develop a news-gathering operation (including a new head of that operation, who will report to interim MSNBC prexy Rebecca Kutler) for MSNBC now that it no longer has access to NBC News resources.
SpinCo is currently discussing how to properly separate MSNBC and CNBC from NBC News. That may include moving some NBC News staffers or entities over to MSNBC. And in sports, SpinCo will have to build a team to manage its league deals (although it will outsource production, mostly to NBC Sports).
MSNBC doesn’t currently have a streaming product, and CNBC just launched CNBC+, which is in its early stages. Lazarus notes that most of the NBC News digital investment has gone toward the news group, NBC News Now and “Today,” but with SpinCo’s cash flow, it can now build new ancillary offshoots around the linear cable products. That could include more events, newsletters, audio and other subscription offerings on top of the traditional networks.
“We’ll now have the money to be able to invest into these businesses,” Lazarus says. “We have the ability now to put investment and focus into the digital future of MSNBC and CNBC for their very passionate and loyal audiences. None of the sports that are on USA and Golf Channel are currently streamed. So we have a digital future ahead of us in sports. It may be on our own, or maybe with third-party distributors. Fandango has a real broad digital opportunity. And we will have the capacity to do M&A, to bring in businesses that we think can be accretive to both our bottom line and our strategy.”
Could that be more networks, as perhaps rivals shed their channels? Lazarus cautions that SpinCo isn’t looking to add properties just for the sake of bulking up, but he’s open to properties that bring “real strategic value” to the company.
Across town, companies like Paramount Global and Warner Bros. Discovery will likely be keeping an eye on how Comcast orchestrates this divorce, and what SpinCo does with its assets. There’s little doubt others will consider a similar move to shed cable networks that are underperforming.
The biggest problem is that Wall Street thinks linear cable channels can’t be revived, given that the subscriber base for cable is shrinking every year as more households cut the cord and younger families never sign up.
“We believe that linear TV’s decline in the U.S. is irreversible, but that there is no immediate cliff. We expect the decline will be a steady one that will take years to reach its final conclusion,” says Naveen Sarma, Media & Entertainment managing director for S&P Global Ratings. “However,” he warns, “every day the companies hold on to their linear TV networks, they become less valuable.”
Did cable really have to collapse so fast? Shapiro can name the moment in 2019 that the entertainment giants hit the point of no return with their cable assets.
“Over the course of 12 months, all of them launched streaming services without advertising,” he says. “What the fuck? What were you thinking? They all chased a business model that all of us knew theoretically didn’t work. Like, You went from a dual-revenue stream to a single-revenue stream, and you thought that was going to be totally OK?”
It wasn’t. Netflix’s April 2022 earnings report dropped a bomb — a stunning subscriber loss, which sent its stock price plummeting. That left everyone who had destroyed their cable business to launch a streamer suddenly regretting their hasty pivot but stuck with the reality of what they had done.
In the case of USA Network, NBCU had turned its back on a brand that, at its zenith — roughly between 2005 and 2015 — was a destination for popcorn hits like “Monk,” “Burn Notice,” “White Collar,” “Suits,” “Royal Pains” and “Mr. Robot.” USA’s audience had also been bolstered for decades by its long association with pro wrestling via WWE’s “Monday Night Raw.” USA averaged as many as 3.3 million viewers in primetime at its peak in 2009.
These days, USA Network isn’t in the scripted biz. “WWE Raw” is now on Netflix, where repeats of USA’s legal procedural “Suits” also recently enjoyed a smash second life. (A “Suits LA” revival is heading to NBC, not USA, but at least USA managed to keep some WWE with “Smackdown.”) Sports and repeats have kept the lights on, but last year, USA slumped to No. 9 in cable, with an average of 673,000 viewers.
While the long-term prognosis is bad, cable networks for the foreseeable future are still profitable revenue generators. On Feb. 5, Disney CEO Bob Iger was pressed by Wall Streeters on his long-term vision for ABC, Disney Channel, Disney Jr., Freeform and a handful of other channels. He’s not blind to the realities at hand, but he’s resolute about pay TV, which has been the single biggest driver of earnings for Hollywood’s largest entertainment conglomerates for more than two decades.
“The linear networks at our company are not a burden at all. They’re actually an asset,” Iger said. “We are funding them at levels that give us the ability to enhance our overall television business that obviously includes and leans into streaming, which is really the future of the television business.”
On the MVPD side, Charter Communications recently reported that it had seen a slowdown in cord cutting, thanks to new skinnier bundles — as well as recent deals that has allowed it to bundle streamers like Peacock with its cable packages. “Maybe that helps the ecosystem,” Sarma says. “The skinny down in these bundles, I think should be attractive to consumers. But is it enough to reverse the trends?”
Where does cable go from here? Network carriage fees still make a tremendous difference when it comes to the bottom line for companies like Disney, Paramount Global and Warner Bros. Discovery. But Comcast is diversified enough with its broadband and cable TV service, parks and other assets that it can give up the cable network revenue without taking too much of a hit.
For instance, Comcast’s cable networks, according to Sarma, represent just 5% of its total $38 billion of earnings before interest, taxes, depreciation and amortization. So spinning off cable “makes sense if you’re trying to carve out a business that’s in secular decline,” he says. It’s much tougher for companies like Paramount Global and Warner Bros. Discovery, which really depend on that cable cash flow.
Meanwhile, a handful of independent cable companies are still investing in original fare to keep the lights on — AMC Networks and Hallmark among them. But they’re doing so while experimenting with their own boutique streaming offerings, AMC+ and Hallmark+. While others have retreated from commissioning expensive scripted series (mostly dramas), AMC Networks has been investing — the company, for instance, acquired the TV rights to a raft of Anne Rice books in 2020. AMC has three Rice-inspired supernatural dramas in production — “Interview With a Vampire,” “Mayfair Witches” and the upcoming “The Talamasca” — and even more in the development pipeline.
Not all of AMC’s networks are active — IFC and SundanceTV mostly run old TV repeats now — but flagship AMC is still churning out a robust slate of originals, and that could be a model for SpinCo’s major properties.
“Nobody at AMCN has their head in the sand,” says Dan McDermott, the president of entertainment at AMC Networks and AMC Studios. AMC licenses some of its shows to Netflix, which makes them much more widely available to AMC’s target audience than they are on linear TV. The licensing fees that Netflix pays for the shows also help AMC make up for linear losses. As McDermott puts it, the AMC channel “is a meaningful first window [for AMC shows], but we have all these other windows now.”
USA and Turner networks have in recent times given up any pretense of maintaining a programming brand. But now Dungey and her team are considering developing some modestly budgeted original series to breathe new life into TNT and TBS. (Perhaps that could mean a return to the “We Know Drama” brand at TNT, or the “Very Funny” comedy ethos at TBS.)
And incoming SpinCo entertainment president Val Boreland, another NBCU veteran who will go with the new company, is believed to also be looking at stocking channels like USA and Syfy with more “blue sky” fare.
“When you when you don’t have to shovel your profits over to the other parts of the company, you can reinvest those profits into programming,” says former USA Network president Chris McCumber. “You can reinvest them into partnerships. There’s a lot of smart investments you can make. If you remember the shows that we did back in the ‘Characters Welcome era,’ blue skies at USA Network, those weren’t big budget shows. It wasn’t movie star television, but it was really great TV. There’s definitely a way to do dramas, comedies, any sort of programming you can do that very, very efficiently now.”
Lazarus agrees. “We’ve told the industry that we’re open for business and bring your ideas,” he says. “We will continue to invest and put a balance between our sports, our original content and our acquisitions.”
While the NBCU cable networks currently feed Peacock, once they move to SpinCo, they’ll be free agents — and Lazarus sees opportunity in finding secondary windows for successful series on his channels.
McCumber emphasizes that SpinCo has a small window of opportunity to rebuild while USA still has solid revenue coming in the door. He likens it to “a little bit of back to the future” for the leaders of SpinCo.
“Remember this: [The channels are] incredibly profitable right now,” he says. “Not as profitable as they maybe were five years ago, but if you take a look at USA Network alone, that’s a billion-dollar business. When they’re coupled with the mothership of NBCUniversal, they have to contribute to the other areas of the company that are now prioritized, like Peacock. But if you decouple them from the mothership, they become the priority.”
Producers such as Jeff Wachtel see an opportunity to be entrepreneurial around programming for the SpinCo networks. Wachtel is a veteran cable programmer and studio exec who drove USA’s programming to its mid-2010s peak. He’s now producing shows with unusual financing and distribution models for outlets like Fox and The CW — two other linear-based network that were reinvented over the past few years with an emphasis on live sports and more budget-conscious acquisitions. Like those two networks, the SpinCo properties will need to brainstorm some innovative ways to secure original programming — and that’s where industry savvy comes in.
“You hear it’s hopeless or the model is broken,” Wachtel says. “But survivors know that that’s just an opportunity.” At USA, “we did some good shows, and we were conservative in how we built things out. We were able to create not just a brand for the network, but shows that had enough value that they lived beyond that. There’s still a real opportunity to do that at a few places. Looks like Channing is talking about doing that at TNT. We’ll see what SpinCo becomes. Can they bring people back? Sure. Do I think it was kind of silly to have given up what they had already established? Yes. But you can do it again.”
The other strategy might be looking at why Bravo survived: It has a real, live, relevant beating heart — revolving around Andy Cohen and his “Watch What Happens” talker and cast reunion specials. Why not take that, along with a page from the early, rebellious days of cable and lean into low-cost, live, personality-driven programming and interstitials?
“Talk to your audience,” suggests Herzog. “I don’t see people taking chances like they used to, either on the high end — like HBO might have in the old days — or on the low end, like MTV or Comedy Central. Back then, we did it because we had no resources, we had no money, and we were just like, ‘fuck it. Let’s try this. We’re not going to go broke doing it. Let’s see what happens.’”
And if it doesn’t work, at least cable will go down swinging. As Herzog says, “Survival is not mandatory.”
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