Mike Cavanagh, President of Comcast Corporation attends the Allen & Company Sun Valley Conference on July 10, 2024 in Sun Valley, Idaho. T
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Comcast’s top brass on Monday pulled the curtain back on the company’s unsuccessful bid for Warner Bros. Discovery, detailing an offer far different from its rival bidders.
Mike Cavanagh, Comcast president and soon-to-be co-CEO, walked through the specifics of the proposal —and the company’s thinking — during the UBS Global Media and Communications Conference on Monday, just days after Comcast was knocked out of the bidding war for Warner Bros. Discovery assets.
“When we looked at the circumstances of how it all came to be … we didn’t expect that we had a high likelihood of prevailing with a deal that made sense to us. We debated whether to bother or not. Do we want the disruption? Do we want the distraction?” said Cavanagh. “But it’s our job, so we thought better to take a look and do the work and see where it leads. You never know. And so that’s what we did.”
Comcast, like Netflix, bid solely on the Warner Bros. film studio and HBO Max streaming business. Paramount Skydance’s offer was for the entirety of the business, including the cable TV portfolio comprised of networks like CNN and TNT.
“We are not interested in stressing the Comcast balance sheet,” Cavanagh said Monday. “As a result, that meant our proposal was light, relative to other proposals from what I gather, on cash.”
Last week Netflix was named the winning bidder. On Monday Paramount launched a hostile offer.
Comcast offered “a significant chunk of equity in a combined entertainment company,” which would have put NBCUniversal — including its Universal theme parks and film studio as well as its broadcast network and streaming platform Peacock — together with Warner Bros.’ studio and HBO Max, Cavanagh said.
The resulting combination would have been a publicly traded, controlled subsidiary of Comcast.
That vehicle would provide shareholders with returns, but would not constitute a full spinout, which would have involved a complete separation of the companies. Comcast’s NBCUniversal is in the midst of a spinout of its portfolio of cable TV networks, which includes CNBC.
In contrast, Netflix’s proposed transaction is comprised of cash and stock, valued at $27.75 per WBD share. The equity value of the transaction is $72 billion, with a total enterprise value of about $82.7 billion.
Paramount went straight to WBD shareholders on Monday with an all-cash, $30 per share tender offer, which equates to an enterprise value of $108.4 billion.
“We respect and understand the decision of the Warner Brothers board to obviously prefer the certainty of high levels of cash or collared stock,” said Cavanagh.
Comcast leadership has long said the company’s bar for doing mergers and acquisitions is high.
“Good news is that we like what we are doing … and we roll on with a lot of focus, but I think we’re better for having taken a look,” Cavanagh said.
Peacock aspirations
Macy’s Thanksgiving Day Parade, 2023: Birds Of A Feather Stream Together – Peacock Float
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Comcast’s NBCUniversal has been shape-shifting in recent years — from the spinout of its cable TV networks, to a heavy focus on bulking up on sports rights like the NBA, to building out its theme parks presence.
The company has also been building out Peacock. NBCUniversal launched its streaming play in 2020 and it has slowly built up since then.
As of Sept. 30 Peacock had 41 million subscribers, paling in comparison to HBO Max’s 128 million customers as of Sept. 30 and Netflix’s more than 300 million customers as of late 2024.
Cavanagh said Monday that had Comcast’s offer for Warner Bros. Discovery been successful, “it would have been an interesting play.”
“It probably would have changed our streaming aspirations to be global streaming aspirations by necessity,” he added.
Sports have been key to the playbook in fueling Peacock’s subscriber growth. NBCUniversal has nabbed exclusive NFL games to Peacock in addition to simulcasting its “Sunday Night Football” package from NBC’s broadcast network. It paid heavily to bring back the NBA to NBC, with exclusive games for Peacock, too. The Olympics have also be integral in its growth.
Live events such as the Macy’s Thanksgiving Day Parade have helped boost viewership across TV and streaming, too.
Peacock has also been increasing its subscription price, similar to its peers. In July Peacock raised prices again, just months ahead of the beginning of the NBA season.
Unlike most of its competitors, Peacock has yet to report a profit, however. For the quarter ended Sept. 30, Peacock reported losses of $217 million, an improvement from $436 million in losses during the same period last year. Cavanagh noted Monday that Peacock improved in the trailing 12 months by $900 million in earnings before interest, taxes, depreciation and amortization.
Peacock’s losses are expected to “meaningfully improve” next year compared with 2025, with “a trajectory to a positive future.”
Disclosure: CNBC parent NBCUniversal owns NBC Sports and NBC Olympics. NBC Olympics is the U.S. broadcast rights holder to all Summer and Winter Games through 2036. Versant would become the new parent company of CNBC upon Comcast’s planned spinoff of Versant.
