• by Wayne Friedman , December 3, 2024

With Comcast's recent decision to spin off cable networks, there is a strong likelihood that consolidation of live, linear TV networks is coming, according to analysts -- but probably not next year.

“Cable network consolidation through SpinCo [Comcast's proposed cable TV networks company] is not imminent and unlikely to play out until at least 2026,” says Craig Moffett, media analyst of MoffettNathanson Research.

Moffett says SpinCo debuting as a new publicly traded company will not be completed until next year. Comcast also wants to protect SpinCo's tax-free status.

Still, the financial backdrop for consolidation is obvious and ready to go for many.

For example, MoffettNathanson Research estimates revenue from Warner Bros. Discovery’s live, linear cable TV networks will decline 13% in 2024 to $20.1 billion, while AMC Networks will dip 21% lower to $2.4 billion.

WBD's cash flow (earnings before interest, taxes, depreciation and amortization) will sink 18% (to $8.3 billion), with AMC down 22% (to $500 million).

Fox Corp. cable networks are projected to see revenues rise by 6% to $6.5 billion, due to its strongly performing news and sports content, while cash flow is expected to climb 10% to $2.8 billion.

“Given this backdrop, it is clear further consolidation is needed,” Moffett writes -- which means anticipating some deals involving cable network groups for Warner Bros. Discovery, Paramount Global, AMC Networks and SpinCo will occur to cut operational costs.

Moffett believes Comcast's proposed spinoff of cable networks -- MSNBC, USA Network, Oxygen, Golf Channel, E! , SyFy, and CNBC, along with digital media companies Rotten Tomatoes, Fandango, Golf Now, and Sports Engine -- will be a major factor in any industry consolidation move.

He guesses that “the most intriguing potential combination would be a combined bid from Comcast/NBCU RemainCo and SpinCo for all of Warner Bros. Discovery.”

WBD has the largest number of cable TV networks -- with over 20 channels.

Moffett says Paramount Global's situation is less certain around any near-term cable TV network spinoff, given some issues around Skydance Media's plan in taking over the company.

Currently, MoffettNathanson Research estimates the $7 billion in annual revenue from Comcast cable networks breaks down into $4.7 billion (67%) from linear distribution revenue, $1.6 billion (22%) from linear TV advertising, and $800 million in other revenue. The operating cash flow margin is estimated at 30%, or $2.1 billion.