As Disney Retreats, AT&T and Comcast Have Options, , on September 30, 2020 at 11:00 am

Financial News
By High West Capital Partners
On September 30, 2020
In Financial News
Tags:

(Bloomberg Opinion) — Covid-19 has roiled the entertainment industry in ways that threaten to leave a permanent mark. Now, corporate giants such as Comcast Corp. and AT&T Inc. that have staked their futures on the space — from television and cinema, to amusement parks and sporting events — are left facing an uncomfortable choice: retrench or stay the course against increasing investor opprobrium.Comcast, the cable giant that acquired NBCUniversal’s TV networks, film studio and theme parks in 2013, is now the target of an activist shareholder, Nelson Peltz’s Trian Fund Management. The hedge fund is known for pushing needlessly bulky companies to slim down by shedding their weakest assets. In this case, that would be NBCUniversal as well as Sky, Comcast’s recently acquired European satellite-TV unit. Last year, AT&T also attracted an activist, Elliott Management Corp., concerned with the trajectory of its own satellite-TV and Hollywood assets. What the two campaigns appear to have in common is a desire to make better sense of a mishmash of businesses undergoing seismic change that have since been grievously affected by the pandemic. Disney, Universal’s theme-park rival, said Tuesday it would let go of 28,000 workers from its U.S. parks.It all comes as the media moguls who erected the industry’s towering conglomerates exit the stage. AT&T’s longtime leader, Randall Stephenson, 60, handed the reins to his No. 2 in July, while Walt Disney Co.’s Bob Iger, 69, stepped aside in February. One notable exception is Comcast CEO Brian Roberts; he is 61, and there hasn’t been talk yet of his retirement. Trian Fund can make noise or polite suggestions in hopes of influencing Comcast’s strategy, but the reality is that Roberts is untouchable. He’s been appointed CEO Comcast for life — so says the company’s highly unusual articles of incorporation:The Chairman shall be Mr. Brian L. Roberts if he is willing and available to serve. … The CEO shall be Mr. Brian L. Roberts if he is willing and available to serve. For so long as Mr. Brian L. Roberts shall be the CEO, he shall also be the President of the Corporation.These legally binding terms are reinforced by the dual-class structure of Comcast shares. That gives Roberts 33% of the voting power over the $214 billion behemoth, which began as a small Mississippi cable system under his late father, Ralph Roberts.Trouble is, the younger Roberts’s empire-building has taken a hit from the pandemic. The coronavirus is making people a lot less eager to visit movie theaters and theme parks. In a Morning Consult poll this month, 37% of U.S. adults said it would take more than six months to feel comfortable going to the movies again, and 42% said the same for amusement parks. Covid-19 has also disrupted sports leagues, postponed the Olympics and made it difficult to shoot and keep schedules on track for new TV shows and films. Advertiser demand has also dried up. Amid all of this, the streaming wars continue to play out, with NBC’s new Peacock app fading behind Netflix Inc. and Disney+. Sky, which Comcast wrestled from Disney and Fox less than two years ago, has also disappointed. Craig Moffett, an analyst for MoffettNathanson LLC, estimates Sky is now worth $10.5 billion, about a fifth of what Comcast paid. It’s a different story, though, for Comcast’s legacy business. Surging use of streaming-video services and the rising number of smart devices per household are driving more people to seek internet service and faster speeds. Comcast signed up 800,000 internet subscribers in the first half of the year, nearly offsetting the 815,000 residential pay-TV customers it lost in that span. The unit generated 61% of Comcast’s revenue in the June quarter and 77% of its adjusted Ebitda.Shareholders really like this business, just as they prefer AT&T’s wireless operations over its HBO Max gambit. Both companies try to argue that there’s a symbiotic relationship between the two sides of their businesses — communications and entertainment — but it’s just not that convincing. Yet media moguls, in their quest for power, just can’t quit buying stuff they don’t need. One option is to spin off NBCUniversal and Sky, freeing them of some debt — which Comcast cable can shoulder — and allowing them to invest unencumbered in content and streaming. Comcast would then be able to spend more on share repurchases and perhaps expand further into mobile 5G service. This year was a reminder of the important role entertainment plays in people’s lives, and how much it’s missed when we can’t have it. Even so, the industry’s present and future is disconcerting. It may be time for Comcast to roll the credits on its Hollywood feature — but good luck persuading Roberts.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals. She previously wrote an M&A column for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.,

As Disney Retreats, AT&T and Comcast Have Options(Bloomberg Opinion) — Covid-19 has roiled the entertainment industry in ways that threaten to leave a permanent mark. Now, corporate giants such as Comcast Corp. and AT&T Inc. that have staked their futures on the space — from television and cinema, to amusement parks and sporting events — are left facing an uncomfortable choice: retrench or stay the course against increasing investor opprobrium.Comcast, the cable giant that acquired NBCUniversal’s TV networks, film studio and theme parks in 2013, is now the target of an activist shareholder, Nelson Peltz’s Trian Fund Management. The hedge fund is known for pushing needlessly bulky companies to slim down by shedding their weakest assets. In this case, that would be NBCUniversal as well as Sky, Comcast’s recently acquired European satellite-TV unit. Last year, AT&T also attracted an activist, Elliott Management Corp., concerned with the trajectory of its own satellite-TV and Hollywood assets. What the two campaigns appear to have in common is a desire to make better sense of a mishmash of businesses undergoing seismic change that have since been grievously affected by the pandemic. Disney, Universal’s theme-park rival, said Tuesday it would let go of 28,000 workers from its U.S. parks.It all comes as the media moguls who erected the industry’s towering conglomerates exit the stage. AT&T’s longtime leader, Randall Stephenson, 60, handed the reins to his No. 2 in July, while Walt Disney Co.’s Bob Iger, 69, stepped aside in February. One notable exception is Comcast CEO Brian Roberts; he is 61, and there hasn’t been talk yet of his retirement. Trian Fund can make noise or polite suggestions in hopes of influencing Comcast’s strategy, but the reality is that Roberts is untouchable. He’s been appointed CEO Comcast for life — so says the company’s highly unusual articles of incorporation:The Chairman shall be Mr. Brian L. Roberts if he is willing and available to serve. … The CEO shall be Mr. Brian L. Roberts if he is willing and available to serve. For so long as Mr. Brian L. Roberts shall be the CEO, he shall also be the President of the Corporation.These legally binding terms are reinforced by the dual-class structure of Comcast shares. That gives Roberts 33% of the voting power over the $214 billion behemoth, which began as a small Mississippi cable system under his late father, Ralph Roberts.Trouble is, the younger Roberts’s empire-building has taken a hit from the pandemic. The coronavirus is making people a lot less eager to visit movie theaters and theme parks. In a Morning Consult poll this month, 37% of U.S. adults said it would take more than six months to feel comfortable going to the movies again, and 42% said the same for amusement parks. Covid-19 has also disrupted sports leagues, postponed the Olympics and made it difficult to shoot and keep schedules on track for new TV shows and films. Advertiser demand has also dried up. Amid all of this, the streaming wars continue to play out, with NBC’s new Peacock app fading behind Netflix Inc. and Disney+. Sky, which Comcast wrestled from Disney and Fox less than two years ago, has also disappointed. Craig Moffett, an analyst for MoffettNathanson LLC, estimates Sky is now worth $10.5 billion, about a fifth of what Comcast paid. It’s a different story, though, for Comcast’s legacy business. Surging use of streaming-video services and the rising number of smart devices per household are driving more people to seek internet service and faster speeds. Comcast signed up 800,000 internet subscribers in the first half of the year, nearly offsetting the 815,000 residential pay-TV customers it lost in that span. The unit generated 61% of Comcast’s revenue in the June quarter and 77% of its adjusted Ebitda.Shareholders really like this business, just as they prefer AT&T’s wireless operations over its HBO Max gambit. Both companies try to argue that there’s a symbiotic relationship between the two sides of their businesses — communications and entertainment — but it’s just not that convincing. Yet media moguls, in their quest for power, just can’t quit buying stuff they don’t need. One option is to spin off NBCUniversal and Sky, freeing them of some debt — which Comcast cable can shoulder — and allowing them to invest unencumbered in content and streaming. Comcast would then be able to spend more on share repurchases and perhaps expand further into mobile 5G service. This year was a reminder of the important role entertainment plays in people’s lives, and how much it’s missed when we can’t have it. Even so, the industry’s present and future is disconcerting. It may be time for Comcast to roll the credits on its Hollywood feature — but good luck persuading Roberts.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals. She previously wrote an M&A column for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

,

Instant Quote

Enter the Stock Symbol.

Select the Exchange.

Select the Type of Security.

Please enter your First Name.

Please enter your Last Name.

Please enter your phone number.

Please enter your Email Address.

Please enter or select the Total Number of Shares you own.

Please enter or select the Desired Loan Amount you are seeking.

Please select the Loan Purpose.

Please select if you are an Officer/Director.

High West Capital Partners, LLC may only offer certain information to persons who are “Accredited Investors” and/or “Qualified Clients” as those terms are defined under applicable Federal Securities Laws. In order to be an “Accredited Investor” and/or a “Qualified Client”, you must meet the criteria identified in ONE OR MORE of the following categories/paragraphs numbered 1-20 below.

High West Capital Partners, LLC cannot provide you with any information regarding its Loan Programs or Investment Products unless you meet one or more of the following criteria. Furthermore, Foreign nationals who may be exempt from qualifying as a U.S. Accredited Investor are still required to meet the established criteria, in accordance with High West Capital Partners, LLC’s internal lending policies. High West Capital Partners, LLC will not provide information or lend to any individual and/or entity that does not meet one or more of the following criteria:

1) Individual with Net Worth in excess of $1.0 million. A natural person (not an entity) whose net worth, or joint net worth with his or her spouse, at the time of purchase exceeds $1,000,000 USD. (In calculating net worth, you may include your equity in personal property and real estate, including your principal residence, cash, short-term investments, stock and securities. Your inclusion of equity in personal property and real estate should be based on the fair market value of such property less debt secured by such property.)

2) Individual with $200,000 individual Annual Income. A natural person (not an entity) who had individual income of more than $200,000 in each of the preceding two calendar years, and has a reasonable expectation of reaching the same income level in the current year.

3) Individual with $300,000 Joint Annual Income. A natural person (not an entity) who had joint income with his or her spouse in excess of $300,000 in each of the preceding two calendar years, and has a reasonable expectation of reaching the same income level in the current year.

4) Corporations or Partnerships. A corporation, partnership, or similar entity that has in excess of $5 million of assets and was not formed for the specific purpose of acquiring an interest in the Corporation or Partnership.

5) Revocable Trust. A trust that is revocable by its grantors and each of whose grantors is an Accredited Investor as defined in one or more of the other categories/paragraphs numbered herein.

6) Irrevocable Trust. A trust (other than an ERISA plan) that (a)is not revocable by its grantors, (b) has in excess of $5 million of assets, (c) was not formed for the specific purpose of acquiring an interest, and (d) is directed by a person who has such knowledge and experience in financial and business matters that such person is capable of evaluating the merits and risks of an investment in the Trust.

7) IRA or Similar Benefit Plan. An IRA, Keogh or similar benefit plan that covers only a single natural person who is an Accredited Investor, as defined in one or more of the other categories/paragraphs numbered herein.

8) Participant-Directed Employee Benefit Plan Account. A participant-directed employee benefit plan investing at the direction of, and for the account of, a participant who is an Accredited Investor, as that term is defined in one or more of the other categories/paragraphs numbered herein.

9) Other ERISA Plan. An employee benefit plan within the meaning of Title I of the ERISA Act other than a participant-directed plan with total assets in excess of $5 million or for which investment decisions (including the decision to purchase an interest) are made by a bank, registered investment adviser, savings and loan association, or insurance company.

10) Government Benefit Plan. A plan established and maintained by a state, municipality, or any agency of a state or municipality, for the benefit of its employees, with total assets in excess of $5 million.

11) Non-Profit Entity. An organization described in Section 501(c)(3) of the Internal Revenue Code, as amended, with total assets in excess of $5 million (including endowment, annuity and life income funds), as shown by the organization’s most recent audited financial statements.

12) A bank, as defined in Section 3(a)(2) of the Securities Act (whether acting for its own account or in a fiduciary capacity).

13) A savings and loan association or similar institution, as defined in Section 3(a)(5)(A) of the Securities Act (whether acting for its own account or in a fiduciary capacity).

14) A broker-dealer registered under the Exchange Act.

15) An insurance company, as defined in Section 2(13) of the Securities Act.

16) A “business development company,” as defined in Section 2(a)(48) of the Investment Company Act.

17) A small business investment company licensed under Section 301 (c) or (d) of the Small Business Investment Act of 1958.

18) A “private business development company” as defined in Section 202(a)(22) of the Advisers Act.

19) Executive Officer or Director. A natural person who is an executive officer, director or general partner of the Partnership or the General Partner, and is an Accredited Investor as that term is defined in one or more of the categories/paragraphs numbered herein.

20) Entity Owned Entirely By Accredited Investors. A corporation, partnership, private investment company or similar entity each of whose equity owners is a natural person who is an Accredited Investor, as that term is defined in one or more of the categories/paragraphs numbered herein.

Please read the notice above and check the box below to continue.

Singapore

168 Robinson Road,
Capital Tower, Singapore 068912
+65 3105 1295

Taiwan

5th Floor, No. 1-8, Section 5, Zhongxiao East Road, Taipei

Hong Kong

R91, 3rd Floor,
Eton Tower, 8 Hysan Ave.
Causeway Bay, Hong Kong
+852 3002 4462

Australia

44 Martin Place, Sydney 2000 Australia
+02 8319 3232

Indonesia

Millennium Centennial Center, 38th Floor, Jl. Jend. Sudirman Kav. 25
Jakarta 12920, Indonesia

Market Coverage