I wish we could go back to the old days where you just got all your stuff from one company and it was called cable TV. Wouldn't that be funny? Haha.
You hated it. Everyone hated that model. Everyone who says we should go back to the model either was not alive or was not paying their bill back when that model existed. They get paid for CNBC and MSNBC and whatever else regardless.
Regardless of whether anyone watches it, yes.
And this is maybe the greatest business model in history, right? Like...
We're just doing the same... We're just doing the podcast for each other this week. I love it.
Hello, and welcome to Decoder. I'm Nilay Patel, editor-in-chief of The Verge, and Decoder is my show about big ideas and other problems. Today, I'm talking with Peter Kafka, who is chief correspondent at Business Insider and host of Channels, a podcast about the media industry. It's a big week for the media industry. Comcast just announced it's splitting itself up into the Comcast Broadband Company and the NBCUniversal Entertainment Company. That comes after the media giant spun out its cable assets like CNBC and MSNBC into a new company called Versant earlier this year.
A quick note before we start, by the way. Longtime Verge fans know we've been disclosing that Comcast NBCUniversal was an investor in our parent company Vox Media for years now. That's all come to an end. Not only did that investment spin out with Versant, but Vox Media itself is splitting in two. And that Versant stake now lives inside of a shell company that is part of a joint venture with a Penske Media Corporation called PMX. And PMX technically does not exist yet. It is all very complicated, and I promise I will sort out a simpler disclosure when all of these deals close. But for now, the upshot is the same as ever. None of these companies have ever told us what to do or say in our reporting, and we wouldn't let them if they tried. Which is good, because Peter and I have a lot to say about Comcast.
He and I have been covering media and telecom as friends, peers, and competitors for years now, and Comcast was the biggest bet on the idea that combining media assets like NBC with access and distribution like Comcast's broadband network would somehow pay off. This idea, which you'll hear us loosely call content plus pipes, is irresistible to media and telecom people. They cannot stay away from it. AT&T tried content and pipes when it bought Time Warner. Verizon tried content and pipes when it bought AOL and Yahoo. Hell, AOL itself tried content and pipes when it bought Time Warner in the early 2000s. You might notice a trend here. All of these deals ended in disaster, but Comcast managed to hold it together with NBCU for 15 years, even though they could never quite explain what value there was in putting the content near the pipes. This is a good one. As you'll hear, Peter and I really like talking to each other about this stuff. Okay, Peter Kafka on the Comcast split. Here we go.
Peter Kafka, you're the chief correspondent for Business Insider, as well as the host of the excellent media industry podcast Channels. Welcome to Decoder.
Thank you, Nilay. Thank you for having me.
I have to say Channels is excellent because I was just on it. That's how I know it's...
It was an excellent episode.
Yeah, and so we're trading it back, but I'm really excited to talk to you about what's going on with Comcast because it feels like you and I have spent our careers weaving in and out of covering Comcast around each other. You especially.
Turns out we were stupid. We should have just slept for the last 15 years and woken up and then nothing would have changed.
One of my favorite moments of all of the weaving back and forth was — it wasn't Comcast specifically, but you had Reed Hastings on stage at an All Things D or Code Conference and you asked him about net neutrality, which we will come to in the course of this conversation, and he was like, 'Yeah, it's over. We're big enough. It doesn't matter anymore.' And I think that's in many ways this was a pivotal moment in the history of internet and content because what he was saying was that he had reached enough scale so that the distributors, the power now had to come to his terms. And if you look back, I think you can trace almost everything that's happened to that moment. Netflix announcing to you that they were big enough that everyone had to deal with them.
Yeah, and it's funny because I always think of that as a classic like, 'Oh, nerds or people who care about this thing that we said we cared about? That's fine. We've just moved on.' Because there was a huge part of the internet or internet culture that was just despondent about the fact that Netflix had been their sword carrier for this stuff and that they were done carrying swords. Shield carrier? Shield?
They had both. They had a sword and a shield. Yeah, you're...
But you've nailed it. I mean, and we'll get into it, but I think Netflix is the great example of why this convergence dream that Comcast, among many others, chased doesn't... is not material for 2026 and they're finally acknowledging that.
Yeah, everyone had to go to Netflix because Netflix had built enough audience. And I think that's where you can begin this conversation. It might be where you can end it, right? That Comcast isn't going to break itself up into a content arm and a broadband arm and maybe those two companies will work together and maybe they won't, but there's just a moment that I think you can point to and say, 'Oh, this was inevitable.' It was inevitable that the dream of the giant multinational conglomerate would have to unbundle itself. And I feel like we're in a time of great unbundling right now.
Yeah, this is a classic cliché. The media bundles and rebundles. We're in the unbundling part of the pendulum shift. I'm sure at some point we'll move back to, 'Hey, wouldn't it be great if we bundled?' But yeah, I mean, the great thing is the bankers and lawyers remain undefeated because they get paid no matter what for every... You do a transaction and it makes no sense, you get paid to undo the transaction.
Every time anyone says that to me, I'm like, 'Why did I quit being a lawyer to be a journalist?' I could have been getting paid on every one of these deals. Let's start at the very start. I jumped way into the weeds because it is true you and I have covered Comcast together and around each other for so long, but let's just start at the start here. Comcast announced they're splitting itself up. At a high level, what's happening here?
So, Comcast started splitting itself up earlier this year. It spun out what is now called Versant. That's their collection of cable networks that no one wants. And they split that off and that was pure financial engineering. That was, 'Hey, maybe if we get rid of this thing, this declining asset, Wall Street will value us more,' because their stock really has been sort of mired for many, many years. That did not move the stock. Cut to last week, they announced, 'Okay, we'll split ourselves up even more. We are now going to be what we were before we bought NBCUniversal. Going to be a Comcast, the company that sells you broadband connections to your home and now some other stuff as well. That'll be one company. There'll be another company that is NBCUniversal, which is NBC the broadcast network, Bravo the cable network for some reason, Peacock the streaming network, the Universal Studios theme park business, big business, and the actual film and TV studio owned by Universal. So, those are big assets and they're all entertainment. And for years and years and years, Comcast CEO Brian Roberts would get asked by all sorts of folks, 'Why do you own a media company and infrastructure company?' And he would have some answer that didn't really make sense. And the real answer is now, which is actually we shouldn't have those two companies combined. They should be separate companies.'
Let's rewind just a little bit. Comcast buying NBCUniversal was a big deal at the time. And a lot of people made the argument that Comcast NBC was the only company of its kind that actually worked. That every other company that had tried to smash together content and pipes kind of failed from the jump. AT&T Time Warner I think is maybe the classic example of this.
Yeah, they didn't even get started.
Yeah, they were like, 'Well, this failed instantly.' And AT&T would make crazy arguments about why it would work. That they were going to load clips of Game of Thrones on mid-range Android phones and that would make people pick AT&T.
And they were going to have amazing data somehow and on underpants down.
Yeah, and it literally just didn't work from the very beginning. There was an argument that Comcast and NBCUniversal worked for a time. What was that argument?
I don't know about that argument, honestly. Like, it never worked in terms of there is a synergy between owning the pipes that distribute content and owning the content. Comcast did own some cable stuff before they went and bought NBCU, so that made sense to fold into NBCU. You can argue that NBCU performed well as an asset under Comcast. You know, again, that theme park business is a real business. They've invested a lot in that. Studio has ups and downs, but it's still a thing that exists and is valuable. But I don't think they've ever proven that there is some benefit from adding the content company to the distribution company. Which is what, you know, a lot of people thought was going to happen when they merged. It freaked out a lot of people. 'Oh, what happens if this big cable distributor now owns these cable networks?' And in fact, that was a real concern for the Department of Justice. They had all kinds of remedies and restrictions around that merger to prevent the abuse. But in the end, I don't know that anything that Comcast, the pipes company, was helped at all by owning the content or vice versa.
And yet it persisted this long. I mean, we're 10, 15 years into this experiment. Why did it last so long if the thesis never made any sense?
Great question. Comcast is a publicly owned company, but it's really a family-owned company. It's the Roberts family. Like a lot of these big media and now tech companies, they are essentially family-run companies, even if they're publicly traded. That's the New York Times. That used to be Viacom. It is now Paramount. We can keep going down the list. Wall Street Journal. The Murdochs, again, publicly traded, controlled by one family. So, it can be as simple as Brian Roberts saying, 'No, this is going to work.' And mind you, they were still trying to expand their media business as recently as a few months ago. They were bidding for part of Warner Brothers Discovery. They were the third bidder in that deal. They didn't try that aggressively, but they were willing in theory willing to spend billions of dollars to expand that media company. I think it is probably as simple as after years and years and years of being told by Wall Street, 'We don't value this asset you want it all. We don't care about your giant media company you own. We only care about your broadband company.' They finally said, 'Okay, we will take you at your word, Wall Street. We'll split it up.' And it's that simple.
And why they stuck it out for 15 years. I mean, we sort of do make fun of AT&T buying WarnerMedia and ditching it a couple years later. At least with AT&T you can say they looked around and said, 'We thought we'd get rewarded by Wall Street for this deal.' They had this synergy plan for AT&T Warner Brothers Discovery, but the real answer was we thought if we owned a media company, we would get valued like Netflix is valued. And Wall Street again did not reward AT&T at all for that deal. And they turned around and said, 'All right, let's just get out of here.' And so you could argue that AT&T behaved more responsibly than Comcast did. And Comcast would argue, 'Look, we have behaved responsibly. We've grown this asset. The fact that we're splitting it up is just a technicality.'
Well, two things here. One, it's funny because Netflix is fundamentally valued like a tech company, not a media company. So everyone feels very confused about that just from the jump. And second, AT&T might have been more responsible, but fundamentally the thing they did was they gave Zack Snyder millions upon millions of dollars to make a grayscale version of Justice League in 4:3, which is just one of the all-time funniest telecom company investments in history, I think.
They had so many great deals.
They did that Friends reunion with poor Matt Perry all drugged up. And sorry, that's actually kind of a grim story. We shouldn't get into that. They generated a lot of entertainment for us, so that was good.
So, give them credit for that.
You and I stayed in business. But it is funny that AT&T, you know, a telecom company, is more like a tech company on its face than a media company. And they chased a tech company valuation by investing in media. And it feels like maybe Comcast wanted that same thing. And they actually got the benefit of running a media company people liked.
Yeah, and they bought it cheap, right? They bought it cheap from GE. Again, conglomerates love media companies. And why did GE own a media company? What did that have to do with GE Finance or any of the industrial? Nothing. They just wanted to own a media company. And they concluded that wasn't helping them either, so they spun it off at a fairly cheap price. And again, Comcast can say that deal has worked out well for us, you know, on our P&L. It just has not been rewarded — shareholders have not rewarded us for it.
This kind of brings us to the immediate question. You're going to turn Comcast from one big company into two smaller companies. Is this designed to create value by having those smaller companies get bought themselves, further split up? It seems like all the executives are saying that is absolutely not the plan. But it feels like an obvious next step.
It feels like an obvious next step. So, first of all, like you said, the Comcast folks have been asked about this and said, 'Absolutely not. We're not selling. We're not selling. We're not selling.' Which can be absolutely what they mean, and it can be absolutely what they mean up until the day they decide to sell one of those assets. There's tax implications that make it difficult for them to go and turn something around right away. So, they might end up holding these things for some period of time before they decide to sell them. I think it's worth noting that if you're a Comcast shareholder, you're going to own 20% of this spun-out company, but not for very long. They're going to sell that down. So, to me, that's a little bit of a tell. But the main reason it flashed in my mind that this will be an M&A event is when Warner Bros. Discovery was trying to financially engineer its way out of the mess it had made with its AT&T deal. They were going to split their company up into the good company, which was HBO and the studio and the cable assets. And the idea was one will dump the cable assets, maybe that will make our existing stuff look more valuable to investors. Also, there's lots of companies out there that want to buy HBO and/or a movie studio. There are no companies out there that want to buy HBO, Warner Brothers, and a bunch of declining cable networks. Turns out they were wrong. There was Paramount. But the idea was they were splitting these things up to make them more sellable, to make them more attractive for sale. So, two things can be true at once. They can say they have no intention of selling either of these assets. People think it would be Charter and Comcast as a combination on the other side. But they have now made them more acquirable if they want to do that.
What's up with Versant for one second? That was the first thing that split off. You can see that they were just trying to cut costs there. Maybe most definitively in the rebranding of MS Now, upon which they spent approximately zero dollars. Right? Like the graphics package for that is straight out of Microsoft Paint. Like zero effort was put towards rebranding MS Now. This thing is just going to be...
Your word for it, because I cannot tell you I'm familiar with the graphics package of MS Now.
See, this is the reason they didn't spend any money on it. CNBC did a little bit better. They kept the NBC in the name because that's just a household brand. That might be the biggest piece of that puzzle is that CNBC is still doing well. What is the future of Versant? If all the cable channels that were distributed on Comcast's network are declining...
...all of Paramount's cable channels are declining, it feels like that company has only one direction to go in unless it radically reconfigures itself for the internet.
That's what it seems like to me and anyone else from the outside. If you thought this stuff was valuable, you would have kept it. Comcast has two responses to that. One is, 'Hey, if we really thought this was a piece of shit, we would have loaded it up with a bunch of debt like AT&T did with Warner Brothers, which then prevented Warner Brothers from ever doing anything else after that. And we have not done that.' That is true. If they really wanted to just make that a garbage disposal of a company, they could have done that. And then I had Mark Lazarus, the CEO of Versant — there he is aware that his cable assets are declining. And his goal is to build them up with something else, to take things that are declining, but they still throw off a lot of money, and throw off less money each year, but the idea is while that stuff is still making money, can we go and find other things that will generate more revenue for us?
You know, you and I have been covering Comcast forever. The main thing I've done forever is watch old media companies try to struggle with new technology. And even when they can see the future — because some of them can't see the future, but eventually they all can sort of see the future. Okay, we know the future is over there. The existing business we have is over here. We have to keep running that business, or we can't get to the new thing, and they usually get screwed. They usually can't figure out how to go to the new place while staying in the old place, because that would require some kind of time travel, right? Or a foot in each canoe is the easier metaphor. So, that is what Versant is trying to do. We have this existing declining, but profitable business, what can we turn that into? That's the pitch.
The reason I ask that is usually a foot in each canoe is great, but you got to turn down the money from the old canoe in order to go invest in the new money that you might make on the new platforms. Versant makes a lot of money because people have cable packages.
And they get paid for CNBC and MSNBC and whatever else, regardless...
Regardless of whether anyone watches it, yes.
And this is maybe the greatest business model in history, right? Like...
We're just doing the same... We're just doing the podcast for each other this week.
Listeners should know that Peter and I share a lot of history covering these companies. If it's not obvious by now, this is the greatest business model in history. You get paid no matter what. It's just because people subscribe to a subscription bundle of cable channels.
That business is not just in decline for Versant. It's in decline overall. And you can see it because Comcast's pay TV business is essentially in free fall.
This is what's called cord cutting and it is just happening every single month at massive rates. I think they're at maybe 50% of their peak in 2008. They're like under 10 million pay TV subs. There's a lot of reporting that says YouTube TV is now bigger, which is wild considering how expensive YouTube TV is.
If YouTube TV is not bigger now, it will be in a year or two. It will be the biggest pay TV company in America.
Is there any way out of that beyond just cutting bait? Because it feels like Comcast splitting off its access division, its broadband and pay TV division, is a sign that that business is going away somehow or getting smaller somehow. And then Versant is tied to the economics of the pay TV business unless it can reinvent itself. All the cable channels are tied to the economics of the pay TV.
Yeah, so you want to talk about Versant or you want to talk about Comcast, the broadband company?
Well, I'm focused on the fact that this one company that had sort of intertwined economics...
...is splitting itself into three and the economics are still intertwined and I don't see how the pay TV business ever recovers. And if the pay TV business never recovers, the cable business at Versant can never recover. And so everyone has to pivot away from their core businesses.
Yeah, Versant can't be in the position where you're buying a package of MS Now and CNBC and the Golf Channel from us in 5 years, right? They know that. I mean, they might still have a segment of that just like AOL still had a dial-up business for years.
When I worked at AOL, it was like a dirty secret that old ladies were still paying for dial-up.
So, that's like an interesting business school case study, right? How do you — you know this thing is happening, what can you do? How can you extract value out of it? Will this thing be a standalone company for X number of years, or will it then get combined to something else? Will some version of Bending Spoons buy it for the digital glue factory that is Bending Spoons? The Comcast part of it is pretty interesting because for several years now the Comcast argument has been we're not really a cable TV company anymore. In fact, we don't actually care if you buy cable TV from us. We're happy to sell it to you, but all we want is for you to buy our broadband. And that is an awesome business. It is super high margin. We have — they won't ever use these words — either a monopoly or a duopoly in almost every market we're in. If you want the internet, you're getting it from us, and after that, we don't care what you do. And that looked like an awesome business, and there was a point in which they formally crossed over and had more broadband subscribers than they had video subscribers. And that was a big moment. Like, Comcast is not a cable TV company anymore. And so if you look at where they are today, that all makes sense. If you see them shedding media. Their other problem, though, is that the broadband business is not as good as it used to be because there actually is competition now. There is fixed wireless from T-Mobile and Verizon, and I'm sure folks who listen to Decoder have heard you talk about this in the past, but it went from being sort of a fringe idea to it's real competition now. Now their broadband numbers, which used to go up and up and up every year, are now flat or sometimes down because they are facing real competition. So, that's a problem for them. They are trying to sort of engineer their way out of that, but one thing they're doing on top of that is saying, 'I guess we should be in another business. Okay, why don't we sell wireless? If the wireless guys are going to sell broadband, we can sell wireless.' So they are now building up a wireless business. And there's no obvious synergy there other than if you're going to buy internet from us, maybe you'll buy a phone connection as well. So it is not a clear-cut sort of business as it used to be even like five years ago.
That wireless business has always been a puzzle for me. They've tried it for many years in the markets they're in to bundle wireless, but they're always reselling someone else's network.
Right? They haven't built one of their own. Other big pay TV companies that have tried to build their own wireless networks and pivot their businesses have more or less fallen on their face. I'm thinking of Dish Network specifically here. They were supposed to be the big winners of the T-Mobile and Sprint merger where the government literally engineered a deal for them to take over some spectrum and part of Sprint's network. Dish Network just declared bankruptcy. Like this just did not work. It is too hard to do at scale. Is Comcast going to try to build its own network in broadband? Are they going to keep reselling Verizon? Do they have a plan to be actually competitive here?
I would assume that it's a reselling and bundling plan. You know, and I'm not a spectrum expert by any means. So I'm not sure what's available, what they would need to be competitive in that market. They, you know, again, their messaging is we're a buyer, not a seller. All right, so if you're Comcast and you're running a broadband and wireless company, what would you buy that would make you more competitive? I don't know.
I'm sure there are listeners right now who are screaming at me that the Dish Network 'we're going to stand up a network' plan was always a sham in order to collect and resell them at a profit later, which is what happened, but still drove that company into bankruptcy. Very curious that the Comcast broadband division that's going to get split out has a plan to grow because I'm looking at the numbers. I think they lost 700,000 subscribers last year. That's a huge number. Their only way to grow is actually to grow outside of the markets they're in. So there is some talk that they'll combine with Charter, which doesn't operate in the same markets as Comcast. But that doesn't get you any economy of scale. Right? Running a bigger physical network doesn't get cheaper. Actually, it only gets more expensive.
Their announced strategy to deal with these losses and this overall problem is we're going to operate it better. And that has to do with pricing and, you know, deals and how we've been selling and we're going to make the selling easier and all that.
Sure. Operate it better. But that's a fix-the-business, not grow-the-business plan.
Every Comcast subscriber just heard their internet provider say they're going to cut costs and operate leaner and thought about their customer service experience, I'm sure, and then thought about those cheaper fixed wireless plans. This is the conundrum they're in. They have to provide a higher quality service for less money.
Is this the part of the story where we mention Elon Musk?
I'm actually — yeah, it's literally the next question. We're doing the podcast together. This is great. SpaceX went public. The only part of that company that makes money is its telecom. Is it Starlink? So much so that there are rumors that they will buy T-Mobile, which is hilarious to me because SpaceX chasing telecom economics with their fixed costs of launch and everything else they're doing, I don't know if the telecom economics can support it. But why does...
But that's because you're not smart enough. You don't have enough intelligence. You're not creative enough to understand what a galaxy-sized TAM is, Nilay.
I have no idea. I mean, look, they're already competing with the T-Mobiles and Verizons to sell you internet access and they may well be competing with Elon Musk. Again, just because Elon Musk enters a market does not mean he wins. We've now seen evidence of that several different times. But he's certainly a real player that they have to worry about.
The Starlink premise at least until now is I will bring you broadband-quality connectivity in places where no cable company would ever dare to spend the infrastructure investment of laying fiber. Comcast has big physical plants in cities mostly. I at least live in Chicago as a Comcast customer. It is true that Comcast was essentially a monopoly or duopoly in almost every apartment building in Chicago. And most people I knew just had Comcast. Starlink has to show up and compete there in ways that they can't yet. This is why people think they might buy T-Mobile. Then the competition looks like, okay, you can get pretty fast access for the same or less money and then you're in a price war. I would say Comcast has done almost everything it can do in its history to avoid that kind of competition. Have they shown any signs of being able to meet that?
No, I mean they've been facing real competition from the telcos and losing broadband subs. And what they've said is, okay, the people who were doing that aren't running that business anymore. We have new people running the business is the real answer there. I will say that again, I really know very little about spectrum. I will say there are sober-minded people who continue to think that the fixed wireless business has sort of a hard cap in terms of how many customers it can serve, that there's like literal just sort of physical limits on what you can do with that. And so I think that's also probably Comcast's hope is these guys can only get so big and then they can't sort of get into our markets beyond that. But that's also kind of the inverse of whatever cable TV executive was saying in 2010 to 15, which is well, maybe cable TV subscriptions will slow a little bit, but they're not going to go to 50%.
