NBC house owners to spin off Golf Channel. What’s subsequent for the community?

Welcome again to a different prolonged version of the Scorching Mic E-newsletter, GOLF’s weekly ship overlaying all issues golf media from me, James Colgan.

THE BIG NEWS

Comcast formally introduced plans Wednesday to spin off Golf Channel, the most recent transfer in a broader effort to clear the decks of its properties within the ailing cable tv enterprise.

The house owners of NBC’s suite of media and sports activities properties made Golf Channel a part of a half-dozen cable networks that might be divested within the subsequent 12 months and shaped into a brand new publicly traded firm, for now known as “SpinCo” till it decides on a reputation. These networks, which embrace MSNBC, CNBC and USA Community, have generated greater than $7 billion in income for Comcast within the final 12 months.

Critically, Comcast will preserve NBC and Peacock, which maintain rights to the PGA Tour and USGA occasions, underneath the corporate umbrella. Below the brand new company construction, NBC Common’s media portfolio will embrace the printed community NBC, its NBC Sports activities and NBC Information divisions, and Peacock. Bravo, a crucial piece of Peacock’s streaming enterprise, is the one cable community stored in-house underneath the brand new construction.

Comcast will ship two of its most trusted executives — Mark Lazarus, the present chairman of NBC Sports activities and the top of a number of key NBC media initiatives, and Anand Kini, present EVP of company technique for Comcast and CFO for NBC — to guide the brand new firm. Comcast will retain possession of the brand new firm at first, and Comcast chairman Brian Roberts will wield a one-third voting share within the new endeavor.

HOW WE GOT HERE

The information arrives as a reminder of a essentially regarding fact for the TV enterprise: As audiences have fled en masse for streaming companies, earnings have tumbled for cable networks.

For years, executives at main media firms have wrestled with methods to place these once-tremendously worthwhile cable networks within the streaming world. Some, like ESPN, made plans for all times with out the so-called “linear TV” enterprise, constructing out streaming-exclusive platforms that may very well be supplied direct-to-consumer. Others doubled down on it, increase a bulwark of sports activities TV rights and status reveals to feed conventional cable channels and help burgeoning streaming platforms — the concept being that “misplaced” earnings on the cable TV facet could be made up on the streaming facet. However that technique belied a regarding fact: if cable TV stored declining, even these dedicated to cable would finally attain an inflection level the place their streamers have been extra worthwhile.

Comcast seems to be preempting that inflection level with Wednesday’s announcement, wiping its arms clear of the cable TV enterprise whereas leaving the arduous a part of charting the longer term to the brand new leaders at SpinCo.

OH SH*T METER

On its face, the image isn’t rosy for the networks included in Wednesday’s announcement. The divestiture marks a serious blow to the slowly eroding cable TV enterprise, and suggests ominously that even a few of cable’s greatest legacy gamers really feel their enterprise is best off with out cable within the image.

Nonetheless, the choice doesn’t essentially spell doom for SpinCo, both. Business insiders are eager to level out that whereas the cable enterprise is declining, it’s nonetheless worthwhile, and divestiture offers Lazarus and Kini the pliability to discover a broad vary of strategic choices. SpinCo may maybe look to dump a few of its less-profitable cable networks, but it surely may additionally buy extra cable networks to create a bigger “bundle” choice, or reposition the prevailing portfolio to higher succeed within the streaming world.

These strategic choices have been longshots underneath the profit-obsessed eye of Comcast possession, however with SpinCo free to hunt exterior funding, they may not be now. If nothing else, the quantity of high-profile expertise leaving Comcast for the brand new firm signifies promoting off the complete portfolio for spare elements is unlikely.

ON GOLF CHANNEL

If the information was a groundswell second within the media enterprise, it was a thunderclap within the golf media enterprise — the place the overwhelming majority of the game’s U.S. market share falls underneath two networks, NBC and CBS. Golf Channel, working underneath the NBC flag, has existed for years as an important (if not wildly worthwhile) part of the PGA Tour and LPGA media enterprise, offering event protection, visibility and entry 52 weeks out of the yr.

Within the close to time period, the spinoff raises questions in regards to the form of the PGA Tour’s present media contract with NBC. How do Golf Channel and NBC, which have overlapping manufacturing and editorial operations, deal with personnel within the break up? How a lot of NBC’s $400ish million annual rights price to the PGA Tour falls onto Golf Channel’s shoulders underneath the brand new company construction? If none or solely a few of it, does that make Golf Channel free to barter weekend broadcast agreements with different leagues, like, for instance, LIV?

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NEW DIGS

One straightforward reply entails the PGA Tour shopping for out partial and even complete possession of the Golf Channel from SpinCo, an consequence that has been the topic of rumors courting way back to 2020. Such an answer may present Golf Channel with a brand new company residence, enable it to proceed the identical strategy to stay golf protection, and salvage Golf Channel’s excellent PGA Tour and LPGA rights from potential complications related to SpinCo’s operations. It might additionally give the PGA Tour a tenant for its glowing new, $50+ million manufacturing facility in Ponte Vedra Seaside, simply throughout the road from Tour HQ. That constructing was constructed to accommodate the way forward for golf’s TV operations, together with PGA Tour Dwell, with house to turn into a house of distant productions for sports activities worldwide. The thought behind the manufacturing facility is huge and daring, however proper now it’s missing tangible enterprise; shifting Golf Channel’s operations may change that.

(Whether or not the PGA Tour would need to buy a cable community to function its personal media rights, when it will possibly merely wait out the top of its present rights settlement in ’29 and do it at no cost, availing itself of any potential cataclysmic enterprise dangers within the meantime, stays a separate and legitimate query.)

CUTTING BACK

Whereas Wednesday’s information raised an eyebrow, it was hardly a shock to those that have been round Golf Channel for the final a number of years. The fact, a number of individuals instructed GOLF.com, was that Golf Channel’s assets have modified within the years following the pandemic. Budgets have been allotted in another way, on-air expertise has not been retained, and sure productions have been moved off-site. These developments have coincided with a philosophical shift pushing assets towards the community’s premiere golf occasions, and away from day-to-day protection, as NBC Sports activities golf chief Sam Flood instructed GOLF.com within the spring.

“We regarded on the complete portfolio, and we determined to lean in the place the viewers goes to be larger,” Flood stated then. “We use our assets neatly on the different occasions.”

Flood insisted then that funding in NBC’s golf product was as flush because it had ever been, and maybe that’s true, however what he stated subsequent eerily foreshadowed Wednesday’s announcement.

“It’s important to take a look at issues by way of the lens that NBC event golf, Golf Channel event golf and the Golf Channel studios are one huge bucket,” he stated. “You take a look at the entire bucket and also you reap the benefits of the second you possibly can develop the sport, have interaction the viewers and provides the most important viewers the absolute best expertise.”

Comcast, it appears, determined it may make do with a smaller bucket.

DOWNSTREAM

NBC has extra than simply its PGA Tour rights to fret about in golf. Months after inking a $27 billion TV cope with the NBA, the community can be on the precipice of getting into negotiations with the USGA for the subsequent spherical of the governing physique’s TV rights. The U.S. Open headlines these rights, however the USGA has historically solely bought its TV rights to networks prepared to broadcast not less than 9 of its championships yearly.

The divestment announcement may complicate these negotiations for NBC by giving them just one over-the-air community to broadcast the USGA. In fact, NBC may provide the USGA wall-to-wall protection for its smaller championships on Peacock. The streaming service has efficiently dealt with unique broadcasts for the NFL and Olympics in current months, and will place NBC as a “better of each worlds” provide combining on-air and streaming choices. The query, as ever, entails value. Now that NBC has greater than $4 billion invested yearly within the NFL and NBA, the community won’t be prepared to beat among the sports activities world’s big-money streamers, or sports-starved different networks like TNT, for the excessive provide.

WHAT IT TELLS US

That Comcast would preserve NBC and the overwhelming majority of its sports activities portfolio speaks to the truth that sports activities TV — and extra particularly, golf TV — stays a worthwhile piece of enterprise. That it will break up up NBC and its golf TV rights from these of Golf Channel speaks to a unique, and barely extra troubling, growth.

For years, the prevailing sentiment throughout the sports activities TV world was that NBC and Golf Channel have been inseparable. Golf Channel supplied NBC with worthwhile scale and a military of gifted staff in Stamford, whereas NBC supplied Golf Channel with a slew of stay tournaments and the monetary may to maintain issues working. The PGA Tour — a media firm at coronary heart like all professional sports activities leagues — eagerly welcomed the chance to develop the scope of its dialog and event protection.

The unraveling of the pact and the separation of the 2 networks tells us the inseparable relationship has damaged, and professional golf’s once-stable TV footing is shifting once more.