Evaluating Media Company Spinoffs: The Cases of CNN and CNBC

Recent corporate moves in the media landscape have generated substantial buzz regarding the potential benefits or pitfalls of spinoffs for investors. The focus has shifted to notable companies like Comcast Corp. and Lionsgate Studios, which have announced plans to separate their cable channels and streaming services into new entities. This trend prompts an essential question: can these spinoffs genuinely unlock shareholder value, or are they merely a reconfiguration of underperforming assets?

The Current Landscape of Media Spinoffs

As of 2025, Comcast Corp. is in the process of spinning off a group of cable channels, including CNBC and MSNBC, into a new company dubbed Versant. Similarly, Lionsgate Studios has completed its spinoff of its cable channel and streaming business into Starz Entertainment Corp. Furthermore, Warner Bros. Discovery is contemplating a separation of its cable properties, including CNN and others. Executives at these firms argue that spinoffs allow them to “unlock value” and pave the way for future growth.

Lessons from History: The Mixed Results of Past Spinoffs

While proponents tout the benefits of spinoffs, historical data suggests a more nuanced view. The earlier wave of media company separations from a decade ago serves as a reminder of the potential pitfalls. Brands such as Gannett and Tribune Publishing faced challenges that resulted in mixed outcomes following their separations.

The Gannett Experience

In 2015, Gannett undertook a spinoff, dividing its newspaper and local television holdings into two distinct entities: Gannett Co. Inc. and Tegna Inc. Initially, Gannett launched with minimal debt and the ambition to expand. However, following a significant merger with GateHouse Media, the company incurred considerable debts, leading to a decline in market value. As of 2024, Gannett’s shares have plummeted roughly 75% from their initial trading price, reminding investors of the risks inherent in poorly executed spinoff strategies.

The Tribune Cautionary Tale

Another significant case is Tribune Publishing, which spun off its newspaper properties in 2014. With a troubling past marked by bankruptcy, Tribune emerged with both significant debt and no cash, resulting in a sharp decline in stock value. The dismal performance of Tribune led to multiple changes in management and ownership, ultimately resulting in the sell-off of its valuable assets, including the Los Angeles Times.

Success Stories: When Spinoffs Work

Conversely, not all spinoffs yield disappointing results. News Corp, for instance, managed to navigate the challenging waters of spinoffs successfully. After separating its newspaper and publishing operations from its entertainment businesses in 2013, News Corp started with no debt and substantial cash reserves. Over the years, it adapted to the changing market landscape by reducing its reliance on print media and investing in digital enterprises. By 2024, News Corp reported significant revenue growth, showcasing that spinoffs can indeed be beneficial when executed judiciously.

Time Inc. and Its Acquisition Debacle

Other noteworthy spinoff stories often reiterate the risks. Time Inc.’s separation from Time Warner in 2014 resulted in its inability to find solid footing in the declining magazine sector, leading to its eventual acquisition by Meredith Corp. in 2017. This sequence of events illustrates that without a robust market strategy, spinoffs can transition from promising ventures to cautionary tales.

Key Parameters for Evaluating Future Spinoffs

For potential investors looking at the upcoming spinoffs of brands like CNN and CNBC, several key parameters should be assessed:

• Debt Level: A new company should ideally have low debt to mitigate financial strain and allow for reinvestment in growth.
• Cash Reserves: Sufficient cash on hand is crucial for navigating initial market challenges.
• Management Quality: The capabilities of the new leadership team can significantly influence the company’s trajectory.
• Parent Company Commitment: Ongoing involvement from the parent firm can enhance investor confidence.

Conclusion: A Balanced Perspective for Investors

The potential for media company spinoffs to create value for investors is palatable, albeit fraught with uncertainty. The history of media separations suggests that those with well-planned structural strategies have the better chance of success. As Comcast, Lionsgate, and Warner Bros. Discovery embark on this new phase, investors should closely monitor how these companies structure themselves and strategize for the future. Understanding the lessons from past successes and failures will be instrumental in making informed investment decisions.