Handicapping Who And What’s Next

Disney and Hearst, the 50/50 owners of A+E Global Media, announced yesterday that after sharing control of the company and its networks for most of the last 40 years, they are putting it up for sale. Pardon me if this is beginning to sound a bit too familiar. A major media company – in this case two of them – are planning to sell off a group of cable networks. It’s yet another step in the dismantling of cable’s yellow brick road. What is the pathway for financial success here?

For those cord cutters and cord “nevers” out there – hello students – A+E is one of the foundational brands of the multichannel universe. The A+E network was launched in 1984 by ABC (purchased by Disney in 1996), Hearst and NBC. It initially picked up the baton from the long-forgotten CBS Cable, a performing arts network, although that focus is hard to see in the rearview mirror. Today it includes a stable of networks such as Lifetime, The History Channel, and Vice TV as well as a host of streamed channels encompassing the content from these networks. Its most recognizable shows include Duck Dynasty, Hoarders, Biography, Storage Wars and The First 48 among many others.

A+E has been rumored to be attractive target for other media companies for many years, but its success always kept it independent. Frankly, it just kept sending money back to its owners every year, so why tamper with a good thing? But the payouts in the hundreds of millions of dollars per year – what Disney refers to in its financial reports as “equity in the income of investees” – peaked in 2023 and are on a glidepath downward. The A+E owners have made their decision to sell, and the question for the market is who is going to buy and what does that look like? There are several scenarios with various degrees of plausibility.

The “Big Media” route: Is there a fit?

Each of the major media companies has in some fashion been searching for ways to shed rather than add cable network assets, but they are also creating new entities that might find at least find some cost savings in an A+E purchase.

• Disney and Fox – Disney of course is the seller here, and Fox shed its cable assets outside of news and sports when it sold them to Disney several years ago (good timing Rupert). Fox does have the ad-supported Tubi, which is the home to many repurposed cable network shows, but that doesn’t provide much of a reason to go out and spend billions of dollars to own and run a business where Fox doesn’t much want to be.
• Comcast/Versant – Comcast is spinning off its cable networks such as CNBC and MSNBC into the new Versant, to be led by longtime cable vet Mark Lazarus. For at least the first several years NBC Universal (staying in the Comcast family) is likely to guide the Versant path in sales and distribution. You could save money from lopping off these operations from the A+E world and it would give both NBCU and Versant additional ad inventory, but why pay a premium for the entire A+E company when they might prefer to just function as an outsourced vendor and get paid for your work? And it’s hard to see that such ownership is a pathway to real growth for an independent Versant.
• Warner Bros. Discovery – WBD is following the Comcast model with its proposed spin-off of most of its cable networks into a new company headed by the current WBD CFO Gunner Wiedenfels. WBD’s stable of reality programming might be the best fit for the A+E content portfolio. But do you really need to own more networks going forward? Consumers today seem far more focused on shows than on networks (or streaming platforms for that matter). Maybe some type of joint venture for licensing programming to a variety of platforms and/or creating new mixes of FAST channels digital-first bundles makes some sense here.
• Paramount Global – Before we sort out potential A+E deals, who will be the first person to tell me with certainty what the future of Paramount itself looks like? The potential sale to Skydance Media just hit the one-year anniversary of its announcement and its still in the potential category. Perhaps some spinoff of the legacy Viacom cable stable and an eventual merger with A+E could make some cost-saving sense, but there are a whole lot of financial maneuverings that need to take place before that is a reality.
• Smaller “Big Media” – Companies such as Nexstar, Sinclair and especially Byron Allen’s Allen Media are still in the network business. Nexstar owns the CW, NewsNation and a couple of smaller “multicast” networks like Antenna TV. Sinclair owns the Tennis Channel and its own stable of diginets. Byron Allen has a similar smorgasbord of small nets and has been sniffing around big plays such as BET for some time. All of these companies might be interested in the A+E assets, but you’d have to expect they would want them at bargain basement prices.

The “Big Streamers” – Do they need networks?

• Netflix, Amazon, YouTube – the biggest tech company streaming platforms all would certainly have the money to buy A+E, but why do they need it? When Amazon bought MGM Studios – and we don’t know the verdict on whether that purchase was worth it – they were buying decades of iconic content branding with the James Bond movies as well as relatively small library of programming such as Real Housewives of Beverly Hills, Survivor, and The Handmaid’s Tale. A+E doesn’t possess programming likely to change the nature of subscriptions for any streaming platform. The streamers would be happy to license the programming where it makes sense, but they aren’t in the network business.

Do all roads lead to private equity?

• Apollo and the usual suspects – This is not a 1950s do wop group. Almost every conversation about the future of legacy media usually comes around to whether these companies belong in a publicly traded company world anymore. In the music business a group of PE and PE-like firms such as Blackstone, KKR, Hipgnosis Song Fund, Reservoir Media and Lyric Capital have acquired major music libraries from Bruce Springsteen to Bob Dylan to John Denver and look to leverage licensing rights going forward. Maybe there is a future for the A+E shows as part of a common licensing pool of content under the umbrella of a group of private investors. What is a media brand today? It is ultimately about the shows and not the networks.