As the shock wears off on the sudden departure of NBCUniversal Chief Executive Officer Jeff Shell, Comcast executives will need to make decisions on a handful of major items that will determine the company’s future in the next 12 to 24 months.
Shell announced he was departing the company immediately Sunday after admitting to an inappropriate relationship with an NBCUniversal employee. Mike Cavanagh, Comcast’s president, will run the NBCUniversal division, though it’s unclear for how long. While Cavanagh has been at Comcast since 2015, serving as the company’s chief financial officer before his promotion to president in October, his background isn’t running large media businesses. Cavanagh was a banker for more than 20 years before joining Comcast.
Shell’s sudden departure comes at a particularly crucial time for the future of the news and entertainment company. While Shell was never the ultimate decision maker at Comcast — that job falls to CEO Brian Roberts, whose family controls the company — his input and vision helped dictate the company’s pathway through streaming, sports rights and acquisitions.
NBCUniversal is staring at big decisions in all three of those categories in the coming months.
The Hulu decision
In 2019, NBCUniversal agreed to an unusual deal with Disney, allowing it to sell its 33% stake in Hulu in Jan. 2024 at a valuation of at least $27.5 billion. But comments from Disney CEO Bob Iger earlier this year have put Disney’s motivation to buy the remainder of Hulu in doubt.
“Everything is on the table,” Iger told CNBC’s David Faber in February, suggesting Disney could buy the remainder of Hulu or sell its 66% stake — conceivably to Comcast.
Shell was a big fan of Hulu and thought it could supercharge NBCUniversal’s streaming efforts, according to people familiar with his thinking. Hulu ended 2022 with 48 million subscribers, more than doubling the number of customers paying for NBCUniversal’s flagship streaming service, Peacock, which topped 20 million in January.Both streaming services are U.S.-based. Uniting Hulu’s ownership could allow a media company to extend the brand globally, adding tens of millions more subscribers.
Acquiring Hulu’s 66% stake from Disney could cost Comcast more than $20 billion. Roberts will continue to be the ultimate decider on such a move. Losing NBCUniversal’s top operator may give Roberts some pause on a deal. Or, perhaps, it could spur Roberts to find new leadership through a large acquisition.
NBA rights
NBC Sports is interested in bring the National Basketball Association back to NBC, its broadcast TV home from 1990-2002, CNBC reported in February.
It’s unclear if NBC will actually get a shot at buying the rights, as Disney and Warner Bros. Discovery have exclusive negotiating rights with the NBA until early next year. But if the NBA decides it wants NBC as a partner, the media company will have to pay billions per year for the privilege. The NBA is looking for a substantial increase to current rights payments, which are $1.4 billion annually for Disney and $1.2 billion for Warner Bros. Discovery.
NBCUniversal also owns several regional sports networks, whose own long-term business is in question as the NBA and Major League Baseball rethink how to broadcast local games amid the bankruptcy of Sinclair’s Diamond Sports Group.
Mark Lazarus was promoted to head of NBCUniversal Television and Streaming in May 2020. He has overseen NBC Sports Group for more than a decade. Roberts and Cavanagh can continue to rely on Lazarus and head of NBC Sports Pete Bevacqua for future media rights moves.
Merging with Warner Bros. Discovery
The elephant in the room with NBCUniversal is the frequent speculation in media circles that a merger with Warner Bros. Discovery could be coming in the next two years. Warner Bros. Discovery must wait two years before completing a sale for tax purposes following AT&T’s divestiture of WarnerMedia into Discovery Communications.
If a Comcast-WBD deal were to happen, Shell may not have had a role at the future company. Warner Bros. Discovery CEO David Zaslav could run the combined media assets.
Warner Bros. Discovery board member John Malone told CNBC in 2021 “there’s no question” Roberts wanted to buy WarnerMedia but didn’t because of regulatory pushback.
“My comment to Brian was that this is the pickle out of the jar,” Malone said in 2021. “If the regulatory environment permitted, down the road, all kinds of relationships could be contemplated between this enterprise that we’re creating and Brian’s enterprise. I think there are many opportunities for this Discovery-[WarnerMedia] enterprise to work with NBCUniversal to develop successful businesses.”
It’s possible a Republican presidential administration could be more welcoming to the idea of a merger. Market dynamics have also shifted since 2021, potentially helping to convince Roberts and Zaslav to attempt a merger. Both Comcast and Warner Bros. Discovery are smaller companies after losing substantial value in 2022.
Given Cavanagh’s background in finance, rather than operations, Roberts may signal his plan to merge NBCUniversal if keeps Cavanagh in the role rather than find an outside replacement. It may make little sense for Roberts to choose a new leader for NBCUniversal if that person will simply steer the company into a merger.
WATCH: CNBC’s Squawk on the Street crew share their thoughts following ouster of NBCU CEO