NBC owners to spin off Golf Channel. What’s next for the network?

Welcome back to another extended edition of the Hot Mic Newsletter, GOLF’s weekly send covering all things golf media from me, James Colgan.

THE BIG NEWS

Comcast officially announced plans Wednesday to spin off Golf Channel, the latest move in a broader effort to clear the decks of its properties in the ailing cable television business.

The owners of NBC’s suite of media and sports properties made Golf Channel part of a half-dozen cable networks that will be divested in the next 12 months and formed into a new publicly traded company, for now called “SpinCo” until it decides on a name. Those networks, which include MSNBC, CNBC and USA Network, have generated more than $7 billion in revenue for Comcast in the last 12 months.

Critically, Comcast will keep NBC and Peacock, which hold rights to the PGA Tour and USGA events, under the company umbrella. Under the new corporate structure, NBC Universal’s media portfolio will include the broadcast network NBC, its NBC Sports and NBC News divisions, and Peacock. Bravo, a critical piece of Peacock’s streaming business, is the only cable network kept in-house under the new structure.

Comcast will send two of its most trusted executives — Mark Lazarus, the current chairman of NBC Sports and the head of several key NBC media initiatives, and Anand Kini, current EVP of corporate strategy for Comcast and CFO for NBC — to lead the new company. Comcast will retain ownership of the new company at first, and Comcast chairman Brian Roberts will wield a one-third voting share in the new endeavor.

HOW WE GOT HERE

The news arrives as a reminder of a fundamentally concerning truth for the TV business: As audiences have fled en masse for streaming services, profits have tumbled for cable networks.

For years, executives at major media companies have wrestled with how to position these once-tremendously profitable cable networks in the streaming world. Some, like ESPN, made plans for life without the so-called “linear TV” business, building out streaming-exclusive platforms that could be offered direct-to-consumer. Others doubled down on it, building up a bulwark of sports TV rights and prestige shows to feed traditional cable channels and support burgeoning streaming platforms — the idea being that “lost” profits on the cable TV side would be made up on the streaming side. But that strategy belied a concerning truth: if cable TV kept declining, even those committed to cable would eventually reach an inflection point where their streamers were more valuable.

Comcast appears to be preempting that inflection point with Wednesday’s announcement, wiping its hands clean of the cable TV business while leaving the hard part of charting the future to the new leaders at SpinCo.

OH SH*T METER

On its face, the picture isn’t rosy for the networks included in Wednesday’s announcement. The divestiture marks a major blow to the slowly eroding cable TV business, and suggests ominously that even some of cable’s biggest legacy players feel their business is better off without cable in the picture.

Still, the decision doesn’t necessarily spell doom for SpinCo, either. Industry insiders are keen to point out that while the cable business is declining, it is still profitable, and divestiture gives Lazarus and Kini the flexibility to explore a broad range of strategic options. SpinCo could perhaps look to sell off some of its less-profitable cable networks, but it could also purchase more cable networks to create a larger “bundle” option, or reposition the existing portfolio to better succeed in the streaming world.

These strategic options were longshots under the profit-obsessed eye of Comcast ownership, but with SpinCo free to seek outside investment, they might not be now. If nothing else, the volume of high-profile talent leaving Comcast for the new company indicates selling off the entire portfolio for spare parts is unlikely.

ON GOLF CHANNEL

If the news was a groundswell moment in the media business, it was a thunderclap in the golf media business — where the vast majority of the sport’s U.S. market share falls under two networks, NBC and CBS. Golf Channel, operating under the NBC flag, has existed for years as a crucial (if not wildly profitable) component of the PGA Tour and LPGA media business, providing tournament coverage, visibility and access 52 weeks out of the year.

In the near term, the spinoff raises questions about the shape of the PGA Tour’s existing media contract with NBC. How do Golf Channel and NBC, which have overlapping production and editorial operations, handle personnel in the split? How much of NBC’s $400ish million annual rights fee to the PGA Tour falls onto Golf Channel’s shoulders under the new corporate structure? If none or only some of it, does that make Golf Channel free to negotiate weekend broadcast agreements with other leagues, like, for example, LIV?

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NEW DIGS

One easy answer involves the PGA Tour buying out partial or even whole ownership of the Golf Channel from SpinCo, an outcome that has been the subject of rumors dating as far back as 2020. Such a solution could provide Golf Channel with a new corporate home, allow it to continue the same approach to live golf coverage, and salvage Golf Channel’s outstanding PGA Tour and LPGA rights from potential headaches associated with SpinCo’s operations. It would also give the PGA Tour a tenant for its sparkling new, $50+ million production facility in Ponte Vedra Beach, just across the street from Tour HQ. That building was built to house the future of golf’s TV operations, including PGA Tour Live, with space to become a home of remote productions for sports worldwide. The idea behind the production facility is big and bold, but right now it’s lacking tangible business; shifting Golf Channel’s operations could change that.

(Whether the PGA Tour would want to purchase a cable network to operate its own media rights, when it can merely wait out the end of its current rights agreement in ’29 and do it for free, availing itself of any potential cataclysmic business risks in the meantime, remains a separate and valid question.)

CUTTING BACK

While Wednesday’s news raised an eyebrow, it was hardly a surprise to those who have been around Golf Channel for the last several years. The reality, several people told GOLF.com, was that Golf Channel’s resources have changed in the years following the pandemic. Budgets have been allocated differently, on-air talent has not been retained, and certain productions have been moved off-site. Those developments have coincided with a philosophical shift pushing resources toward the network’s premiere golf events, and away from day-to-day coverage, as NBC Sports golf chief Sam Flood told GOLF.com in the spring.

“We looked at the entire portfolio, and we decided to lean in where the audience is going to be bigger,” Flood said then. “We use our resources smartly at the other events.”

Flood insisted then that investment in NBC’s golf product was as flush as it had ever been, and perhaps that is true, but what he said next eerily foreshadowed Wednesday’s announcement.

“You have to look at things through the lens that NBC tournament golf, Golf Channel tournament golf and the Golf Channel studios are one big bucket,” he said. “You look at the whole bucket and you take advantage of the moment you can grow the game, engage the audience and give the biggest audience the best possible experience.”

Comcast, it seems, decided it could make do with a smaller bucket.

DOWNSTREAM

NBC has more than just its PGA Tour rights to worry about in golf. Months after inking a $27 billion TV deal with the NBA, the network is also on the precipice of entering negotiations with the USGA for the next round of the governing body’s TV rights. The U.S. Open headlines those rights, but the USGA has traditionally only sold its TV rights to networks willing to broadcast at least nine of its championships annually.

The divestment announcement could complicate these negotiations for NBC by giving them only one over-the-air network to broadcast the USGA. Of course, NBC could offer the USGA wall-to-wall coverage for its smaller championships on Peacock. The streaming service has successfully handled exclusive broadcasts for the NFL and Olympics in recent months, and could position NBC as a “best of both worlds” offer combining on-air and streaming options. The question, as ever, involves price. Now that NBC has more than $4 billion invested annually in the NFL and NBA, the network might not be willing to beat some of the sports world’s big-money streamers, or sports-starved other networks like TNT, for the high offer.

WHAT IT TELLS US

That Comcast would keep NBC and the vast majority of its sports portfolio speaks to the fact that sports TV — and more specifically, golf TV — remains a valuable piece of business. That it would split up NBC and its golf TV rights from those of Golf Channel speaks to a different, and slightly more troubling, development.

For years, the prevailing sentiment within the sports TV world was that NBC and Golf Channel were inseparable. Golf Channel provided NBC with valuable scale and an army of talented employees in Stamford, while NBC provided Golf Channel with a slew of live tournaments and the financial might to keep things running. The PGA Tour — a media company at heart like all pro sports leagues — eagerly welcomed the opportunity to expand the scope of its conversation and tournament coverage.

The unraveling of the pact and the separation of the two networks tells us the inseparable relationship has broken, and pro golf’s once-stable TV footing is shifting again.