With one major cliffhanger, spinoff drama has taken the television industry by storm. Will these new businesses be able to survive on their own?
Later this year, Comcast Corp. (CMCSA) plans to split off a collection of cable networks, including CNBC and MSNBC, from NBCUniversal and form a new business called Versant. In the meantime, Lionsgate Studio Corp. (LION) just finished spinning off its cable channels to form Starz Entertainment Corp. (STRZ).
Furthermore, it has been reported for months that Warner Bros. Discovery Inc. (WBD) has been thinking about methods to spin off its cable television businesses, which may include Cartoon Network, CNN, Discovery Channel, and TBS.
The actions, according to executives, are measures to “unlock value” and position their new and existing companies for future expansion. The terminology is quite similar to that used during a previous wave of spinoffs about ten years ago, when several media corporations split off their TV businesses from their newspaper and magazine assets.
The outcomes of such spinoffs were distinctly uneven, and many of those businesses were eventually purchased by another party. However, their results can be used to determine whether the most recent separations are worthwhile investments for investors.
Jim Friedlich, chief executive of the Lenfest Institute for Journalism, who has counseled newspaper and local television-station groups on a number of spinoff transactions, stated, “There is a distinction between a value-creating spinoff and the type of asset cast-off we often saw in the newspaper business.” “In one case, the new company is built to succeed, and in the other, it is just being set up to be stripped for parts.”
The amount of debt and cash a new business starts with, whether the parent firm plans to stay involved, and the skills of the management team put in place are among factors to consider when assessing its prospects of success, according to Friedlich.
“If investors believe in the structure, the brands, the track record of the management team and the commitment of the parent company to remain a major shareholder, then they will buy the stock,” he stated.
Here’s how previous newspaper and magazine separations transpired to give you an idea of how the current wave of television spinoffs might operate.
Gannett
In 2015, Gannett divided its holdings in local television stations and newspapers into two distinct businesses, Tegna Inc. (TGNA) and Gannett Co. Inc. (GCI).
About 19,000 people worked for the spin-off newspaper company, which included 92 publications in the US, including its flagship USA Today.
With almost little debt at first, the new Gannett set out to expand through acquisitions. On the first day of trading, shares were valued at $14.37 and had a $1.6 billion market capitalization. Gannett’s first year as a stand-alone business was 2016, with $3 billion in sales and $52.7 million in net profitability.
With more than 200 newspapers, Gannett became by far the biggest newspaper firm in America when it combined with GateHouse Media, which was financed by private equity, in 2019 for $1.4 billion. However, the merger also resulted in $1.8 billion in debt for the company.
Gannett’s fortunes haven’t been strong despite the enormous growth. In 2024, the business made $2.51 billion, but it also lost $26.4 million. 24,000 individuals were employed by the corporation after the GateHouse merger. Since then, that figure has dropped to about 11,000 people.
In recent weeks, Gannett’s stock has dropped 75% since its founding, trading at about $3.50. It presently has a market value of little more than $500 million.
“This spinoff didn’t work out very well, and the response on the street has reflected that,” Doug Arthur, a media analyst with Huber Research Partners LLC, stated.
According to Gannett spokeswoman Lark-Marie Anton, the business has consolidated operations, divested properties, and increased its use of outsourced services, among other significant changes, since its 2019 merger. The business has paid off $700 million in debt thus far.
“We are working to build a sustainable, digitally led business that serves our communities and creates long-term value for our shareholders,” she stated.
The Tribune
Tribune Publishing Co. is a prime example of the most problematic media spinoff.
Following the company’s disastrous takeover by Sam Zell, Tribune was emerging from a protracted and complex bankruptcy when it made the decision to split off its newspaper businesses in 2014. These properties included the Chicago Tribune, the Los Angeles Times, and the Baltimore Sun.
In 2019, Nexstar Media Group (NXST) purchased Tribune Media Co., which was formed from Tribune’s network of regional television stations.
The spinoff was difficult from the beginning, according to those involved in the separation. The debt holders from the bankruptcy, who had little interest in newspapers, were the main shareholders of the two enterprises.
In order to pay a one-time cash dividend to its stockholders, Tribune Publishing used $275 million of its $350 million in debt when it first became a stand-alone business. Additionally, the business had no cash on hand. Stocks began trading at $24.50.
Within a year after the spinoff, Tribune’s stock fell to less than $8 per share after a significant debt holder sold its entire investment after the lockup period ended. When Tribune faced bankruptcy, it turned to investor Michael Ferro to help stabilize the business. However, Ferro quickly took over the board and replaced the management with his own group. He changed the company’s name to Tronc Inc. in 2016.
By 2018, Tribune was having problems once more, and Gannett was trying to buy it. To assist thwart the move, Ferro enlisted biotech billionaire Patrick Soon-Shiong as an additional investor; nevertheless, the two quickly became antagonistic. The Los Angeles Times was sold to Soon-Shiong by the firm in 2018 for $500 million. Ferro sold Alden Global Capital, a hedge company known for taking drastic cuts to its newspapers, his share of Tribune in 2019.
Alden paid $17.25 per share for the remainder of Tribune in 2021.
News Corporation
In 2013, News Corp (NWSA) (NWS) established the pattern by separating its 21st Century Fox television and film studio operations into its international newspaper, book publishing, real estate listings, digital education, and Australian satellite TV divisions.
With $2.6 billion in cash and no debt, the new business, which includes Dow Jones, the publisher of MarketWatch, the Wall Street Journal, and Barron’s, got off to a strong start. Rupert Murdoch, the multibillionaire media tycoon who turned the corporation into a major force in the world, continued to have the largest stake in the new business.
News Corp has experienced severe difficulties as a result of a sharp drop in revenue from many of its newspapers. However, analysts claim that the corporation has made progress in turning into a business that can succeed on its own.
By paying $1 billion to acquire Realtor.com, News Corp significantly expanded its real estate industry in its first year. It quickly sold Amplify, its digital education business.
In the years that followed, News Corp sold off its Australian satellite television company, Foxtel, as well as its coupon-insert operations, News America Marketing. Additionally, it has made progress in turning its main business, Dow Jones, from a newspaper publisher to a news information provider.
News Corp reported $10.1 billion in sales for its entire fiscal year in 2024, up from $8.6 billion for its first full fiscal year in 2014. From $770 million in 2014 to $1.54 billion in 2024, it boosted its earnings before interest, taxes, depreciation, and amortization, or Ebitda.
The company’s revenue mix has also seen a significant change. News Corp’s news operations accounted for 72% of their overall income in 2014. That percentage fell to 44% in the fiscal year 2024, which concluded prior to the Foxtel television unit’s sale. Real estate services accounted for slightly under 5% of total revenue in 2014; by 2024, that percentage had increased to 16.5%. News Corp has opposed calls from some analysts and activist investors in recent years for the company to split up its real estate division.
Shares of News Corp. began trading at $13.44 in June 2013 and remained there for many years, only rising above $20 in 2021. Since February 19 of this year, the stock has stayed in the high-$20s after reaching its all-time high of $30.49 a share.
“News Corp has had its struggles, but they have a really valuable position in real estate,” Arthur stated. “It’s still a work in progress, but it’s performed better than a lot of the other spinoffs.”
A representative for News Corp chose not to comment.
Meredith Corp. and Time Inc.
Time Warner Inc. divided its film and television divisions from its magazine publishing division, Time Inc., in 2014.
With the magazine industry in sharp decline at the start of its operations, the new company—which was home to iconic titles like Time, People, and Sports Illustrated—was unable to establish itself. After opening at $25.28 per share, Time Inc.’s shares dropped to about $12.50 in just two years.
Meredith Corp., a local television and magazine firm based in Des Moines, Iowa, paid $2.8 billion to acquire the business in 2017.
“The Time Inc. sale was great for Time Inc.’s shareholders, but was a disaster for Meredith,” Arthur stated.
Within a year, Meredith, which was far more focused on lifestyle publications like Family Circle and Better Homes & Gardens, sold Fortune, Money, Sports Illustrated, and Time.
Then, in 2021, Meredith declared that it was splitting off its magazine group into a different business and selling its TV operation to Gray Television for $2.7 billion. Later that year, Meredith agreed to pay $2.7 billion to Barry Diller’s IAC Inc. (IAC) for the sale of its magazines.
