MW Can media company spinoffs of brands like CNN and CNBC be good for investors? Here's what history tells us.

By Lukas I. Alpert

Recent corporate media spinoffs have been a mixed bag, with many failing due to the way they were set up, Wall Street analysts say

Spinoff drama has hit the television business, but with one big cliff-hanger: Can these new companies thrive on their own?

Comcast Corp. $(CMCSA)$ has been working to carve off a group of cable channels, including CNBC and MSNBC, from NBCUniversal later this year and into a new company to be called Versant. Lionsgate Studio Corp. $(LION)$, meanwhile, just completed a spinoff of its cable channels into a separate company now known as Starz Entertainment Corp $(STRZ)$.

And for months, there have been reports that Warner Bros. Discovery Inc. (WBD) has been considering ways to spin off its cable-television properties, which could include CNN, Discovery Channel, Cartoon Network and TBS.

Executives describe the moves as ways to "unlock value" and set up both their new and old businesses for future growth. The language sounds strikingly similar to that heard during an earlier wave of spinoffs around a decade ago, when numerous media companies separated their newspapers and magazine assets from their TV businesses.

The results of those spinoffs were decidedly mixed, with many of those companies ultimately being acquired by someone else. But their performance can help gauge whether the latest round of separations could be good buys for investors.

"There is a distinction between a value-creating spinoff and the type of asset cast-off we often saw in the newspaper business," said Jim Friedlich, chief executive of the Lenfest Institute for Journalism, who has advised newspaper and local television-station groups on several spinoff transactions. "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."

Friedlich said there are several things to look at to measure a new company's chances at success: how much debt and cash it starts off with; whether the parent company intends to remain involved; and the abilities of the management team put in place.

"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 said.

To get a sense of how the current wave of television spinoffs could work, here is how earlier newspaper and magazine separations played out.

Gannett

In 2015, Gannett split its newspaper and local television-station holdings into two separate companies: Gannett Co. Inc. $(GCI)$ and Tegna Inc (TGNA).

The spun-off newspaper company consisted of 92 papers in the U.S. including its flagship USA Today, and approximately 19,000 employees.

The new Gannett started off with virtually no debt and a mission to grow through acquisitions. Shares opened on the first day of trading at $14.37 with a market capitalization of $1.6 billion. In 2016, its first year as a standalone company, Gannett recorded $3 billion in revenue and net income of $52.7 million.

In 2019, Gannett merged with the private-equity-backed GateHouse Media in a $1.4 billion deal that created by far the largest newspaper company in America, with over 200 newspapers - but it put $1.8 billion in debt on the company's books.

Despite the vast expansion, Gannett's fortunes have not been robust. The company reported $2.51 billion in revenue in 2024 and a net loss of $26.4 million. Following the GateHouse merger, the company employed 24,000 people. That number has since declined to approximately 11,000.

Gannett shares have been trading around $3.50 in recent weeks, down 75% from the company's launch. Its market cap is now just over $500 million.

"This spinoff didn't work out very well, and the response on the street has reflected that," said Doug Arthur, a media analyst with Huber Research Partners LLC.

Gannett spokeswoman Lark-Marie Anton noted that the company had made many meaningful changes since its 2019 merger - divesting properties, consolidating operations and utilizing more outsourced services. In all, the company has so far paid down $700 million in debt.

"We are working to build a sustainable, digitally led business that serves our communities and creates long-term value for our shareholders," she said.

Tribune

If there is a poster child for the most troubled media spinoff, it would be Tribune Publishing Co.

When Tribune decided in 2014 to spin off its newspaper properties - which included the Chicago Tribune, the Los Angeles Times and the Baltimore Sun - it was emerging from a long and complicated bankruptcy following the company's disastrous acquisition by Sam Zell.

Tribune's slate of local television stations became Tribune Media Co., which was later sold to Nexstar Media Group $(NXST)$ in 2019.

Many involved in the separation say the spinoff was troubled from the start. The two companies' primary shareholders were the debt holders from the bankruptcy, none of whom wanted much to do with newspapers.

So when Tribune Publishing launched as a standalone company, it started with $350 million in debt - $275 million of which was used to pay a one-time cash dividend to its shareholders. The company was also left with no cash on its books. Shares opened at $24.50.

After the lockup period ended, a major debt holder sold its entire stake and Tribune's stock plunged to below $8 a share within a year of the spinoff. Faced with the possibility of going into bankruptcy, Tribune brought in investor Michael Ferro to help stabilize the company, but he swiftly seized control of the board and replaced the management with his own team. In 2016, he renamed the company Tronc Inc.

By 2018, Tribune was in trouble again, with Gannett making a move to acquire it. Ferro brought in another investor, biotech billionaire Patrick Soon-Shiong, to help fend off the move, but the two soon were at odds. In 2018, the company agreed to sell the Los Angeles Times to Soon-Shiong for $500 million. In 2019, Ferro sold his stake in Tribune to Alden Global Capital, a hedge fund that had a history of exacting steep cuts at its newspapers.

In 2021, Alden acquired the rest of Tribune for $17.25 a share.

News Corp

News Corp $(NWSA)$ $(NWS.AU)$ set the trend back in 2013, when it spun off its global newspaper, book publishing, real-estate listings, digital education and Australian satellite TV units from its 21st Century Fox television- and movie-studio businesses.

The new company - which includes Dow Jones, the publisher of MarketWatch, the Wall Street Journal and Barron's - started on good footing, with no debt and $2.6 billion in cash. Rupert Murdoch, the multibillionaire media baron who built the business into a global powerhouse, remained the largest shareholder of the new company.

News Corp has faced serious struggles as revenue to many of its newspapers declined significantly. But the company has made inroads in transforming itself into a business that can thrive on its own, analysts say.

In its first year, News Corp substantially increased its real-estate business by acquiring Realtor.com for $1 billion. Soon after, it sold its digital education company, Amplify.

Over the succeeding years, News Corp offloaded its coupon-insert businesses, News America Marketing, as well as its Australian satellite-television company, Foxtel. It has also made headway in transforming its flagship Dow Jones business from a newspaper publisher into a news information company.

For its full fiscal year in 2024, News Corp reported revenues of $10.1 billion, up from $8.6 billion in its first complete fiscal year in 2014. It increased its earnings before interest, taxes, depreciation and amortization, or Ebitda, to $1.54 billion in 2024 from $770 million in 2014.

The company has also radically shifted its revenue mix. In 2014, 72% of News Corp's total revenue came from its news units. In the 2024 fiscal year, which ended before the sale of the Foxtel television unit, that figure had dropped to 44%. In 2014, real-estate services made up just shy of 5% of total revenue; by 2024, it had risen to 16.5%. In recent years, activist investors and some analysts have called for News Corp to spin off its real-estate business, something the company has resisted.

News Corp shares started trading in June 2013 at $13.44 and stayed roughly in that range for many years, only crossing above $20 in 2021. The stock hit its all-time peak of $30.49 per share on Feb. 19 of this year and has since remained in the high-$20s.

"News Corp has had its struggles, but they have a really valuable position in real estate," Arthur said. "It's still a work in progress, but it's performed better than a lot of the other spinoffs."

A News Corp spokesperson declined to comment.

Time Inc. and Meredith Corp.

In 2014, Time Warner Inc. separated its magazine-publishing business, Time Inc., from its film and television business.

The new company, home to storied titles like Time, People and Sports Illustrated, began operating with the magazine industry in steep decline, and could never get its footing. Time Inc.'s stock opened at $25.28 per share, but within two years had fallen to around $12.50.

In 2017, the company was acquired by Meredith Corp., a Des Moines, Iowa-based magazine and local-television group, for $2.8 billion.

"The Time Inc. sale was great for Time Inc.'s shareholders, but was a disaster for Meredith," Arthur said.

Meredith, which was focused far more on lifestyle magazines like Better Homes & Gardens and Family Circle, within a year sold Time, Sports Illustrated, Fortune and Money.

Then, in 2021, Meredith announced it was selling its TV division to Gray Television for $2.7 billion, and spinning off its magazine group into a separate company. Later that year, Meredith reached a deal to sell its magazines to Barry Diller's IAC Inc.( IAC) for $2.7 billion.

Are new spinoffs going to be worth the money?

MW Can media company spinoffs of brands like CNN and CNBC be good for investors? Here's what history tells us.

By Lukas I. Alpert

Recent corporate media spinoffs have been a mixed bag, with many failing due to the way they were set up, Wall Street analysts say

Spinoff drama has hit the television business, but with one big cliff-hanger: Can these new companies thrive on their own?

Comcast Corp. (CMCSA) has been working to carve off a group of cable channels, including CNBC and MSNBC, from NBCUniversal later this year and into a new company to be called Versant. Lionsgate Studio Corp. (LION), meanwhile, just completed a spinoff of its cable channels into a separate company now known as Starz Entertainment Corp (STRZ).

And for months, there have been reports that Warner Bros. Discovery Inc. (WBD) has been considering ways to spin off its cable-television properties, which could include CNN, Discovery Channel, Cartoon Network and TBS.

Executives describe the moves as ways to "unlock value" and set up both their new and old businesses for future growth. The language sounds strikingly similar to that heard during an earlier wave of spinoffs around a decade ago, when numerous media companies separated their newspapers and magazine assets from their TV businesses.

The results of those spinoffs were decidedly mixed, with many of those companies ultimately being acquired by someone else. But their performance can help gauge whether the latest round of separations could be good buys for investors.

"There is a distinction between a value-creating spinoff and the type of asset cast-off we often saw in the newspaper business," said Jim Friedlich, chief executive of the Lenfest Institute for Journalism, who has advised newspaper and local television-station groups on several spinoff transactions. "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."

Friedlich said there are several things to look at to measure a new company's chances at success: how much debt and cash it starts off with; whether the parent company intends to remain involved; and the abilities of the management team put in place.

"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 said.

To get a sense of how the current wave of television spinoffs could work, here is how earlier newspaper and magazine separations played out.

Gannett

In 2015, Gannett split its newspaper and local television-station holdings into two separate companies: Gannett Co. Inc. $(GCI.AU)$ and Tegna Inc (TGNA).

The spun-off newspaper company consisted of 92 papers in the U.S. including its flagship USA Today, and approximately 19,000 employees.

The new Gannett started off with virtually no debt and a mission to grow through acquisitions. Shares opened on the first day of trading at $14.37 with a market capitalization of $1.6 billion. In 2016, its first year as a standalone company, Gannett recorded $3 billion in revenue and net income of $52.7 million.

In 2019, Gannett merged with the private-equity-backed GateHouse Media in a $1.4 billion deal that created by far the largest newspaper company in America, with over 200 newspapers - but it put $1.8 billion in debt on the company's books.

Despite the vast expansion, Gannett's fortunes have not been robust. The company reported $2.51 billion in revenue in 2024 and a net loss of $26.4 million. Following the GateHouse merger, the company employed 24,000 people. That number has since declined to approximately 11,000.

Gannett shares have been trading around $3.50 in recent weeks, down 75% from the company's launch. Its market cap is now just over $500 million.

"This spinoff didn't work out very well, and the response on the street has reflected that," said Doug Arthur, a media analyst with Huber Research Partners LLC.

Gannett spokeswoman Lark-Marie Anton noted that the company had made many meaningful changes since its 2019 merger - divesting properties, consolidating operations and utilizing more outsourced services. In all, the company has so far paid down $700 million in debt.

"We are working to build a sustainable, digitally led business that serves our communities and creates long-term value for our shareholders," she said.

Tribune

If there is a poster child for the most troubled media spinoff, it would be Tribune Publishing Co.

When Tribune decided in 2014 to spin off its newspaper properties - which included the Chicago Tribune, the Los Angeles Times and the Baltimore Sun - it was emerging from a long and complicated bankruptcy following the company's disastrous acquisition by Sam Zell.

Tribune's slate of local television stations became Tribune Media Co., which was later sold to Nexstar Media Group (NXST) in 2019.

Many involved in the separation say the spinoff was troubled from the start. The two companies' primary shareholders were the debt holders from the bankruptcy, none of whom wanted much to do with newspapers.

So when Tribune Publishing launched as a standalone company, it started with $350 million in debt - $275 million of which was used to pay a one-time cash dividend to its shareholders. The company was also left with no cash on its books. Shares opened at $24.50.

After the lockup period ended, a major debt holder sold its entire stake and Tribune's stock plunged to below $8 a share within a year of the spinoff. Faced with the possibility of going into bankruptcy, Tribune brought in investor Michael Ferro to help stabilize the company, but he swiftly seized control of the board and replaced the management with his own team. In 2016, he renamed the company Tronc Inc.

By 2018, Tribune was in trouble again, with Gannett making a move to acquire it. Ferro brought in another investor, biotech billionaire Patrick Soon-Shiong, to help fend off the move, but the two soon were at odds. In 2018, the company agreed to sell the Los Angeles Times to Soon-Shiong for $500 million. In 2019, Ferro sold his stake in Tribune to Alden Global Capital, a hedge fund that had a history of exacting steep cuts at its newspapers.

In 2021, Alden acquired the rest of Tribune for $17.25 a share.

News Corp

News Corp (NWSA) (NWS) set the trend back in 2013, when it spun off its global newspaper, book publishing, real-estate listings, digital education and Australian satellite TV units from its 21st Century Fox television- and movie-studio businesses.

The new company - which includes Dow Jones, the publisher of MarketWatch, the Wall Street Journal and Barron's - started on good footing, with no debt and $2.6 billion in cash. Rupert Murdoch, the multibillionaire media baron who built the business into a global powerhouse, remained the largest shareholder of the new company.

News Corp has faced serious struggles as revenue to many of its newspapers declined significantly. But the company has made inroads in transforming itself into a business that can thrive on its own, analysts say.

In its first year, News Corp substantially increased its real-estate business by acquiring Realtor.com for $1 billion. Soon after, it sold its digital education company, Amplify.

Over the succeeding years, News Corp offloaded its coupon-insert businesses, News America Marketing, as well as its Australian satellite-television company, Foxtel. It has also made headway in transforming its flagship Dow Jones business from a newspaper publisher into a news information company.

For its full fiscal year in 2024, News Corp reported revenues of $10.1 billion, up from $8.6 billion in its first complete fiscal year in 2014. It increased its earnings before interest, taxes, depreciation and amortization, or Ebitda, to $1.54 billion in 2024 from $770 million in 2014.

The company has also radically shifted its revenue mix. In 2014, 72% of News Corp's total revenue came from its news units. In the 2024 fiscal year, which ended before the sale of the Foxtel television unit, that figure had dropped to 44%. In 2014, real-estate services made up just shy of 5% of total revenue; by 2024, it had risen to 16.5%. In recent years, activist investors and some analysts have called for News Corp to spin off its real-estate business, something the company has resisted.

News Corp shares started trading in June 2013 at $13.44 and stayed roughly in that range for many years, only crossing above $20 in 2021. The stock hit its all-time peak of $30.49 per share on Feb. 19 of this year and has since remained in the high-$20s.

"News Corp has had its struggles, but they have a really valuable position in real estate," Arthur said. "It's still a work in progress, but it's performed better than a lot of the other spinoffs."

A News Corp spokesperson declined to comment.

Time Inc. and Meredith Corp.

In 2014, Time Warner Inc. separated its magazine-publishing business, Time Inc., from its film and television business.

The new company, home to storied titles like Time, People and Sports Illustrated, began operating with the magazine industry in steep decline, and could never get its footing. Time Inc.'s stock opened at $25.28 per share, but within two years had fallen to around $12.50.

In 2017, the company was acquired by Meredith Corp., a Des Moines, Iowa-based magazine and local-television group, for $2.8 billion.

"The Time Inc. sale was great for Time Inc.'s shareholders, but was a disaster for Meredith," Arthur said.

Meredith, which was focused far more on lifestyle magazines like Better Homes & Gardens and Family Circle, within a year sold Time, Sports Illustrated, Fortune and Money.

Then, in 2021, Meredith announced it was selling its TV division to Gray Television for $2.7 billion, and spinning off its magazine group into a separate company. Later that year, Meredith reached a deal to sell its magazines to Barry Diller's IAC Inc.( IAC) for $2.7 billion.

Are new spinoffs going to be worth the money?

(MORE TO FOLLOW) Dow Jones Newswires

May 31, 2025 08:30 ET (12:30 GMT)

MW Can media company spinoffs of brands like CNN -2-

The main argument for spinoffs has been that they would allow the new company to reinvest in itself, rather than have to contribute its profits toward the broader objectives of the parent company.

Not all have decided that a separation is the way to go. Late last year, Walt Disney Co. $(DIS)$ decided against pursuing a spinoff of its television assets, after determining that the benefits didn't outweigh the costs and that pulling the companies apart would likely prove too complicated.

The cable-TV spinoff being put together by Comcast - which is called Versant and will include USA Network, Syfy, Oxygen, E!, Golf Channel, CNBC and MSNBC - should be well set financially to start.

Those properties currently generate about $7 billion in revenue on their own, the company has said, and that money will no longer need to be diverted toward theme parks or NBCUniversal's Peacock streaming service.

Versant is also expected to have little or no debt to begin with, and is expected to offer either good dividends to shareholders or set up a share-buyback plan. The company's management will include media veterans Mark Lazarus as chief executive and Anand Kini as chief financial and operating officer.

Lazarus has said the new company will be focused on using its war chest to bring in new programming, extend sports media-rights deals and even pursue acquisitions.

But Versant will consist of what are widely considered declining assets, so the management team may end up being hard-pressed to turn the new company into a growth business.

As for Starz - which Lionsgate acquired for $4.4 billion in 2016 - the new company began trading in early May with $559 million in net debt and $66 million in cash.

Its largest shareholders are private-equity firms MHR Fund Management and Liberty Strategic Capital - the latter led by former Treasury Secretary Steven Mnuchin - which also are the primary shareholders of Lionsgate.

TD Cowen analyst Doug Creutz said that Starz has some positives out of the gate, with about 70% of its business coming from direct-to-consumer streaming customers, while it has little exposure to volatile advertising markets. But he noted that the company has seen increasing subscriber losses in recent years, and would need to stabilize that in order to succeed.

"This remains a 'show me' story until proof arrives in the form of steady quarterly performance," Creutz wrote in a note to clients.

So far, Starz shares have traded up nearly 50%. In its first earnings report as a separate company on Thursday, Starz said it added 320,000 subscribers in its first quarter of operations, bringing it to a total of 12.3 million customers.

"We have a very clear plan for the business to succeed as a standalone," a company spokesperson said.

Meanwhile, the contours of a Warner Bros. Discovery spinoff are not entirely clear, as the company has not made any announcement about whether it intends to pursue such a split.

But late last year, the company reorganized its structure to separate its linear television unit from its streaming and studio divisions, leading many analysts and media watchers to speculate that the TV unit could be spun off.

Doug Arthur of Huber Research wrote in a note on a potential Warner Bros. Discovery spinoff that he expected much of the company's debt to be put on the new company's books, while much of the cash would stay with "remain co." He added that he believed such a split could be complex to execute.

But Arthur noted that the new company could attract outside investment, and that its cost structure could prove beneficial and could result in a share price that is substantially higher than where Warner Bros. Discovery trades today, at around $10 a share.

A spokesperson for Warner Bros. Discovery declined to comment.

Many media analysts suspect that these spinoffs could ultimately lead to a roll-up of several smaller companies into one or two larger entities in order to compete in the marketplace, which could result in benefits for investors.

Or the companies could carry on as they are, and could deliver value if their decline is effectively managed. After all, these are still businesses that generate large amounts of cash - if less with each passing year.

-Lukas I. Alpert

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

May 31, 2025 08:30 ET (12:30 GMT)

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