Once upon a time, Time Warner was a giant media company with both a programming arm and a distribution arm.
Starting around 2005, investors started complaining: Programming and distribution are two different business models; distribution requires capital investment; the company isn’t streamlined; the company isn’t focused; cable is an awkward asset (some objections paraphrased, some direct quotes). Investors demanded Time Warner Cable be spun off.
Yet Time Warner’s cable operation was the conglomerate’s most stable source of revenue – even the complaining investors acknowledged that. Time Warner expected the synergy (synergy-synergy, as opposed to layoffs-synergy) between the two parts of the company would only get amplified.
Time Warner’s foot-dragging on the spin-off – four years! – eventually made investors so profoundly unhappy that in 2009, they cut the value of the stock by more than half, driving the price from the $45 to $50 range down below $20. Shortly after that, Time Warner jettisoned its cable operations.
And, lo! The investors were mollified. It took a few years, but Time Warner stock recently got back to $50.
During the same period, Time Warner Cable rose from about $20 to recently oscillate in the $90 to $100 range.
Two years after Time Warner and TWC split, Comcast took control of 49 percent of NBCUniversal. Last month, Comcast purchased the 51 percent remainder.
In other words, in all the ways that count, Comcast now looks pretty similar to Time Warner back in 2008.
As might be expected, investors – who had just demonstrated that they really, really mean it when they say that having programming and distribution all together is very, very bad – investors cut the value of the company by almost 5 whole percentage points, driving Comcast’s stock from $40 to $38.
The point apparently being made, a couple of days later, Comcast stock made back that $2, and at press time was trending up. Analysts have declared Comcast a buy, with target prices for the stock ranging from 10 to 20 percent higher than it is now.
I think we’ve all learned something.