Comcast is breaking up with NBCU. Why did it ever buy it in the first place?

Today on Decoder, I’m talking with Peter Kafka, who is chief correspondent at Business Insider and host of Channels, a podcast about the media industry. And it’s a big week for the media industry — Comcast just announced that it’s splitting itself up, into the Comcast broadband company and the NBCUniversal entertainment company. That’s after the media giant spun out its cable assets like CNBC and MS.NOW into a new company called Versant earlier this year. A quick note, by the way — longtime Verge fans know we’ve been disclosing that Comcast NBCUniversal was an investor in our parent company, Vox Media, for years now. That’s come to an end — not only did that investment spin out with Versant, but Vox Media itself is splitting in two, and that Versant stake now lives inside of a shell company that is part of a joint venture with the Penske Media Corporation called PMX, which technically does not exist yet.  It is very complicated, and I promise I will sort out a simpler disclosure when all of these deals close. But for now the upshot is the same as ever: None of these companies have ever told us what to do or say in our reporting, and we wouldn’t let them if they tried. Verge subscribers, don’t forget you get exclusive access to ad-free Decoder wherever you get your podcasts. Head here. Not a subscriber? You can sign up here. That is good, because, boy, do Peter and I have a lot to say about Comcast. He and I have been covering media and telecom as friends, peers, and competitors for years now, and Comcast was the biggest bet on the idea that combining media assets like NBC with access and distribution like Comcast’s broadband network would somehow pay off. This idea, which you’ll hear us loosely call content plus pipes, is irresistible to media and telecom people. They cannot stay away from it.  AT&T tried content plus pipes when it bought Time Warner. Verizon tried content plus pipes when it bought AOL and Yahoo, and, hell, AOL tried content plus pipes when it bought Time Warner in the early 2000s. You might notice a trend here — all of those deals ended in disaster. But Comcast managed to hold it together with NBCU for 15 years, even though it could never quite explain what value there was in putting the content near the pipes. As you’ll hear Peter say, this big split feels like the company admitting it never really had that answer and capitulating to Wall Street’s demands.  Peter and I talked a lot about what comes next for Comcast and NBCU — both companies have existential choices ahead of them and face stiff competition, and it’s unclear if there are more deals coming to either sell or acquire more assets. We also talked a lot about how we got here and why content plus pipes always crashes and burns.  You’ll hear us talk a lot about net neutrality in that context — that’s the idea that ISPs like Comcast have to treat all traffic on their network equally, and they can’t throttle Netflix and prioritize Peacock. That might have been the entire basis of content plus pipes, but Peter and I disagree on whether it was regulators or the market that kept the internet from turning back into cable TV in that way.  This is a good one, as you’ll hear, Peter and I really like talking to each other about this stuff. Okay: Peter Kafka, chief correspondent for Business Insider and host of the Channels podcast, on the Comcast split. Here we go. This interview has been lightly edited for length and clarity. Peter Kafka, you’re the chief correspondent for Business Insider as well as the host of the excellent media industry podcast Channels. Welcome to Decoder. Thank you, Nilay. Thank you for having me. I have to say, Channels is excellent because I was just on it. That’s how I know it’s good. That was an excellent episode. So, we’re trading it back. I’m really excited to talk to you about what’s going on with Comcast because it feels like you and I have spent our careers weaving in and out of covering Comcast around each other, you especially. Turns out we were stupid. We should have just slept for the last 15 years, woken up, and nothing would’ve changed. Of all the weaving back and forth, one of my favorite moments wasn’t about Comcast specifically. You had [former Netflix CEO] Reed Hastings onstage at a Code Conference event, and you asked him about net neutrality, which we will come to in the course of this conversation. Reed Hastings said, “Yeah, it’s over. We’re big enough. It doesn’t matter anymore.” In many ways, this was a pivotal moment in the history of internet and content because what he was saying was that he had reached enough scale that the distributors, the power, now had to come to his terms. If you look back, I think you can trace almost everything that’s happened to that moment: Netflix announcing to you that they were big enough that everyone had to deal with them.  It’s funny because I always think of that as the classic, “Oh, nerds or people who care about the thing we said we cared about, it’s fine. We’ve just moved on.” There was a huge part of internet culture that was just despondent about the fact that Netflix had been their sword carrier for this stuff and that it was done carrying swords. Shields? Whatever. It was both. They had a sword and shield.  But you’ve nailed it. We’ll get into it, but I think Netflix is the great example of why this convergence dream that Comcast, among many others, chased is immaterial for 2026, and it’s finally acknowledging that. Yeah. Everyone had to go to Netflix because Netflix had built enough of an audience. I think that’s where you can begin this conversation, it might be where you can end it — that Comcast is going to break itself up into a content arm and a broadband arm. Maybe those two companies will work together, and maybe they won’t, but there’s a moment that I think you can point to and say, “Oh, this was inevitable. It was inevitable that the dream of a giant multinational conglomerate would have to unbundle itself.” I feel like we’re in a time of great unbundling right now. The media bundles and re-bundles are a classic cliche. We’re in the unbundling part of the pendulum swing. I’m sure at some point we’ll move back to, “Hey, wouldn’t it be great if we bundled?” But the great thing is the bankers and lawyers remain undefeated because they get paid no matter what for every… You do a transaction, it makes no sense, so you get paid to undo the transaction. Every time anyone says that to me, I’m like, “Why did I quit being a lawyer to be a journalist? I could have been getting paid on every one of these deals.” But you have more fun. It is more fun. Talking to you about this stuff is way more fun than being a lawyer and not being able to talk about it.  I jumped way into the weeds because it is true that you and I have covered Comcast together and around each other for so long. Let’s just start at the start here. Comcast announced it’s splitting itself up. At a high level, what’s happening here? Comcast started splitting itself up earlier this year. It spun out what is now called Versant. That’s its collection of cable networks no one wants. It split that off, and that was pure financial engineering. That was, “Maybe if we get rid of this declining asset, Wall Street will value us more.” Its stock really has been mired for many, many years. That did not move the stock. Cut to last week, it announced, “Okay, we’ll split ourselves up even more. We are now going to be what we were before we bought NBCUniversal. We’re going to be Comcast, the company that sells you broadband connections for your home and now other stuff as well.” That’ll be one company. There’ll be another company, NBCUniversal, which is NBC, the broadcast network; Bravo, the cable network (for some reason); Peacock, the streaming network; the Universal Studios theme park business, which is a big business; and the actual film and TV studio owned by Universal. So, those are big assets and they’re all entertainment. For years and years, Comcast CEO Brian Roberts, would get asked by all sorts of folks, “Why do you own a media company and an infrastructure company?” He would have some answer that didn’t really make sense. The real answer is actually that they shouldn’t have those two companies combined. They should be separate companies. Let’s rewind just a bit. Comcast buying NBCUniversal was a big deal at the time. A lot of people made the argument that Comcast Universal was the only company of its kind that actually worked, that every other company that had tried to smash together content and pipes failed from the jump. I think AT&T buying Time Warner is the classic example.  It didn’t even get started. Yeah, they were like, “Well, this failed instantly.” AT&T would make crazy arguments about why it would work. It was going to load clips of Game of Thrones on mid-range Android phones and that would make people pick AT&T. And they were going to have amazing data somehow and… underpants gnomes.  It literally just didn’t work from the very beginning. There was an argument that Comcast NBCUniversal worked for a time. What was that argument? I don’t know about that argument, honestly. It never worked in terms of there being a synergy between owning the pipes that distribute the content and owning the content. Comcast did own some cable stuff before it went and bought NBCUniversal, so that made sense to fold into NBCUniversal.  You can argue that NBCUniversal performed well as an asset under Comcast. Again, the theme park business is a real business. It’s invested a lot in that. The studio has had its ups and downs, but it’s still a thing that exists and is valuable.  But I don’t think it’s ever proven that there was some benefit from adding the content company to the distribution company, which is what a lot of people thought was going to happen when they merged. It freaked out a lot of people: What happens if this big cable distributor now owns these cable networks? In fact, that was a real concern for the Department of Justice. It put all kinds of remedies and restrictions around that merger to prevent abuse. But in the end, I don’t know that Comcast, the pipes company, was helped at all by owning the content company or vice versa. And yet, it persisted this long. We’re 15 years into this experiment. Why did it last so long if the thesis never made any sense? Great question. Comcast is a publicly owned company, but it’s really a family-owned company. It’s the Roberts family. Like a lot of these big media and now tech companies, they are essentially family-run companies even if they’re publicly traded. That’s The New York Times. That used to be Viacom. That’s now Paramount. We can keep going down the list — The Wall Street Journal is publicly traded and controlled by one family, the Murdochs. So it can be as simple as Roberts saying, “No, this is going to work.” Mind you, it was still trying to expand the media business as recently as a few months ago. It was bidding for part of Warner Bros. Discovery as the third bidder in that deal. It didn’t try that aggressively, but it was, in theory, willing to spend billions of dollars to expand that media company. I think it is probably as simple as after years and years of being told by Wall Street, “We don’t value this asset you own at all. We don’t care about this giant media company you own. We only care about your broadband company,” Comcast finally said, “Okay, we will take you at your word, and we’ll split it up.” It’s that simple. As for why they stuck it out for 15 years? We do make fun of AT&T buying Warner Media and ditching it a couple of years later. At least with AT&T, you can say it looked around and said, “We thought we’d get rewarded by Wall Street for this deal.” It had this synergy plan for  AT&T and Warner Bros. Discovery, but the real answer was, “We thought if we owned a media company, we would get valued like Netflix is valued.” Wall Street, again, did not reward AT&T at all for that deal. So, it turned around and said, “All right, let’s just get out of here.”  So, you could argue that AT&T behaved more responsibly than Comcast did. And Comcast would argue, “Look, we have behaved responsibly. We’ve grown this asset. The fact that we’re splitting it up is just a technicality.” Two things there. One, it’s funny because Netflix is fundamentally valued like a tech company, not a media company. So, everyone feels very confused about that just from the jump. Second, AT&T might’ve been more responsible but fundamentally, the thing it did was give Zack Snyder millions upon millions of dollars to make a grayscale version of Justice League in 4:3 aspect ratio, which I think is one of the all-time funniest telecom company investments in history. It had so many great deals. It did that Friends reunion with poor Matthew Perry all drugged up. Sorry, that’s actually kind of a grim story. We shouldn’t get into that.  It generated a lot of entertainment for us, so that was good. I give it credit for that. You and I stayed in business. But it is funny that AT&T, the telecom company, is more like a tech company on its face than a media company, and it chased a tech company evaluation by investing in media. It feels like Comcast wanted that same thing, and it actually got the benefit of running a media company people liked. Yeah, and it bought it cheap from GE. Again, conglomerates love media companies. Why did GE own a media company? What did they have to do with GE Capital or any of its industrial divisions? Nothing. It just wanted to own a media company. It concluded that wasn’t helping either, so it was spun off at a fairly cheap price. Again, Comcast can say, “That deal has worked out well for us on our P&L. Shareholders have not rewarded us for it.” This brings us to the immediate question. You’re going to turn Comcast from one big company into two smaller companies. Is this designed to create value by having those smaller companies get bought themselves and further split up? It seems like all the executives are saying that is absolutely not the plan, but it feels like an obvious next step. It feels like an obvious next step. Like you said, the Comcast folks have been asked about this and said, “Absolutely not. We’re not selling. We’re not selling. We’re not selling.” It can be absolutely what they mean, and it can be absolutely what they mean up until the day they decide to sell one of those assets. There are tax implications that make it difficult for them to go and turn something around right away, so they might end up holding onto these things for some period of time before they decide to sell them. I think it’s worth noting that if you’re a Comcast shareholder, you’re going to own 20 percent of this spun out company, but not for very long. They’re going to sell that down. To me, that’s a little bit of a tell.  But the main reason this as an M&A event flashed in my