Big Media companies have spent the last few years trying to get out of the cable TV business because cable TV is in permanent decline.
That seems like a problem for Versant CEO Mike Lazarus: His newly public company is composed primarily of cable TV networks, like CNBC and MSNBC, that used to belong to Comcast, until they got spun out a few months ago.
Now, Lazarus has to convince investors that the assets Comcast doesn’t want to own anymore — because it thinks they’re a drag on its stock price — would be a good stand-alone company.
Lazarus does have a fairly concise pitch: He wants to manage the decline of his cable TV assets, take the money those assets continue to generate, and plow the profits into new, growing businesses.
Switching up business models on the fly is very tricky, and there aren’t a lot of companies that have pulled it off: Netflix’s transformation from DVD-by-mail startup to streaming juggernaut gets referenced a lot because the feat is so rare.
So I wanted to talk to Lazarus about how he thinks he can pull it off, and where he might spend some of his money as he does it. One answer he shared with me: Sports rights for just about anything that isn’t the NFL, which will be too pricey for him. We also discussed his interest in Vox Media’s podcast operation, which he didn’t end up buying.
You can hear our entire chat on my Channels podcast (which Vox Media produces). The following is an edited excerpt of our conversation:
Peter Kafka: Your job is to convince Wall Street that the cable TV networks Comcast didn’t want to own would be good for other investors to own. How do you do that?
Mark Lazarus: We have a series of assets, which spin out a lot of cash: seven linear networks, four digital networks. We’re looking at the strength of our iconic brands and how we can utilize those to build businesses and transform ourselves.
A year ago, we were 83% pay television-dependent and 17% not. Now we’re at just under 80% and over 20%.
So we are spinning out a lot of cash. What are we gonna use that cash for? First, we want to have a strong balance sheet, which we do — a low debt load. We’re able to service that debt and still have a lot of cash to invest.
You guys have said you want to get to a point where 50% of your business will be from something other than cable TV?
That’s a yearslong project, but that is our goal.
We’ve done that in the golf business. Fourteen years ago, that business was 100% from the Golf Channel. We now have Golf Channel; GolfNow, which is a tee time business where we book 40 million tee times; and GolfPass, which is a direct-to-consumer business. Now that bucket of assets is 50% pay television and 50% not.
So there’s no illusion about, “No, no, cable networks are coming back.” It’s “We know this is a declining asset. The trick is to leverage what we can out of that and outrun the decline.”
The trick is to arrest the decline as best we can, by raising ratings. This quarter, we raised ratings across many of our networks.
That doesn’t arrest the subscriber decay, but it arrests the audience decline. So we want to do the best we can to mitigate that decline, and build assets around those, and use those assets like we did with golf.
You’ve been talking up your interest in sports rights. But in sports, there’s the NFL, which owns all of television, and then there’s everything else.
NFL rights are only going to get more expensive, and you’re unlikely to be in that business. So what kind of sports can you bring to your audience?
The NFL is an amazing product, and I believe that the NFL will be able to garner increases from their existing rights holders.
I think that that will leave the media companies needing to make content choices, and they will make that across the entirety of their [schedule]. Will they reduce their news budgets? Will they reduce their entertainment budgets? Will they rebalance their sports portfolios?
We saw that with ESPN and F1 racing last year. They said: “Actually, Apple, you can have it.“
I think there will be other things like that.
In the last year, we’ve renewed and expanded many of our sports relationships: The USGA for the US Open, the PGA of America with the Ryder Cup. We’re the largest exhibitor of WNBA games, including having the WNBA finals this year. We added League One volleyball.
I think the leagues are going to roll up more content, and there will be more available for national distribution. And we think that with USA Network in particular — a fully distributed cable network, in today’s parlance — with people who understand the sports landscape, people who know how to produce and market sports, across the range of our portfolio, that we can buy some more rights.
Is the ultimate goal to say, “We are the home of the WNBA” or a different sport? Or is it, “We have a lot of sports, and maybe you didn’t know you wanted to watch professional volleyball, but here it is.”
Somewhere in the middle.
We’re likely not going to be big enough to be an exclusive purveyor, but we can be a significant player in a bunch of things. But having sports for sports’ sake doesn’t make a lot of sense.
One of the things you were reportedly interested in buying is the podcasting network that’s distributing this show.
What happened there?
We are a part of the family already [because Versant owns a stake in Vox Media, stemming from Comcast/NBC’s investment in the company in 2015]. I’ve known [Vox Media CEO] Jim Bankoff for a long time. I have a lot of respect for what he’s built over time and how he’s transitioned over time. We had some good conversations.
There are more assets, as you know, than just the podcasting piece. And his job for the shareholders, of which we are one — if he can maximize return for them, then we support that.
I’m going to translate. You were interested in the podcast network. He was negotiating a deal to sell more than the podcast network, and you said, “Go with God.”
Yes. I think that’s likely the outcome, but I can’t speak to it. I don’t know any more than that.
