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
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