Accrued Interest's Simeon McMillan on $VSNT and the evolving media space

Summary

• Simeon McMillan’s core call on Versant is underperform: he argues its financials are overearning because they still sit under “the protective halo of the NBC family,” whose ad-sales relationship ends in 2028. He pegs conservative fair value at $27 versus a current $35–36; the stock rerated after management announced a roughly $1.35 dividend, or about a 4–4.5% yield, not because of operating results. Free cash flow is falling 15–20% a year: “it’s scary out there.”
• 2028 is the load-bearing date: the Morris Trust restrictions affecting M&A and other strategic deals come off around 2027–28, while NBC fully separates from the Versant channels’ ad-sales department in 2028. Ads are sold as packaged portfolios, with the Olympics, football and rotating Super Bowl helping force purchases of weaker networks. Versant’s sports rights are largely NBC sports rights that did not fit on the NBC network. Until the restrictions ease, “management knows that their hands are tied… they literally couldn’t even sell the company if they want to.”
• Carriage renegotiations without NBC will be brutal: McMillan says the industry has entered a regime where “channels are just getting dropped and staying dropped.” He calls YouTube TV’s Disney standoff—allowing subscribers to miss about two weeks of NFL and college-football games—“shooting the hostage,” and says it extracted free ESPN+, WWE and UFC pay-per-view content. “Versant doesn’t have those”; he expects its channels to be “completely railroaded.”
• The hidden gem is the golf software business: the golf assets are roughly $600 million of revenue on each side, with GolfNow/GolfPass and TeeOff controlling an estimated 75% of the third-party tee-time aggregation market. When Walker asks about the model, McMillan says he is not sure of the exact sales agreements but thinks they are probably percentage-based. Golf is still growing, but the software side is only growing at mid-single digits, maybe high-single digits, if that—“not growing fast enough, with margins high enough,” to change the equity story. Walker’s comp is Mindbody, acquired for roughly 7–8x revenue in early 2019.
• CNBC is the trophy asset, but it needs a trophy buyer willing to pay a trophy price: Walker floats a large tech company such as Amazon or, more speculatively, Robinhood. McMillan says financial news, like political talk, “is clearly being disrupted by podcasts.” His year-one Substack thesis is that “YouTube competes with everything”; putting legacy TV content there is “a devil’s bargain,” while podcasting talent means companies have “no choice but disrupt yourself.”
• On the NFL, McMillan says Fox’s existence is tied to the league and expects the same broadcast partners to remain because the NFL is overwhelmingly domestic and broadcast still reaches the most viewers. Walker asks why YouTube TV—already carrying Sunday Ticket—or Netflix would not take a package and says the incumbents may “bid their enterprise value.” McMillan counters that sports video is Netflix’s lowest-margin product; Netflix would rather surgically select high-juice events such as the Home Run Derby or World Baseball Classic rights for Japan than take a full season. Walker’s Pro Bowl claim was undercut by the flag-football version’s worst ratings in 30 years, down 60% year over year.
• The closing thesis is audience-driven: McMillan’s Nielsen Gauge tracking shows Warner Bros. stuck at 1.5% of big-screen viewing and Paramount below 2% every month, while YouTube’s rise is “meteoric.” “If you don’t have the audience, you’re not going to have the value. And financial engineering is not a strategy.” Asked about Paramount–Warner Bros., McMillan says the odds are “-10” and asks when the breakup will come, adding that he generally likes the assets but could not be more negative on how the combination is playing out.

Deep dive

1. The spin kept everything except what actually matters

• McMillan’s edge is biographical: a decade in senior FP&A, ad sales, and IR roles, including the office of the CEO at Univision, “where I got to see them work with a very similar set of assets as Versant.” His starting posture on spin-offs generally: “a lot of the alpha has come out of spin-offs recently — you can’t just mindlessly buy them,” and Versant is “one of the last” after nearly a decade of cable-network separations. He began looking at it partly to test whether there might be strategic value if something happened with Paramount, Skydance and Warner Bros.
• The structure itself is the tell: Comcast put all its TV assets into Versant except NBC network, Peacock and Bravo. Walker’s laugh — “they put everything in except for the things that actually matter” — with Bravo the funny one, since it’s general entertainment that Comcast simply decided it wanted to keep.
• One distinction from Warner Bros. Discovery’s linear spin: “this spin-off was not done under duress” — it’s been a long time coming. The timing matters because 2028 is the key date for both the ad-sales separation and the removal of the main Morris Trust constraints.

2. 2028 is the cliff: ad-sales divorce plus M&A handcuffs

• The mechanics investors under-appreciate, per McMillan: “you can’t just pop up and sell ads to a hit show overnight.” Ads are sold by teams as packaged portfolios — “they use the stronger content to help sell the weaker content” — and the Olympics, football and rotating Super Bowl help force advertisers to buy the other networks. Once NBC’s ad-sales department separates in 2028, “whatever forecast you want to make, it changes completely.”
• The second constraint is the Morris Trust structure: around 2027–28, Versant is no longer held back from M&A and other strategic deals that could threaten the spin-off’s tax-free status. Until then, “management knows that their hands are tied… they literally couldn’t even sell the company if they want to” — which is why McMillan watches “little cues and tells of what they talk about, what they choose not to focus on.”
• Walker’s extension on sports: Versant gets the worst of all worlds. Its Premier League, NASCAR and other rights are largely the NBC portfolio that did not fit on NBC. The four NASCAR races are the ones NBC could not put on the network; in 2028 either NBC takes back what performs or tells Versant to bid on what does not. “USA is going to reach 70 million people and be getting 10 cents a head, and NBC is going to be reaching 100 million and getting a dollar a head.” McMillan’s verdict on renegotiations with Charter, Comcast and Verizon without NBC attached: “I think they’re going to be completely railroaded.”

3. The number: $27 fair value, and the AMC Networks mirror

• The recent rally was not fundamentals: “it wasn’t because of anything they said with the actual performance” — the announced dividend of about $1.35 a share, producing a roughly 4–4.5% yield at $35–36, forced the rerate. His conservative fair value is $27, looking through to 2028 and putting a multiple on it.
• Walker’s setup compares Versant at roughly 4.5–5x EBITDA with AMC Networks at about 5–5.5x. McMillan’s comp work is different: “I actually think this is very much like AMC.” AMC Networks was trading at about 7.5–8x enterprise value to free cash flow in 2028, while Versant was around 7x 2026 on his adjusted math — with free cash flow “rapidly falling, between 15 and 20% a year.”
• Walker’s technical color: the CNBC hosts’ “coiled spring” framing of spin selling pressure tempted a younger him, and he suspects funds were shorting Versant against a feared Netflix-driven Warner Bros. linear spin — “it’s not lost on me that the day Paramount won the bid, this was up quite a bit.”

4. GolfNow is a real asset — trapped, undisclosed, and immaterial to the equity

• The golf assets are roughly a 50–50 split, about $600 million of revenue on each side. The Golf Channel half is declining and losing, or likely to lose, carriage because it is not a must-see channel; “the must-watch golf events aren’t even on the channel.” McMillan sees no synergy with the software half. His analogy is the NFL Network and NBA TV: “there really was not that much value” in league-owned channels; a contract can solve it.
• The software side includes GolfNow and GolfPass; McMillan also identifies GolfNow and TeeOff as the number-one and number-two brands, together controlling an estimated 75% of the third-party tee-time aggregation market. When Walker asks whether courses provide inventory or pay a percentage of bookings, McMillan says he is not sure of the exact mechanics but thinks the agreements are probably percentage-based.
• Golf itself, he found, was not a pandemic fad: “it turns out it’s not… it’s a healthy sport.” But “the key thing is what is material to the stock.” A roughly $600–700 million business growing at mid-single digits, maybe high-single digits, if that, cannot offset the media declines, which is why the filings break out almost nothing.
• Walker’s upside case anyway rhymes with Mindbody, acquired for what McMillan thinks was roughly 7–8x revenue in early 2019. Golf-course inventory could be “pretty damn sticky”: once a platform gets exclusive rights, courses do not turn over every month. McMillan sees a potentially attractive standalone business trapped inside Versant’s structure and likely to find a new home later.

5. CNBC: same disruption disease as MS NOW, needs a trophy buyer

• McMillan’s cross-read from his radio years, including a carve-out with Hot 97, WBLS and billboards: liberal and conservative talk are different products, but CNBC and MS NOW share the same disease — “both financial news reporting and political talk is clearly being disrupted by podcasts.” CEOs and finance people break news on Rogan, Theo Von, All-In and other shows; almost half of the Bloomberg anchors, in his observation, have podcasts. The Meta CFO’s “free cash flow” hat appeared on a podcast shortly before Meta raised its CapEx forecast and damaged its free cash flow.
• Walker’s exit scenario: “CNBC would be a great trophy asset, but you need a trophy buyer who’s willing to pay a trophy price” — a large tech company that sells things, given CNBC’s unusually high-income audience. His pie-in-the-sky name is Robinhood. McMillan says CNBC is one of the last channels likely to survive as the linear bundle shrinks; in his battle royale, Fox News is last and CNBC is near the top five. CNBC is also trying to sell higher-value B2C subscription products, but Andrew’s response is: “everyone’s got a Substack.”
• Walker’s mismanagement charge — “how can CNBC’s YouTube presence suck?” — draws McMillan’s structural defense: for legacy video, YouTube is “a devil’s bargain — you have to do it but the economics are horrible, so you try to do as little as possible.” And letting talent podcast means “your talent ends up competing with you… you have no choice but disrupt yourself.” Streaming made networks irrelevant anyway: “a show is a tile on the screen.”
• The model they converge on is ESPN’s Pat McAfee play: ESPN licenses his show and paid him to take it off YouTube. Walker says “Jim Cramer is their Stephen A. Smith”; McMillan suggests CNBC might license the All-In guys instead of relying on Jim Cramer for two hours. Walker: “that’s the future.”

6. YouTube TV shot the hostage — and Versant has no hostages of its own

• The most important TV negotiation last fall, per McMillan, was YouTube TV’s Disney dispute, more contentious than Charter’s the year prior because “for the first time… they let the subscribers miss two weeks of NFL games.” In the old regime an NFL game meant the distributor folded — “the subscribers come with pitchforks.” Now “channels are just getting dropped and staying dropped,” and Disney took a charge of hundreds of millions of dollars.
• The precedent that kills Versant specifically: YouTube extracted the goodies — ESPN+ content, WWE and UFC pay-per-views — free for its subscribers. “Versant doesn’t have those.”
• On Walker’s question about Charter’s surprise Q4 video-sub gain, an honest non-answer: “I don’t cover Charter extensively… it did not register to me” — because in his tracking, “almost 100% of the net customer adds in the pay-TV bundle have come from YouTube TV,” and cord-cutting continues “at an egregious pace.”

7. The NFL auction: existential broadcast stakes, surgical streamers

• Walker asks about a possible summer NFL agreement despite the current deal possibly running through 2029. He notes Netflix’s successful Christmas games and Amazon’s positive results, then asks why YouTube TV — which has Sunday Ticket — or Netflix would not take a package outright and become the TV channel. He later says the existing partners may effectively “bid their enterprise value.”
• McMillan says Fox has “no point to exist without the NFL”; it is one of the big four broadcasters and would essentially disappear without the league. He also says the NFL is overwhelmingly domestic and “can only move as fast as the audience” — unlike F1 or MLS taking a larger Apple TV package — because broadcast still reaches the most viewers. Prediction: the same broadcast partners remain, and the negotiation “might not be as big of a game changer as some people think.”
• His brake on Netflix is that “the sports video product is the lowest-margin part of their business”; a cheap drama is far more profitable per viewing hour. Netflix is “the king at finding the piece of content that has the most juice” — the Home Run Derby and World Baseball Classic rights for Japan — and “if the owners would let them surgically carve out the package, they would. The problem is they can’t.”
• The best live disagreement: Walker claims there are no NFL games nobody wants — even the Pro Bowl outdraws the NBA Finals. McMillan corrects him: the flag-football Pro Bowl had its worst ratings in 30 years. Walker checks, concedes — down 60% year over year: “I would have been right until this year.” McMillan’s meta-point: “a lot of times the narratives don’t always match the ratings,” and the NFL is “such a religious brand that people are far too hesitant to criticize them.”
• McMillan’s read on Netflix’s Warner Bros. bid, previewing a coming piece: “this is like the Golden State Warriors going after Kevin Durant — they didn’t need him, but if you can get him, you can. And you keep him away from a competitor.” His stated hot take: “HBO as a network is so overrated… maybe two or three hit shows at any given time with eight episodes — you can’t build a network around that.”

8. Audience dictates who wins; Paramount–Warner gets “-10”

• The content McMillan is proudest of is his monthly Nielsen Gauge breakdown of big-screen, non-mobile viewing share, tracking “the meteoric ascendance of YouTube” while Warner Bros. sits stuck at 1.5% and Paramount below 2% every month. The episode’s closing law: “if you don’t have the audience, you’re not going to have the value. And financial engineering is not a strategy.”
• Asked the odds the Paramount–Warner Bros. merger succeeds, McMillan says “-10. The question is when is the breakup coming.” He adds that history suggests it will be a disaster, that he generally likes the assets and thinks they could be combined, but that he could not be more negative on how it is playing out.
• Walker and McMillan agree to make the broader media discussion a quarterly fixture.