Versant Media Group, Inc. (VSNT) Earnings Call Transcript & Summary

All right. We're going to kick us off here on day 4 of the Morgan Stanley TMT Conference in San Francisco. We're really excited to have Mark Lazarus, the CEO of Versant, which spun off from Comcast in early January. Quick disclosure. For important disclosures, please see the Morgan Stanley research disclosure website. And if you have any questions, please feel free to reach out to your Morgan Stanley sales rep. I'm joined by Thomas Yeh from the Morgan Stanley Media and Entertainment research team. Mark, thanks so much for being here.

Thank you for having us.

So you just reported earnings and reiterated your outlook for 2026. What have been your biggest learnings in the first few months of operating as a stand-alone company following the separation from Comcast?

We've learned a lot. We learned that our -- I think that we really realized that while we have big iconic, well-known brands, they were really hidden inside of Comcast, and that's been a lot of the premise for the entirety of the spin that we can unlock value with these very popular big brands. So taking CNBC, MS NOW, Golf Channel, E!, Oxygen, SYFY, Fandango, GolfNow and really exposing them. And then bucketing them into vertical businesses where we can expand beyond the pay television ecosystem, that we've been so successful and are so successful in, but we'll be able to invest into them. We'll be able to do that, and I think the biggest learning is how important our strong balance sheet is, right? We have very low leverage. We're able to invest in the businesses and return money to shareholders. And I think learning that as we've gone has been really helpful. And then our -- the independence that we have, we've been able to do a few things in these first few months, we've closed two small acquisitions. We've announced three organic investments. And while that could happen over time in a big company, it would have taken more time. We're a little -- we're able to be more nimble and fast moving.

Excellent. That's a great place to start. So we wanted to -- we actually -- we have CNBC presence here at the conference, which is great...

We travel with our own crews.

We appreciate that. I start my day every morning with CNBC.

Thank you.

So we'd love for you to maybe walk through some of the four core verticals, what you think are maybe most important and most underappreciated as you look at the portfolio, and what you see as the most immediate areas of growth within the company?

So -- okay. So I'll start with CNBC and focusing a vertical around CNBC, the global leader in business news, a very influential network in terms of who comes on and who's watching, has focused on business news, personal finance and the retail investor. And our ability to do that through television and digital is one thing. But we're going to invest in a renewed and revitalized direct-to-consumer product, direct-to-consumer products that will allow us to build out tools sets using AI and for stock recommendations, charting tools, that will allow us to expand quickly in an area that we really weren't investing in before. So that's one important vertical. The second one would be in political news and opinion around MS NOW. MS NOW did not have a digital video strategy, hard to believe in this day and age that a big brand, really the #2 or #3 depending on the year, rated linear television cable network did not have a digital video strategy. And that was by design from the NBC News Group decided to put their resources into other digital video products. So they did not create one around MS NOW. Puts us a little behind, but it also has a massive opportunity. It's the #2 engaged audience of all linear services, 9 hours a week, our audience watches. And over the last 10 years, the prime time audience for MS NOW has doubled, in a world where distribution has gone down, our audience has doubled. So a very important and valuable audience that is highly engaged in that product, we'll be able to focus with a direct-to-consumer product around newsletters, around podcasting, around -- and then on the digital video side. The third, and I talk briefly is Golf. It's a fun vertical to have, and it's really a model home for what we've been -- what we want to do with the rest of the businesses. Golf 12, 15 years ago was Golf Channel was the entire business that we had in Golf. We then acquired a business called GolfNow, and it was a roll-up of tee time businesses. We now have a tee time business that is of significant scale. We booked 40 million tee times last year. We're in the early stages of our growth there. We only have -- we only booked roughly 10% of all the tee times, so there's a lot of organic growth. We're early in our international expansion. We're now -- we bought a company in Belfast and now serve the U.K. with great penetration. We have Austria, France, Germany, South Africa and Australia that we're growing into. So GolfNow and then extensions to that is a software services business and enterprise software that helps with yield management and inventory management for golf courses and helps them run their businesses. And then a video subscription business where we're partners with Rory McIlroy for GolfPass. When you roll that all up, it's now the same size as our linear Golf business, so roughly 50-50 in terms of how the revenues come in. And that's a model home. That's what we want to do in all four of these verticals. Go from where we're roughly -- we were in '24, we were 83% Pay TV. That's gone down in '25 to 81% on our way to 30%, 33% over the next 3 to 5 years and then eventually, hopefully, the whole portfolio lives in a 50-50 world. And then the final one is our entertainment and sports vertical. On the sports side, we have very strong sports product. We have -- we're the biggest provider of Golf content, roughly 2,000 hours of live golf, 200 events. We have the -- premierly, we have roughly half the Premier League schedule exclusively on USA Network. We have the WNBA. We have NASCAR. We have had 2 weeks of incredible Olympics as part of our programming partnership with NBC. We'll have that again in 2028 for the L.A. games. We did a deal with women's volleyball league called League One. So -- and we're looking at other sports properties. So we're heavily invested in sports. On the entertainment side, Fandango is, I think, an underappreciated part of our portfolio, mostly known as a movie ticketing service. We have -- we sell roughly 70 million movie tickets every year. It's also a top 5 home video business for streaming movies and TV series at home with Fandango at home. And we're going to move that business and all of that audience and circulation we have for movie tickets and home video into a free AVOD business. We have the content, both that we own and that we license from third parties for both our TV networks and for AVOD, and we'll be able to create a service for -- with just an advertising base. So again, moving and transitioning our business from heavy dependence on Pay TV to a more balanced dependence across other revenue streams.

That's an excellent overview and we want to get into a bunch of those pieces. I think one of the things you hit on was the importance of live programming in there, which I think is over 60% of your audience distribution across news and sports. Maybe you can talk about the resilience you've seen in viewership trends, how important live programming assets are for you and how you see that portfolio evolving over time?

So yes, four of our businesses are heavily reliant on live programming. So MS NOW, live; CNBC, live; Golf Channel, a lot of live; and USA Network with its sports portfolio a lot. There is also some live on E! with live from the red carpets and award shows and other things. So we do have a live portfolio. When you look at ratings trends, Live has held up better on linear television than scripted or unscripted. I'm sure there's hits in scripted and unscripted and some do well. But on the whole, live ratings are holding up. Our sports ratings are either in the area of flat or growing. MS NOW is up double digits since we rebranded in November. Some of that is new cycle. Some of that we like to think is how we're programming it. And CNBC's ratings have been steady and continues to garner an important and valuable audience. So Live is going to be the best in linear television, and it's part of our thesis around the vertical strategy as opposed to a horizontal strategy of just rolling up other businesses. We don't want to overly dilute that live element. It's important for advertisers, it's important for distributors, and it's important for audiences.

I wanted to dive a little bit deeper into the strategy that you mentioned about evolving the revenue mix over time. You mentioned the 33% target over a midterm time frame. How should we think about -- we all clearly know the headwinds in the linear ecosystem. How should we think about your clearest opportunities to really offset that and whether that's continuing mitigation of potentially some of those declines on the linear side versus the growth drivers that you're seeing on the...

We have to do both. I mean we need to mitigate the secular decline as best we can. Some of that will be by the mix of programming and maintaining audiences so we can continue to drive ad revenue. There are premiums on ad revenue for live content, and that will be helpful. Some of it will be through renewing distribution deals with some increases and I'll call the marketplace increases, not expecting outsized increases. So those will be forms of mitigation. In terms of growth, which I think is more important, we need to mitigate what we can, but we need to grow. I mean it's not -- to get to the right mix, the wrong way isn't going be -- isn't going to make anyone get excited. So it's going to be about either organically or inorganically growing new revenue streams. So we've got the three initiatives I laid out, MS NOW, CNBC and the Fandango AVOD as growth vehicles organically. We've made two small acquisitions to date as we were spinning. Free TV Networks, which is a free-to-air, linear over-the-air form of fast channel, but it's built solely on advertising. And free-to-air television and free AVOD are two areas in our ecosystem that are growing. It's demonstrable that those are growing. So we're very bullish that we'll be able to grow revenue streams there. And then we bought a company called INDY Cinema, which like we have in the Golf business is a software -- enterprise software platform that ties very closely with our movie ticketing service, and we'll be able to implement it across all the relationships we have in the film and cinema industry. So again, a diversified revenue stream. We'll continue to look for bolt-on acquisitions that fit in our verticals. But really, we're focused on those organic growth plans for now.

Can you talk a little bit more just in terms of how you see the opportunity for the Free TV Networks acquisition. And as we head into the Fandango AVOD launch, how we should think about that given the fact that [ FAST ] is a very competitive space, which is growing. But clearly, a lot of alternatives and...

Yes. So on the Free TV, it's already an established brand. We bought a small company that was led by gentleman who had done this before and sold that business to Scripps earlier named Jonathan Katz. He relaunched another set a couple of years ago. It's four networks in specific genres around African-American audiences, Western audiences and True Crime places that we already, certainly with True Crime with Oxygen, we already have some expertise. So we think those comes -- it's mostly direct response advertising now, but we believe that, that can grow to 9-figure ad revenue very quickly. And then there's expansion opportunities in terms of getting distribution there, which just grows the audience. So there's a big appetite for free. I mean the cost of media is hitting people hard and people are looking for free options and the same thing on the free AVOD and that serves a little different role with us. If you look at what others have done in terms of revenue, say, a Tubi or a Pluto, they've been able to get big audiences. What we have that they don't have. First, we have a very strong brand in Fandango, it's well known. It's got high awareness, and it's a very popular brand. We haven't ever really marketed or advertised it as what it does in home video or certainly not in AVOD. We have a lot of information on our customers that those others don't because of what they -- because they're purchasing tickets and TV series and movies from us. So we have a lot of information on what they're buying and what they're doing. We'll be able to serve them content that fits their viewer profile and more importantly, we'll be able to work and target advertising to them, and we'll be able to use -- because it's digital advertising, we will be able to be more effective and be in sort of the newer forms of advertising, programmatic ad sales in other areas. So we're very bullish on growth for both of those.

Got it. And for INDY Group Cinema, can you just maybe talk a little bit about how that fits into the broader portfolio? I think there's obviously ebb and flow in terms of the sentiment about the health of the box office in terms of just the...

I think if people make good movies, people will go. But we also believe it's -- we can tie it in with our -- with who we work with now, the theater owners and cinema operators. But it also doesn't -- it gives us the opportunity to potentially think beyond theatrical films as a ticketing service, and it gives us a technology offering that could go into other parts of the ticketing world. We don't have current plans, but it gives us optionality to expand what we do in ticketing.

Got it.

So we want to go back to sports. You clearly articulated your leadership position in golf as a vertical. Maybe you could talk about, obviously, that's the most competitive space, the sports rights backdrop given how important it is and how live viewership is really driven by that. How important is your ownership of kind of the sports rights and programming and your ability to get those sports rights given you're obviously a bit smaller than some of the other competitors that you're going up against?

Yes. Well, that I've personally had a long career in sports. I ran in parts of my career, Turner Sports, ran NBC Sports. So I've been smaller. I've been bigger. I'm back to smaller. But we believe a couple of things. One, we have a very attractive portfolio now. We have a product that has big passionate fan bases. It's not the NBA, it's not the NFL, but they also don't cost with those costs. So NASCAR has a big following. Each and every week, it's typically a top 1 or 2 rated sport on the weekend. It's -- there's one race everyone who's interested in it watches it. There's been a lot of buzz around F1, and F1 has done really well and done nice growth. But every week, the NASCAR race is 2 or 3x bigger in terms of audience. It's a big popular sport. Premier League where we have half -- roughly half, a little less than half, the games exclusively is an important product. And we, over the last 12 years as part of NBCU really feel like we've helped build up the Premier League in this country. And now as part of this new company, we'll get the benefit of. WWE is also an important big popular sport, call it a sport because it's live, but we -- and does really well for us. So we have a very strong portfolio, and we talked to Olympics and WNBA. But I think what's happening, what we're going to see over the next year or 2 is as the NFL comes back to market and extracts more rights fee from those who are either are in it now or stay in it or come to get in it. I believe it will cause some dislocation of properties from other places. And we would still over 60 million homes have broad reach with USA Network and will be in a position to potentially bring some other sports to our portfolio. We have a strong sports division. My personal history in sports, we have a gentleman named Matt Hong, who's running our day-to-day sports vision was COO at Turner Sports for years and now as the President of our sports division. We have our own production company facilities. So we're ready to go, and we have the relationships. So as those opportunities develop, we're not chasing the NFL. We're not going to be in the NBA, but there'll be good live sports properties that will fit our profile.

I'm curious how you think the NFL kind of renegotiations play out. And as you alluded to, other players might have to kind of divest other things? How do you kind of see that playing out? And where Versant can fit in that?

Well, I think that the NFL is going to come to market shortly. I think they're in preliminary discussions. I'm not in any of those, so I don't know for sure. But I believe that all of the current players will want to stay in and will pay excisable increase to maintain their NFL relationships. And I think they're all going to have to make hard decisions as other properties come up, what they can stay in and what they can't, what they can afford and what they can't. And I think that will create opportunities for people like us.

It makes a lot of sense. So I want to turn to general entertainment, how does that fit into your broad strategy? I would say investors are obviously a bit less enthused about that vertical versus kind of news and sports where you guys play, but how should we think about the appropriate level of investment in scripted original content?

Yes. We're doing -- there's general entertainment. I'd like to call it based on what we have focused entertainment, right? We have -- U.S.A. is sort of broad-based, but we're kind of leaning on the sports arm there. And -- but we'll do a few scripted originals for USA Network, not a massive amount of few that will help us with ad sales and be good for our discussions with distributors. But candidly, we're not going to make enough that is going to change the profile of USA Network, but it's an important part of our -- to have as part of our portfolio. And then when you look at something like Oxygen, that's why I say focused, it's heavily focused on True Crime. True Crime has proven to be a very durable genre. It works on linear television. It works in FAST channels. It works in streaming. We're going to put a lot -- do a lot of that in AVOD. We talked about True Crime as part of Free TV Networks. So I believe we will -- we can continue to focus on that. It's relatively efficient to make. I know you asked about scripted, but we're going to lean more into unscripted as an entertainment company. We'll have a few scripted originals, but we -- which will mostly be USA and some coproductions for SYFY Network. But True Crime or Oxygen, and then E! really centered around pop culture also has a strong digital E! News digital business, has a strong traditional digital business, but we're starting to make video content with them. But again, that will be largely unscripted. We got a lot of press around the redo of the Real Housewives of New York, the original series -- the originals. I think we were trying to call it the Golden Girls because that would be stealing, but golden something, but we were going to make unscripted content for E! and then focus on live, pop culture, on the award shows, on our red carpet and on our digital business. So a long way of saying, scripted will be a piece, but a smaller piece, and we'll focus on the unscripted.

Makes sense. I'm curious, AI has obviously been a huge topic of this conference. I'm curious as I think about some of the things you just talked about, crime could be one area where you could leverage AI production. Do you think of that as something that could increase the velocity and output of content, make things a lot cheaper? Is that something that you guys would leverage?

Yes, 1,000%. We believe in that. We have to obviously just be respectful of unions, guilds, et cetera. And I think in that space, we think that's imminently doable. And I think it's -- it's exactly the types of opportunities that we look at. It's also exactly the kind of things we can do as an independent company where we can move quickly. Inside the bigger company, we had -- there was a lot of competing constituencies, and you had to balance all of that every single day as you are making these decisions. We have a much narrower path now, and so we can make informed decisions more quickly and do some things that we might not have done inside the bigger company.

Great. And we want to turn to CNBC a bit more, as you alluded to, you're kind of the leader in the space. Maybe talk about tapping into that really dedicated sticky fan base. And I also want you to hit on prediction markets. You had signed a deal with Kalshi. We had Tarek here at the conference. Maybe just talk about how you're integrating prediction markets into your programming.

Yes. So CNBC is, I assume, an incredibly valuable big global brand. And I went to Davos for the first time and saw it on full display. I mean it was -- every business leader, every political leader wants to come talk to CNBC. It's an influential voice. And I think of this go to our 6 to 9 a.m. window where Squawk Box lives and Morning Joe lives. And I think between those two shows, we reach more influential people every single morning than any other media company. And that's a really nice calling card for us. So CNBC, the number of live interviews with influential people and the people that we reach, I think, stands in as one of one. That's a really important part of who we are. Every politician regardless of party wants to come on and send their message, most business leaders or many business leaders want to come on and send their message to, whether it's employees or investors or others. So a very powerful, powerful network and has always been, but I think we can help accelerate that inside this company, and it won't be a hidden gem anymore. It's just going to be a gem, that's one. On the prediction markets, it's a little bit of the Wild West out there now. We did a deal with Kalshi and it's got several components to it. We like that they had gone through sort of the regulatory processes, and we're on the other side of that. The deal has multiple components where we -- they buy advertising from us, that's one that was sort of table stakes. But we're integrating their content into our shows and into our messaging. They're putting CNBC and access the CNBC information into their app, which is good for us as it gets us into other and new and younger audiences. They're providing us data and information for all of our content on air and digitally. And then finally, we hope that we will be able to get more people to use their platform. And as that happens, we get -- we have -- get a piece of revenue stream from that. So multifaceted, very new, just getting started. The prediction markets around sports and other things. Some of it's got its ups and downs. We like the discipline that Kalshi has shown in terms of what they're getting into and what they're not.

I wanted to ask a little bit more about the linear business, which is still a large part of your revenues. I think you mentioned on the earnings call a degree of visibility into that revenue stream just given the timing and the renewal schedule in particular with some of your partners. Can you maybe just talk about maybe it's early days, but what you're seeing in terms of how your negotiating leverage might change with these distributors going forward now that you're no longer part of the broader Comcast?

Yes. So I think we have roughly 16% of our subs up this year towards the back end of the year. Yes, we were being negotiated as part of the bigger NBCU or not. So that comes without having football to drive, but it also comes with things that are benefits. Let's start with -- we like that we have 62% live news and sports, which has value to the linear television distributors. That's an important element. CNBC, MS NOW are big, powerful engines. MS NOW, certainly, this year, as we come towards election cycles, we expect more and more growth as the year goes on and then the sports portfolio. One of the things that has been part of big media companies, I'm sure everyone has read over time is the stress between distributors and media companies, not really about the price of the linear network, but what's the streaming service and the stress. Why should we pay you for all your linear networks, where we can just tell people to buy your streaming service and get most of the same content. None of our content, none of our content today is on any streaming service. So it's exclusive to the Pay TV ecosystem, and we think that has value. 180 Premier League games, 10 NASCAR races, 50 WNBA games, 52 weeks of WWE, that is all exclusive to Pay Television. And that with -- and not having our own streaming service, and we're not going to create a aggregated SVOD service, we think, gives us -- puts us in a very good position. We also have the history of just 2025, where we -- even though we were part of NBCU, it was obviously known that we were spinning and we were going to be our own company and have to bifurcate the contracts, and we were able to successfully complete a series of deals on terms that work for both parties.

Does the launch of MS NOW on a DTC platform change that dynamic, you think at all?

We don't think so because it's not going to be a replicate service. We're not just going to stream our network. It's going to have community access to our talent, other talent with differentiated shows. So it won't be just a replicate service. It will be a much different service with a lot of other things attached to it.

Got it. There's also greater focus, I think, on the directionality of the universe subscriber declines. I think some green shoots in recent quarters from some of the major distributors in terms of the stability that they're potentially seeing, but also increasingly maybe some concern on skinny bundle fragmentation. Can you maybe just talk a little bit about your networks and how they're positioned to?

Yes. So the green shoots are very exciting. I mean I think Charter, in particular, but we -- yes, we have modeled for sort of decline industry-wide decline. So if that moderates, that will be good for what we've planned for. And right now, there are some indications that we may see some moderation to that as you point out. So that's -- as it relates to the bundles, most of the skinny bundles are focused on news and sports. And we are in all of those bundles that have been built out as part of our -- with our networks because we are heavily news and sports. I do think, candidly, entertainment is those networks have some distribution risk over time. But the preponderance of our -- not only our content but the revenue attached to those services is much -- is higher than it is for our entertainment services. So we're -- we feel like we're in a very good position to be as part of the skinny bundles evolve especially around news and sports will be part of them.

So as a portfolio of networks, is there a -- an interest or, I guess, a focus on establishing minimum thresholds based on the tiering of sports and news relative to some of the entertainment networks that you...

Well, those -- there are minimum thresholds in the industry now that exists. And I won't talk about individual negotiations. But yes, we certainly would like to maintain certain levels of minimum thresholds and work. And most of the distributors are working with the programmers on that. It's not just us. I mean it's -- there's. It's an industry-wide thing. So -- but again, we've been able to be part of all that.

Got it. Quickly, you mentioned political. Can you maybe just talk about from an advertising perspective, how you think that shapes out as we head into the second half of 2026? And how you're positioned to potentially benefit from that?

Yes. Well, MS, obviously, and CNBC both could serve in that role. We don't get -- and a lot of political advertising is very local. We get some national political advertising, mostly around advocacy and props and other things that are up for vote. But what we do get is a halo around ratings. That is good for the entirety of our -- for the entirety of our advertising sales unit. So ratings around for MS, in particular, in the even years has typically a nice spike to it, and we're seeing that early on. We saw it around the state of the union. We saw it around certainly the election last November, and we saw it just Tuesday night, where MS was the fifth rated network of all -- in all of television regardless of distribution mechanism with a couple of primaries in Texas and a few other states. So we feel like we're on a very good trajectory there.

Great. In our last couple of minutes, I just wanted to ask more around the M&A and strategic considerations that you've highlighted during your Analyst Day and on your earnings call. There have been some small acquisitions already made. How are you thinking about M&A going forward in terms of the philosophy of what you might be looking for and -- just in terms of size and opportunity set?

We will be disciplined and opportunistic. We do, as I said, our balance sheet is really important to us. We want to maintain the strong balance sheet that we have. We come from a very disciplined background at Comcast. Anand Kini, who's here in the room with us is our COO and CFO. But we come from a very disciplined background and we're going to maintain that. So that's one. So we're not looking to... Second is we will invest in these four verticals. And our criteria will be, does it help expand one of those four or more of those four verticals, that will be an important filter for us. And then finally, returning money to shareholders is important. And when we announced our dividend this week and the authorization for share buyback, I think we put our money where our mouth is on that.

Great. I think that's all the time we have. Thank you so much for being here.

Thank you all very much. Appreciate it.