Comcast Video Losses Slow During Q3, but Executives Decline to Forecast Growth in Q4
Comcast’s cable business lost fewer video subscribers during Q3 than stock analysts expected. The company, in a quarterly report Friday, cited a net loss of 117,000 video subscribers, and net gains of 287,000 broadband subscribers and 123,000 phone customers. Comcast executives attributed the better-than-expected video results to its strategy rather than any macroeconomic trends. “I think we've got a really nice balance between rate and volume,” said Neil Smit, president of Comcast’s cable division, during a teleconference Friday. The company raised video rates, but only slightly, while adding new services and beginning to deploy its cloud-based set-top box, the X1. Already in four markets, the X1 will be introduced in two new “major markets” within weeks, Smit said.
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Macroeconomic factors aren’t expected to affect results in Q4, Smit said. “I wouldn’t say there are any unusual circumstances that would affect the video momentum going forward,” he said. “I think housing is neither a headwind nor tailwind,” he said. In some markets, the amount of new housing formation has improved, but only modestly, he said.
Stock analysts liked the video results. Pivotal Research Group analyst Jeffrey Wlodarczak increased his rating on the company’s shares to “Buy” from “Hold” after the company reported results. “Video sub loss decelerated for the 8th straight quarter … and there is a reasonable shot in the next two quarters that video sub growth could be positive,” he wrote in a note to investors. Smit declined to speculate on whether the company would add video subscribers in Q4. “We just have our heads down,” and plan to continue “blocking and tackling,” he said.
At NBCUniversal, retransmission consent will increasingly contribute to broadcast results, Steve Burke, NBCU CEO said. “In fairly rapid fashion over the last two to three years, the industry has settled on, not really a rate card, but a general agreement on what the right kind of structure for retransmission consent is,” Burke said. That agreement seems to hold across the four major broadcast networks and the big distributors, he said. “We'll participate according to those kinds of established structure,” he said. “What we have to do is wait for our existing affiliation agreements to expire and negotiate for new ones."
In 2012, agreements covering about 20 percent of NBC’s subscriber base are due to expire, Burke said. Some of those have already been renewed “in handshake fashion,” and others are still pending, he said. Meanwhile, NBC is on schedule negotiating with its broadcast affiliates to “share” in their retransmission consent revenue, he said.
Asked if Comcast would consider offering its cable video products outside of its traditional service area, Chairman Brian Roberts said it’s not an area of focus now. Instead, the company will work on extending its relationships with customers within its markets, through business services, advanced video services and home automation, he said. “Out in the markets we don’t serve, it’s not clear what the business opportunity is for us,” he said.
Q3 sales at Comcast increased 15.4 percent from a year earlier to $16.4 billion. Net income increased 132.8 percent from a year earlier to $2.1 billion on higher sales, and the proceeds of selling its stakes in SpectrumCo and A&E Networks.