Comcast Adds TV Subscribers Again, Defying Industry Trend
Comcast Corp. (CMCSA) is having no problem getting bigger. The largest U.S. cable company added video customers for a second straight quarter, bucking the industry trend of losing TV subscribers.
Video subscriber growth and the Winter Olympics helped first-quarter profit of 68 cents a share, excluding some items, beat the 64 cents analysts estimated on average. Philadelphia-based Comcast also reported in today’s statement that revenue rose to $17.4 billion. Analysts had predicted $17 billion.
Comcast is about to get even larger once its proposed $45 billion purchase of Time Warner Cable Inc. (TWC) is approved by regulators. While Comcast’s results mark a lone bright spot in a U.S. industry that is losing TV customers overall, opponents of the deal have argued that a combined Comcast-Time Warner Cable would raise prices on its 30 million subscribers to help drive profit growth. Comcast has argued that size will mean better service and technology, as well as the ability to negotiate for lower programming costs from cable networks.
“The more we get into the planning efforts on our side, the more confident we are in the potential and the potential synergies,” Chief Executive Officer Brian Roberts said of the planned merger on a conference call today. Improvements in broadband speeds and cable-TV technology have helped Comcast boost revenue, showing what a combined company will be able to offer both customers and shareholders, he said.
Bolstered by its new X1 digital set-top box that gives people the ability to watch TV shows stored online, Comcast added 24,000 TV customers in the quarter to reach a total of 22.6 million. Analysts, on average, had projected a loss. Comcast also had added TV subscribers in the fourth quarter, ending 26 straight quarters of declines.
Those gains run counter to what the industry has seen as a whole. Last year, the number of Americans paying for television fell for the first time, dropping by 251,000 customers to about 100 million, according to research firm SNL Kagan.
The quarter’s increase was also partially driven by $1.1 billion in revenue from the Olympics, which aired on Comcast’s NBC channels. That means NBCUniversal made a profit in Sochi, based on the $875 million that people familiar with the matter said it invested. The company broke even in 2012 on the Olympics.
NBCUniversal’s revenue, excluding the Olympics, rose 8.1 percent to $6.88 billion, bolstered by the end of the broadcast network’s decade-long drought in the TV ratings game. NBC said earlier this month that it expects to be back in the No. 1 spot when the season wraps up.
Yesterday, Netflix said it opposes Comcast’s plan to acquire Time Warner Cable because it would give the combined cable carrier even more leverage to extract charges from Internet companies to ensure their services run smoothly for users. Comcast said it already abides by U.S. net-neutrality regulations, which prohibit it from discriminating among different types of Internet traffic.
Comcast is now as much of an Internet company as a video company, adding 383,000 broadband subscribers in the period to a total of 21.1 million.
Following Comcast’s purchase of Time Warner Cable, the combined companies would account for a little more than 38 percent of the total U.S. broadband market, while its cut of the pay-TV industry would tally just under 35 percent, according to Leichtman Research Group.
As streaming entertainment services such as Netflix Inc. gain in popularity, Comcast’s broadband business is about more than just getting customers on the Internet. The company sees its biggest competition coming from Silicon Valley, where companies such as Google Inc., Apple Inc., Yahoo! Inc. and Facebook Inc., seeking bigger slices of advertising budgets, are investing in entertainment offerings that could lead to fewer people paying for traditional TV subscriptions.
Revenue from cable subscriptions, including high-speed Internet and phone, rose 5.3 percent to $10.8 billion.
Comcast used a new accounting method for how it counted video customers. Under the old method, it had a slightly lower figure for how many subscribers it had for bulk customers, such as hospitals and college dorms. Even under the old method, the company would have had a gain of 4,000 video customers.
As the company looks to complete the deal toward the end of the year, Comcast plans to increase repurchases of its own shares by an additional $2.5 billion this year as a way to sweeten the offer if Time Warner Cable shareholders approve the merger. Time Warner Cable ceased its own share buyback plan that would have totaled about $2.5 billion this year because of the pending acquisition.
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