Comcast 2Q earnings meet expectations; A look at some key issues
Tom Paine
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Comcast earnings calls are so well correographed that I usually focus on exception reporting, noting the few items or remarks that stand out like outliers. But there was a little more substance and discussion of strategic issues today as Comcast reported 2nd quarter earnings, though the financial results were largely as expected (hint: it made a ton of money)
Comcast couldn't comment on the ongoing spectrum auction because FCC rules prohibit it. It stands to gain money by selling spectrum as well as spend money buying spectrum. But Neil Smit did comment on the wireless opportunity in general, saying "with 28 million customer relationships, our MVNO rights, which we've invoked, and our 15 million Wi-Fi hotspots, we think there's a real business opportunity there. We've been in test and learn mode." Smit also mentioned the appointment of Greg Butz to head Comcast's wireless effort.
Comcast lost only 4,000 video customers, its best second quarter result in over ten years. The second quarter is usually a low tide spot because many college students and seasonal workers move and disconnect.
Comcast's X1 is now at 40% penetration,, up from 30% at the beginning of the year, but at the 2nd quarter rate may fall short of its 50% stated goal at year end. X1 is seen as more than a user interface, but as the key vehicle for delivering content and services via the cloud.
Brian Roberts on OTT (streaming over the web) and going out of footprint, as Hulu (1/3 owned by Comcast as silent partner) prepares a Netflix-like OTT service: 'OTT economics are unproven to us, and out of footprint it's not clear that that's the right strategy for us."
No mention of an item in the New York Post this weekend suggesting that Comcast might be planning a nationwide mobile content service.
Judging from a Q&A exchange, it sounds as if the XB6 wireless (WiFi) gateway is taking a little bit longer to get out of the lab than expected. Maybe late this year or early next.
Theme parks are now a billion dollar quarterly business for Comcast, with operating margins of about 45%. Quite an achievement for a company that was once laughed at for trying to acquire Disney.
NBC had the best upfront since Comcast has owned the company, with a 12.5% CPM increase at NBC primetime.
Steve Burke on retrans fees: "I think, on retrans is we still have some major contracts where retrans is going to take significant step-ups and we're still hundreds of millions of dollars less than some of the other comparable peers."
Strong gains were reported at MSNBC (Brian Williams?), and Meet the Press "moved up from 3rd to 1st in key demo"(graphics?), perhaps proving that the prior host was the problem. Political advertising is expected to provide a boost for the remainder of the year.
Business Services revenue grew 17%. About 75% of Business services revenue comes from small business, and I wouldn't be surprised if there is a slight downward blip in growth this quarter due to the major voice outage earlier this month.
For those obsessed with the numbers, revenue for the quarter was up 2.8%, and operating cash flow was up 3.0%. Results compared to last year were hurt by some tough comparisons, particularly in its film business. Cable revenue grew 6%.
