QUOTE AND NEWS
TechCrunch  4 hrs ago  Comment 
 HBO Go finally hit the PS4 this week bringing the online streaming service to the best selling next-gen console. But of course it doesn’t work with Comcast. Why would it? HBO Go hit the PS3 last year and Comcast subscribers still can’t use...
Forbes  9 hrs ago  Comment 
Comparing units outstanding versus one week ago at the coverage universe of ETFs at ETF Channel, the biggest inflow was seen in the Consumer Discretionary Select Sector SPDR Fund (XLY), which added 21,850,000 units, or a 19.0% increase week over...
Forbes  Mar 4  Comment 
The FCC, the Obama Administration, the progressive activists, and the lefty foundations all deserve the scalding they are getting from conservatives for the FCC’s new rules to subject the Internet to the comprehensive regulatory regime usually...
MarketWatch  Mar 4  Comment 
Comcast’s NBCUniversal is aiming to launch a comedy-focused subscription Web video service later this year, The Wall Street Journal reports.
Wall Street Journal  Mar 3  Comment 
Comcast’s NBCUniversal is aiming to launch a comedy-focused subscription Web video service later this year, as interest grows in reaching young online viewers who don’t watch traditional TV.
TheStreet.com  Mar 3  Comment 
The ink has yet to dry on the Federal Communications Commission's new net neutrality rules, but the cable-TV industry's largest player is already looking for ways to gut the landmark regulations.  Comcast , the country's largest...
Benzinga  Mar 3  Comment 
Comments made at Morgan Stanley conference © 2015 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Telecom Ramblings  Mar 3  Comment 
Here's a quick look at some other news from early this week worth a quick look: Comcast Business is making a metro Ethernet move up in northern New England. They have expanded into five communities in Bennington County, Vermont. That's the...
Forbes  Mar 3  Comment 
Funding a Roth IRA is one of the best gifts you can give to a child. The problem, however, is that most children don’t have any earned income so they don’t qualify for an IRA contribution. This is where Comcast’s notorious customer service...




 

Comcast (NASDAQ: CMCSA) is the nation’s largest cable television and Internet service provider in terms of number of customers served. Comcast served 23.6 million cable customers in 39 states, 15.9 million high-speed Internet customers, and 7.6 million voice (phone) customers and passed over 51.2 million homes and businesses across 39 states.[1]

In December 2009, General Electric Company (GE) gave Comcast a 51% stake in its NBC Universal division. In addition to $6.5 billion in cash, Comcast will merge its cable networks and web assets, valued at $7.25 billion, with NBC Universal.[2] The deal was one of the largest in recent media business history, and gave Comcast additional profitable cable franchises.[3] NBC Universal was the segment of GE that had the highest operating margin for five of the past six years, and as such, Comcast benefits a lot from the deal. Further, many analysts believe that the once-powerful NBC Universal will thrive again under Comcast with programming and a focus on digital initiatives like Hulu and the large number of cable channels that are part of the deal.[4]

Business Overview

Segments

Comcast is the nation's largest provider of cable services by number of subscribers, offering a variety of entertainment, information, and communication services to residential and commercial customers. The company's largest operating segment is its Cable Division, which includes primarily its video, Internet, and phone services. Comcast serve over 23.6 million video customers, 15.9 million high-speed Internet customers, and 7.6 million phone customers.[1] In addition to its Cable Division, Comcast also earns revenue through its Programming Division.


  • Video (54.2% of 2009 Revenue): Comcast offers video services to 23.6 million customers.[1][5]
  • Internet (21.7% of 2009 Revenue): Comcast offers high-speed Internet service to about 15.9 million customers nationwide.[6]
  • Phone Services (9.1% of 2009 Revenue): CMCSA provides local and long-distance phone service to about 7.6 million customers. In 2009, Comcast earned $3.3 billion in revenue from its phone services, a substantial increase from its 2008 revenues of $2.6 billion.[6] This was largely due to Comcast increasing the number of users.
  • Advertising (4.0 of 2009 Revenue): Comcast's advertising segment earns revenue through progamming license agreements with programming networks.
  • Other (3.0% of 2009 Revenue): Comcast earns revenue through its regional sports networks, digital media center, on-screen guide advertising, and fees from various other services.[6]
  • Franchise Fees (2.7% of 2009 Revenue): Comcast earned $948 million in revenue from franchise fees in 2009.
  • Programming (4.2% of 2009 Revenue): Comcast earns revenue in its programming segment mainly through advertising sales and from subscriber license fees for its networks, which include E!, Golf Channel, VERSUS, G4, and Style.[7]

Trends and Forces

Vulnerable to Strength of U.S. Housing Market Economy

With more than 85% [8] of television owners already paying for cable or satellite services, the number of new potential cable customers is limited. New homes are an important source of new customers for cable companies and as a result, growth in the cable industry is closely tied with growth in the housing market. Furthermore, the company believes that weakened consumer spending in 2010 will further slow expansion of its Cable services.

Bundling Expands Product Offerings, but Increases Competition

Comcast's already large customer base--the largest in the industry--means that their best future customers may already be in their base. Given the limited universe of potential new cable customers, a significant growth area is selling to their current cable customers other services, namely Internet and voice services. Comcast brands this strategy their "Triple Play," otherwise known as bundling.

Bundling is the marketing strategy of cross-selling customers across cable, Internet, and voice services. Comcast's "Triple Play" and costs approximately $99 per month. Consumers benefit because they have one consolidated monthly bill, and one company to deal with if there are problems. However, this strategy also increases the amount of competitors that Comcast must face, including Verizon Communications (VZ) and AT&T (T). Furthermore, Comcast is feeling similar pressure as its phone service counterparts, as a secular shift towards mobile phones reduces the amount of households that use a traditional phone line.

The cable TV market is shifting to a new digital system, which is upsetting some customers

Cable providers all over the U.S. are requiring their subscribers to shift to new digital systems. RCN has reached 100% digital penetration in New York, Philadelphia, Washington DC, and Chicago.[9] Comcast subscribers, primarily in the Washington D.C. area, have been forced into this transition as well. The benefits for Comcast are obvious: it can offer more channels with a digital platform. Many customers, however, are upset about losing the lower priced analog option. [10]

Net Neutrality

Congress is considering legislation that would allow broadband Internet providers--like Comcast--to charge for preferred delivery of digital content. “Net neutrality” advocates are lobbying Congress to treat all web content the same, as is the current standard. Comcast and other Internet providers claim they should be able to sell premium service to larger users of their networks, since they are investing heavily to build and maintain such networks. If legislation is passed to prevent Comcast from charging premium prices for differentiated delivery, it would limit Comcast's future revenue growth.

Competition

Comcast's focus on bundling widens the scope of competition beyond cable companies to Internet service providers and voice companies. Comcast's main competition in cable TV is from both traditional cable television providers like Time Warner (TWX) and satellite providers such as DirecTV (DTV) and Dish Network (DISH). In previous years, Comcast has lost customers to the satellite providers, who have aggressively pursued new customers. With the Triple Play package, the company now competes on many fronts with companies like AT&T (T) and Verizon Communications (VZ).



References

  1. 1.0 1.1 1.2 CMCSA 10-K 2009 Item 1 Pg. 1
  2. Reuters: GE-Comcast NBC Universal Deal
  3. The Street: Who Really Wins, Loses in GE-Comcast Deal?
  4. CMCSA 10-K 2009 Item 7 Pg. 25
  5. 6.0 6.1 6.2 CMCSA 10-K 2009 Item 7 Pg. 24
  6. CMCSA 10-K 2009 Item 7 Pg. 28
  7. One TV World
  8. RCN's Major Market Analog Crush
  9. Washington Post: As Cable TV Goes Digital, It's Still Stuck Inside the Box


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