QUOTE AND NEWS
SeekingAlpha  8 hrs ago  Comment 
By The Entertainment Oracle: Last week the box office saw two big achievements. While neither is history-making, for investors in studios and media companies, they are big news. The first is that for the first time since August, two films grossed...
Wall Street Journal  Oct 10  Comment 
Comcast is threatening to appeal a recent bankruptcy court decision that paves the way for Houston’s struggling sports network to emerge from Chapter 11 without repaying a $100 million loan to the Philadelphia-based cable company.
Reuters  Oct 10  Comment 
Ten years ago, Walt Disney Co, having fended off a hostile bid from Comcast, had to make a case why it was better off as an independent company.
Motley Fool  Oct 10  Comment 
Comcast's new "better customer service" era is off to a rocky start. Here's why it matters to investors.
CNNMoney.com  Oct 10  Comment 
Customer says when he complained about Comcast service and billing problems, he was fired from accounting firm that works for cable company.
SeekingAlpha  Oct 9  Comment 
By NYU Stern Investment Management Research: By Ziv Israel Background Dish Network (NASDAQ:DISH) officially began operations in March 1996 as the home satellite TV service of EchoStar (founded in 1980), founded by Charles Ergen. The...
New York Times  Oct 8  Comment 
The “most bountiful” holiday season in three years? The most innovative cities in America. Did Comcast retaliate against an unhappy customer by getting him fired?




 

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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