Comcast (NASDAQ:CMCSA) recently posted its earnings for the second quarter. The company reported strong gains in the broadband segment as the demand for high speed Internet continues to rise in the U.S. due to the increased use of multiple devices. The triple play bundling boosted revenues for the mammoth and the pay-TV subscribers declined at a slower rate. We expect this trend to continue as Comcast is offering additional features such as X1 to retain its pay-TV subscribers. The revenues at NBCUniversal increased by 9% led by broadcasting television and higher collection from Fast and Furious 6. The company has posted a strong set of numbers across the board and clearly the company is benefiting from its early acquisition of NBCUniversal. We believe that the improved ratings at the broadcasting network, a solid movie lineup along with the rising demand for broadband will continue to drive growth for the company.
Growth In Cable Communications
- Comcast Q4 Earnings: Best Pay-TV Subscriber Performance In Last Nine Years, NBCUniversal And High-Speed Internet Continue To Grow
- Comcast’s High-Speed Internet Business: Subscriber Base, ARPU Growth Likely
- Comcast Q3 Earnings: NBCUniversal, High Speed Internet Drive Growth
- Comcast Q3 Earnings Preview: NBCUniversal, Subscriber Trends In Focus
- Comcast’s Pay-TV Business: Our Long-Term Projections Suggest Growth In ARPU Will Offset Declining Subscriber Base
- Comcast Q2 Earnings: High Speed Internet Segment And NBCUniversal Lead Revenue Growth
Comcast reported a 6% revenue gain in its cable communication segment as the company continued to expand its broadband business by adding 187,000 new customers.  The boom in demand for broadband in the U.S. can be primarily attributed to a resurgent housing market and stronger economy, along with the growing need for speed and connectivity. (See – The Broadband Heat) The company posted strong gains in the business services, which increased by 26% to $788 million.
Pay-TV Subscriber Trends
One of the key factors that we closely monitor is the pay-TV subscriber trend. According to our estimates, pay-TV contributes close to 35% to Comcast’s value. The subscriber trends in the cable business were great for the cable company, which routinely lose subscribers to satellite and telcos, but Comcast has been slowing down its losses and saw a decline of only 159,000 subscribers as compared to 176,000 in Q2 2012. The company increased video revenue by 3% to $5.2 billion, driven by growth in sales of advanced video services like digital video recorders and rising rates.  The company stated that 55% of the video customers now also subscribe to HD or DVR service.  Going forward, we expect this trend to continue as Comcast in particular has been aggressive in improving its services and offering additional features such as X1 and an improved television streaming to its subscribers.
NBCUniversal Shows Strength
Continued Strength In Cable Networks
Comcast took full control of NBCU in the first quarter with a $16.7 billion deal. According to our estimates, NBCU and Comcast content contribute close to 25% to the company’s value. In the second quarter, NBCU witnessed robust growth across all segments. The revenue from the cable networks segment increased 8% to $2.4 billion, reflecting a new content licensing agreement, a 4% increase in distribution revenue and a 6% increase in advertising revenue. The revenues at broadcast television segment increased by 12% to $1.7 billion driven by a 13% increase in advertising revenue, primarily reflecting higher primetime ratings at the NBC broadcast network, and higher retransmission consent fees, partially offset by lower content licensing revenue due to the timing of content availability.  We expect the ratings at the broadcasting network to improve further as the network is focused on developing new content and original programming. NBC has entered into the third quarter with strong performance from America’s Got Talent, which finished second in prime broadcast network television for the week ending July 22. 
Furious 6 Fuels Universal Pictures Revenues
The revenue from the filmed entertainment segment jumped 13% to $1.4 billion led by higher theatrical revenue from the strong box office performance of Fast and Furious 6, as well as higher content licensing revenue from the availability of certain films in international television markets. (See – Universal Pictures’ Fast And Furious Is Hauling In Quick Sales For Comcast ) Despicable Me 2 released towards the end of the second quarter and has performed well at the box office.  Brian Roberts stated that Despicable Me 2 will be the most profitable film in Universal’s history.  For 2013, the studio has handful of movies such as Kick Ass 2, Riddick and 47 Ronin lined up which can boost the revenues for the division.
New Attractions At Theme Parks
Theme parks revenues increased only 1% reflecting the shift of holidays to the first quarter this year. The company has been increasing its investments in NBCU, especially in the theme parks as it build new attractions such as Transformers and expansion of Harry Porter in Orlando as well as Despicable Me in Hollywood. As a result of this acceleration the company expect NBCU’s full-year capital investment plan to increase by 50% from 2012 to $1.1 billion.  Theme parks in particular have been providing steady cash flows to the company and the new attractions will aid to the attendance growth at the theme parks. (See – What Does Theme Parks Mean To Comcast?)
We are currently in the process of updating our model for Comcast in view of the recent earnings.Notes:
- Comcast’s SEC Filings [↩] [↩] [↩]
- Comcast’s CEO Discusses Q2 2013 Results – Earnings Call Transcript, Seeking Alpha, Jul 31, 2013 [↩] [↩] [↩]
- Top 10 List For Prime Broadcast Network TV – United States, Nielsen, Week Of Jul 22, 2013 [↩]
- See – Despicable Me 2′s Success Bolsters Comcast’s Movie Business [↩]