Comcast (NASDAQ:CMCSA) will report its Q4 2013 earnings on January 28. Earlier this month, the company stated that it modestly added pay-TV subscribers for the first time since 2007.  The company has been continuously losing video subscribers for the past 26 quarters. However, over the past few quarters, the decline has come in at a slower rate due to the company’s focus on advanced features such as Xfinity and X1/X2. Going forward, it will be interesting to see if Comcast can manage to add more subscribers amid the fierce competition from alternative video platforms and telcos.
We expect steady growth in the broadband business due to the rising demand for faster Internet and a decline of DSL Internet connections. During the third quarter, Comcast added 297,000 new broadband customers, driven by a boom in demand for Internet, and a growing need for speed and connectivity in the U.S.  The use of multiple devices and the higher penetration of smartphones is aiding the overall demand for high-speed Internet.
NBCUniversal has also seen a great year with its movie business. The studio has taken 14% of the $10.64 billion U.S. box office revenues, its highest share since 2000, and released two of the three highest-grossing films of the year on a global basis.  The studio’s high ride was primarily driven by the success of Despicable Me 2, and Fast And Furious 6. NBCUniversal’s cable and broadcasting networks will also benefit from advertising growth. According to MoffettNathanson Research, national TV advertising is projected to be up 5% in the fourth quarter. 
We currently have $50 price estimate for Comcast, which we will soon update based on the fourth quarter earnings announcement.
Pay-TV Subscriber Trend In Focus
The pay-TV business contributes around 40% to Comcast’s value, according to our estimates. For cable companies in the U.S., the past several quarters have been tough, as they experienced significant challenges in retaining their pay-TV subscribers. This difficulty reflects a combination of market saturation, fierce competition, and an increased focus from providers on acquiring higher-value subscribers. Moreover, some consumers opt for a lower-cost mixture of over-the-air TV, Netflix (NASDAQ:NFLX) and other over-the-top viewing options. By the end of the third quarter, Comcast’s subscribers fell to 21.65 million, down 1.25 million since 2010.  Comcast has been actively addressing the issue of subscriber churn by providing advanced features to its customers. The company offers the Xfinity Streampix service in order to cater to the demand for content streaming. While the company managed to turnaround the subscriber trend in the fourth quarter, it will be interesting to see if it can continue to add more subscribers in 2014.
NBCUniversal Will Benefit From Sunday Night Football
According to our estimates, NBCUniversal contributes close to 20% to Comcast’s value. NBCUniversal includes the cable and broadcasting networks, theme parks and studio businesses of the company. Despicable Me 2 has been a huge success for Universal Pictures. The movie cost a modest $76 million to produce and so far it has grossed close to $965 million in box-office sales globally.  NBCUNiversal will also benefit from better ratings at NBC driven by Sunday Night Football. This key spot was the No. 1 show in prime time for the fourth consecutive fall television season and it won every key adult and male demos. The show averaged 21.7 million viewers (up from 21.4 million in 2012) for its 19 NFL regular-season telecasts. This marks its second-best viewership in NBC’s eight seasons of broadcasting the NFL’s Sunday prime time package. Notes:
- Comcast has first video customer growth in six years in Q4 -CEO, Reuters, Jan 7, 2014 [↩]
- Comcast’s SEC Filings [↩] [↩]
- Comcast’s NBCUniversal Sees A Solid Year With Movies, Trefis, Dec 31, 2013 [↩]
- Q4 Broadcast Ads Up 4.7%, Early 2014 Scatter TV Down, Mediapost, Jan 14, 2014 [↩]
- Despicable Me 2, Box Office Mojo [↩]
- An NFL Ratings Bonanza, Sports Illustrated, Jan 2014 [↩]