What Can Help Comcast’s Digital Media Side Of Business Amid Pay-TV Struggle?

With cord-cutting gaining momentum and Pay-TV having peaked, Comcast (NYSE:CMCSA) is looking at other avenues to generate revenues from digital video delivery. To this end, one of the most helpful revenue sources is the company’s broadcasting side of the business. Comcast generated around $8.4 billion in revenues through NBC broadcasting in 2015 and we expect this figure to rise by more than 30% over the next five years. This increase will be driven by a consistent growth in NBC’s advertising and content licensing revenues. Cyclic events that garner substantial viewership, growing numbers of TV households, and an increase in advertising spending will together push advertising revenues up. And the availability of NBC content on multiple platforms and a consistent improvement in quality of programming should boost content licensing revenues.

Sturdy Growth In Advertising Revenues

NBC’s advertising revenues have grown strongly from less than $4 billion in 2011 to $5.75 billion in 2015, driven by strong viewership for NBCUniversal’s broadcasting networks. We believe that the viewership will remain strong going forward, that will ensure solid sales of advertising times on NBCUniversal’s broadcasting networks.

Broadcasting advertising is driven by three factors: strength of the national and local advertising markets, macroeconomic conditions, and viewership ratings. The advertising revenues tends to be much higher during certain events, such as the presidential election (which drives political spending), or the Olympics (which commands very high viewership).  And higher viewership pushes the advertising spending upwards. These events are cyclical and repeat every four years. The surge in 2012 advertising revenues was driven by the political and the Olympics spending, which will be the case once again this year.

Also, the number of TV households in the U.S. are likely to continue to grow, albeit at a slow pace. This could result in a higher number of subscribers and viewers for NBCUniversal’s cable networks, which will eventually impact advertising spend positively. The overall U.S. advertising market rose by 4.3% in 2015 to $182 billion and this figure is expected to increase at a CGAR of 5% through to 2020.

Growth in Content Licensing Revenues

Broadcasting content licensing revenues represent revenues generated by licensing of NBCUniversal’s programming to various distribution platforms such as cable networks, broadcast networks, and digital distributors. The segment’s revenues increased steadily from $2.0 billion in 2011 to $2.8 billion in 2015.  We expect this trend to continue in the future, primarily due to the availability of a number of new viewing platforms. In addition there is the prevalent trend of cord cutting that is pushing subscribers to free antenna-based programming and online streaming services. Also, NBC is striving to improve the quality of content on offer in order to increase in its licensing revenues. At present, NBC commands  high ratings, which bodes well for its quest to generate higher broadcasting revenues going forward.

See our complete analysis for Comcast

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