How Comcast’s Cable TV Business Has Been Bucking Industry Trends

Comcast (NASDAQ:CMCSA) has managed to drive growth in its Cable TV segment despite intense competition and secular pressures facing the industry. The company has managed to stem subscriber losses while steadily increasing its fees. The key drivers for the pay-TV business are the number of subscribers (or the company’s U.S. pay-TV market share), and the average fee per subscriber. In this note, we explore the factors that are driving Comcast’s Cable TV business.

We have a $40 price estimate for Comcast, which is slightly above its current market price. Take a look at our interactive breakdown of Comcast’s cable-TV business and the base case scenario for revenue growth.

See our complete analysis for Comcast

The media industry is in a transformative phase, as streaming media and live videos on social media take center stage, threatening the traditional pay TV industry.  Nevertheless, Comcast’s Cable revenues have grown from $20.5 billion in 2013 to over $22.3 billion in 2016 despite the threat of cord-cutting. Currently, we project these revenues to grow to over $28 billion by 2024.

Comcast has been adapting quickly to the new environment, and is providing consumers an option to stream cable TV content through the X1 platform, along with several other convenient features. This has helped Comcast stem subscriber declines to an extent, despite the massive threat of cord-cutting, which is negatively impacting the U.S. Pay TV industry as a whole. Its subscriber base has declined marginally from 22.8 million in 2010 to 22.5 million in 2016, and we expect it to stabilize around this level over our forecast period.

While many Pay-TV players are losing subscribers due to cord-cutting and competition, Comcast has managed to buck the trend through its technology-focused products such as X1. As a result, its market share has grown in the past few years. We expect the company’s Pay-TV market share to increase gradually over our forecast period.

Furthermore, the company has been able to raise prices for its Pay-TV subscriptions due to the bundling of streaming services with legacy pay TV services. As penetration for on-demand streaming services is increasing, the company will be able to charge a higher fee for its services, which will drive average subscriber fees up. We forecast the average fee per subscriber for Comcast to grow to $104 by 2024.

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